Market Commentary

For the week ending 1/16/2026

 

A resilient U.S. stock market battled midweek turbulence before closing modestly lower last week.

While some major indices initially reached new all-time highs on Monday, they faced headwinds from a combination of underwhelming banking sector earnings and a mild pullback in tech/growth stocks. Additionally, the markets are contending with an unprecedented standoff between the Trump Administration and the Federal Reserve Bank.

The week began with continued momentum on Monday, leading the Dow Jones Industrial Average and the S&P 500 to reach new all-time highs, before retreating during a tech-led selloff on Wednesday.

A standoff between the White House and the Federal reserve sparked market jitters across the board as the U.S. Department of Justice launched a criminal investigation into Federal Reserve Chair Jerome Powell. This move represents another escalation of tensions between the White House and the Fed. Many characterized this action as simply a pretext to pressure the Fed to set interest rates at Trump’s direction, rather than based on evidence or economic conditions. Powell accused the administration of a “power grab” intended to compromise central bank independence and said he won’t bow to this intimidation. This political friction introduced more volatility and uncertainty, although indices steadied by the end of the week as investors focused back on corporate fundamentals. The administration’s move was met with bipartisan pushback from legislators, every living former Fed chair, and central bankers from around the world.

Meanwhile, the fourth-quarter earnings season kicked off with underwhelming results from several major financial institutions. JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup all saw their shares decline after reporting mixed results or conservative outlooks. They cited issues including stubborn expenses, delayed merger deals, and geopolitical risks, such as Citigroup’s loss from its Russia operations exit. However, on Thursday both Goldman Sachs and Morgan Stanley saw their shares rise after beating consensus expectations due to strong trading profits and investment banking revenues.

On Thursday Taiwan Semiconductor Manufacturing Co. (TSMC) reported record profits and announced plans to boost capital spending by more than was previously expected in 2026, signaling immense confidence in AI demand. This news helped majority of global chipmakers like Nvidia and AMD to rebound toward the end of the week.

Also on Thursday, the U.S. and Taiwan announced details of a new agreement to lower tariffs to 15% from 20%. Taiwan will also invest $250 billion into U.S. chipmaking under a new trade deal. Commerce Secretary Howard Lutnick says Taiwan Semiconductor will expand its Arizona manufacturing plants and could double its manufacturing size in America.

Inflation data came in mixed with Annualized December Consumer Price Index (CPI) reaching 2.7%, just above the 2.6% consensus, and Core CPI hitting 2.6%, cooler than the 2.7% expected. Annualized November Producer Price Index (PPI) came in at 3.0%, above the 2.7% consensus, and Core PPI was also at 3.0%, above the 2.7% estimate.

Other economic data offered more positive news. November retail sales rose 0.6% month-over-month, ahead of the 0.4% expectation. January’s Empire and Philadelphia manufacturing indexes both exceeded expectations. Additionally, weekly initial jobless claims and continuing claims declined this past week, in a positive signal for the labor market.

Markets remain very attentive to geopolitical news related to President Trump’s renewed tariff threats, and any updates related to Venezuela, Iran, Greenland, Ukraine and Israel. Additionally, investors will be paying close attention to quarterly earnings season reports and more economic data releases.

 For the week, the Dow dipped -0.3% to 49,359, the S&P 500 fell 0.4% to 6,940 and the Nasdaq dropped -0.7% to 23,515.

Oil rose .5% to $59.44/bbl, gold rose 2.1% to $4,595 and the yield on the 10-year treasury rose 1.4% to 4.23%.

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