- The Dow Jones Industrial Average reached a new record high during trading Tuesday, surpassing 50,500, extending a streak of record-breaking performances from last week.
- December retail sales were flat, falling short of expectations for a 0.4% increase, as holiday season spending lost momentum.
- Software stocks rebounded sharply, with Datadog and ServiceNow shares rising after reporting better-than-expected earnings and securing deals following last week’s sell-off.
- Commerce Secretary Howard Lutnick reiterated his call for 5-6% GDP growth in 2026, contingent on interest rate cuts from the Federal Reserve.
The Dow Jones Industrial Average (DJIA) continued its record-setting run on Tuesday, reaching an intraday high of 50509.22 before closing at 50259.81, a gain of 123.57 points, or 0.25%. The index has now achieved a fourth consecutive record high, building on momentum that carried it above the 50,000 mark for the first time last week. The S&P 500 rose 0.47% to close at 6964.82, even as the Nasdaq Composite increased 0.90% to 23238.67. Gains were broad, led by rebounding software stocks following last week’s artificial intelligence-driven sell-off, with financial and entertainment names providing further support to the Dow. This performance reflects ongoing investor optimism despite some economic headwinds.
December Retail Sales Disappoint, Missing Expectations Across the Board
The Department of Commerce reported that retail sales in December were unchanged at $735 billion on a monthly basis, a sharp slowdown from November’s 0.6% increase and well below the 0.4% increase expected by economists. Excluding automobiles, sales were similarly flat against expectations for a 0.3% increase. The control group, which directly enters GDP calculations, contracted by 0.1%. Declines were widespread, with furniture stores and miscellaneous retailers both falling 0.9%, while auto dealer sales decreased 0.2%. The weak data painted a picture of a consumer losing steam as the year-end holiday season concluded and traders of rates wasted no time repricing expectations, increasing bets on more than two interest rate cuts from the Federal Reserve this year. The Labor Department also reported that the Employment Cost Index (ECI) rose just 0.7% in the fourth quarter, below expectations of 0.8% and the slowest pace since the third quarter of 2020, adding further weight to the argument for monetary easing.
Lutnick Reaffirms Strong Growth Outlook
Commerce Secretary Howard Lutnick continued to emphasize his ambitious growth narrative, reiterating expectations for GDP growth of 5% or more in the first quarter of 2026, noting that 6% is achievable if the Federal Reserve cuts interest rates. Speaking on the All-In podcast in January, Lutnick attributed the optimistic forecasts to over 30 major construction projects and new factory expansions resulting from $18 trillion in investment. He also pointed to revamped CHIPS Act deals with companies such as Taiwan Semiconductor Manufacturing (TSM) and Nvidia (NVDA) as key drivers of domestic manufacturing growth. Treasury Secretary Scott Pesent offered a more conservative estimate of 4-5%, while leading forecasters remain skeptical, with the International Monetary Fund projecting U.S. Growth of 2.1% for this year.
Software Stocks Rebound on Earnings
The software sector experienced a sharp rebound on Tuesday after a brutal sell-off last week, fueled by concerns about artificial intelligence spending following disappointing results from several major companies. Datadog (DDOG) shares rose 15% after the company exceeded key metrics in its fourth-quarter results, while ServiceNow (NOW) stock rebounded 4%. Spotify (SPOT) jumped more than 16% after announcing a record 38 million new monthly active users in the fourth quarter, bringing the total to 751 million, surpassing Wall Street estimates of 745 million. Goldman Sachs upgraded the stock to “buy” with a $700 price target. On the downside, S&P Global (SPGI) shares fell about 16% after issuing 2026 earnings guidance of $19.40-$19.65 per share, well below expectations of $19.96, while Coca-Cola (KO) shares declined more than 4% as its 2026 organic sales outlook of 4-5% disappointed investors following a strong run in the stock this year.
Chip Companies Rise as TSMC Revenue Increases
Semiconductor stocks continued to gain ground on Tuesday after Taiwan Semiconductor Manufacturing (TSM) announced its highest-ever monthly revenue. January revenue came in at NT$401.26 billion (approximately $12.71 billion), up 36.8% year-over-year, and 19.8% from December, reinforcing the narrative that global spending on artificial intelligence remains strong despite recent market disruptions. Nvidia, Advanced Micro Devices (AMD), and Broadcom (AVGO) shares rose around 1% during the session. Walt Disney (DIS) shares rose more than 2.5% to lead gains in the Dow, alongside American Express (AXP) and Salesforce (CRM), while healthcare names including Amgen (AMGN) and Merck & Co (MRK) pulled the index lower.
Dow Jones Technical Analysis
The Dow continues to trade in a strong uptrend, with Tuesday’s intraday high of 50509.22 representing a new record. The index is above both the 50-day exponential moving average at 48744 and the 200-day exponential moving average at 46314, reflecting broad-based bullish momentum. The stochastic oscillator is approaching overbought territory at 77.96/64.48, which may suggest some consolidation in the near term. Key support lies at the psychological 50000 level, with the previous breakout area around 49600 providing secondary footing. On the upside, traders will monitor a sustained close above 50500 to confirm a breakout to new highs.
