Published as of: January 22, 2025, 9:19 a.m. ET

(Wednesday market open) Winter's icy grip reached New Orleans and Florida early Wednesday, but the market stayed warm thanks in part to solid quarterly results from Netflix (NFLX), which boosted shares of the streaming giant double digits in pre-market trading and contributed to gains for major indexes.

That happened even as the Trump administration made new threats to impose tariffs on imports from China by February 1. Treasury yields stayed flat early despite that and another potential updraft from the Bank of Japan's (BoJ) rate decision looming Friday, with markets expecting an increase. "Treasury yields are likely to remain elevated, with risks to the upside," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. "Inflation remains sticky—with or without potential tariffs—and the labor market has stabilized, likely keeping the Fed on hold for the next few meetings."

Transport firms dominate earnings as the week advances and could provide a closer look at freight and passenger traffic trends. American Airlines (AAL), Union Pacific (UNP), and CSX (CSX) report tomorrow after United Airlines (UAL) shared positive results late Tuesday. When Union Pacific reported in October, it benefited from increased volume, a key metric to monitor. FactSet now sees blended fourth quarter S&P 500 earnings growth of 12.5% counting companies already reporting and estimates for those to come, but mega caps next week could have a massive impact.

1. Earnings keep impressing: Procter & Gamble (PG) and Johnson & Johnson (JNJ) both beat analysts' earnings estimates with their latest numbers this morning. Other companies surpassing earnings estimates early today included Travelers (TRV) and Abbott Labs (ABT). Strong earnings almost across the board last night and early today precede a relatively light afternoon schedule. Through the end of last week, with 9% of companies reporting, 79% had beaten analysts' average earnings per share estimate. Meanwhile, 67% reported a positive revenue surprise, FactSet said.
2. Bond market still churning: Though equity volatility tracked by the CBOE Volatility Index (VIX) has fallen early this year, fixed income volatility remains elevated amid worries about various policy initiatives such as tariffs and immigration. Though there's optimism in some quarters that inflation can continue falling, bond volatility—which often ends up spilling into equities—suggests not all investors are convinced. "The proposed policies on tariffs and immigration—all else equal—would likely put downward pressure on growth and upward pressure on inflation," said Liz Ann Sonders, chief investment strategist at Schwab, in an interview with CNBC yesterday. As of early today, the CME FedWatch tool built in nearly 100% chances of a Federal Reserve rate pause next week and around a 26% chance of a rate cut this quarter.
3. Data eyed for recession signs: December leading indicators from the Conference Board are due just after the open, and this report is often watched for signals of a possible recession. It was negative for months before a surprising 0.3% gain in November, but analysts expect a flat reading. The November gain reflected rebounding building permits, improved average hours worked in manufacturing, and fewer initial unemployment gains. November's gain meant the Leading Economic Index^® no longer signaled an impending recession after signaling one much of the time since early 2022.

• United Airlines kicked off a big reporting week for airlines with results that impressed investors yesterday afternoon. Shares rose 4% in pre-market action, lifted by earnings per share and revenue that exceeded Wall Street's consensus views. Demand trends are "continuing to accelerate," the airline said in its release. The key metric of total revenue per available seat mile rose 1.6% year over year.
• Oracle (ORCL) climbed 9.2% ahead of the open on news that OpenAI, Softbank, and Oracle are planning a joint venture called Stargate for AI infrastructure, supported by billions of dollars from the federal government under the Trump administration. News of the venture appeared to give other AI-related stocks an early boost Wednesday, with Nvidia (NVDA) up nearly 3% and Arm Holdings (ARM) climbing 6.2% before the opening bell. Nvidia again surpassed Apple (AAPL) in market capitalization.
• Netflix rose 14.8% in pre-market trading following earnings. Margin expansion and subscriber growth were two standouts, with paid net subscriber additions up nearly 19 million in the quarter, well above the company's previous guidance. It's the last time Netflix is reporting net subscriber growth, which was boosted partly by live sports events. Investors also were encouraged by Netflix raising prices on most subscription tiers.
• Procter & Gamble rose 3.5% ahead of the open following earnings per share and revenue that surpassed analysts' estimates. Organic sales increased across many product categories, the huge consumer staples firm reported. The company maintained its fiscal 2025 guidance.

Breadth check: Market breadth improved last week, according to Schwab's Weekly Trader's Outlook. For that positive trend to continue, it might help to see non-mega cap companies surpass Wall Street's earnings estimates. This might lift hopes that the hundreds of S&P 500 stocks without $1 trillion market capitalizations can contribute more to overall index growth.

The U.S. 10-year Treasury note yield (TNX:CGI—candlesticks) has retreated but remains above its 2025 lows near 4.5% and above the two of three key moving averages (blue, red, and green lines are 20-, 50- and 100-day moving averages). The yield spent some time in late November and early December below the 20-day moving average but quickly recovered. It's now back below it but there's reason to think this might not last, either.