Martin Gamble on US markets: Health insurance stocks plunge, data storage names surge

A topsy-turvy week for US markets saw investors digest turbulence in the health insurance space, earnings from a good chunk of the big tech contingent, as well as the latest decision on interest rates.

Health insurance names like UnitedHealth and Humana were sickly after the Trump administration proposed keeping Medicare rates flat next year which would have major implications for their margin performance.

The Fed’s decision to leave rates unchanged was greeted with a shrug by investors but the subsequent updates from Microsoft, Meta Platforms and Tesla were more impactful.

A poor reception for Microsoft’s latest earnings saw hundreds of billions wiped off its market cap. However, in the second tier of technology companies there was more positivity with data storage plays Seagate and Western Digital surging yet higher on strong updates.

Royal Caribbean Cruises issued a positive outlook sustained by heavy spending by affluent travellers – some two-thirds of 2026 capacity is already locked in at record prices.

Caterpillar

Caterpillar is widely viewed as a global industrial bellwether thanks to its role in helping customers around the world build roads, extract key resources and support vital infrastructure such as data centres.

It’s this data-centre-driven part of the business that is thriving, with strong demand for the company’s power generation solutions as AI-related construction accelerates.

This supported earnings per share of $5.16 – ahead of the $4.71 expected by analysts, and revenue of $19.1 billion compared with the $17.7 billion market forecast.

The early phase of the AI boom centred on firms producing the advanced chips needed for artificial intelligence computing power. Now, industrial operators are gaining from the huge energy needs and building work required for this expanding infrastructure. Caterpillar is racing to boost its capacity to keep pace with this demand.

Tariffs remain a challenge for this global player, and it’s notable that pressures appear to be increasing rather than easing, with Caterpillar expecting a bigger impact in 2026 than 2025.

Microsoft

The headline numbers in Microsoft’s latest earnings may not have been too shabby but the market heavily punished slowing growth in its cloud computing division and the impact of rampant AI spending on margins.

The result was the worst one-day plunge for the shares since the pandemic. Earnings per share for the three months to 30 December came in at $4.14 versus the $3.97 market forecast, and revenue of $81.3 billion coming in higher than the $80.27 billion analyst consensus estimate.

The market is looking for evidence the massive spending on AI is paying off commercially and its verdict on these earnings is the evidence is not there yet.

The details also made clear Microsoft’s reliance on ChatGPT-owner OpenAI for a lot of future revenue, which made some investors nervous. Microsoft shares have been under pressure since Alphabet-owned Google launched Gemini 3 in November last year – posing a clear competitive threat to ChatGPT.  

Mastercard

Mastercard won the battle of the payment providers versus Visa as it reported strong growth in earnings and announced plans for significant job cuts.

Ahead of the numbers was a lot of focus on the threat posed by the Credit Card Competition Act (endorsed by Donald Trump) which could, in theory, break up the virtual duopoly enjoyed by Visa and Mastercard.

However, Mastercard reassured with fourth-quarter revenue that came in at $8.81 billion versus the $8.77 billion expected, and earnings per share of $4.76 which was 13% ahead of market forecasts.

While payment volume growth showed signs of slowing, there was a big increase in the contribution made by Mastercard’s ancillary services in areas like consulting, security and data insights. This helped give the shares a boost as it revealed it was cutting 4% of its global workforce.

Visa’s shares also ticked higher, although they saw more modest gains than its rival despite strong Christmas trading supporting payment volumes and helping earnings to come in ahead of consensus.