Weekly Recap:

by Michael Reinking, CFA & Eric Criscuolo

Published on 1/16/26

The Supreme Court kept us waiting, but the NY Giants definitely acted swiftly this week. There was a lot of anticipation on Wednesday that the court would announce its decision on the legality of the IEEPA tariffs. But after issuing a few opinions on other cases, they closed up shop for the day. Legal analysts, of which I am not one, have said that each week without a decision increases the likelihood of the administration prevailing. However, most still believe Trump will lose the case. Others noted that the Justices may view this as a "blockbuster" case. For those, decisions are often held until the end of the Court’s term in June. On Friday the court said it "may" issue at least one ruling on Tuesday, so tune in, again! The other big news this week was that, unlike the Justices, John Harbaugh and NY Giants ownership did not keep us waiting, acting swiftly in naming Harbaugh as the new Head Coach. Welcome to New York, and New Jersey, John! Now get us to .500! 

With this week’s most important news addressed, we’ll move on to financial markets. It’s been an interesting start to the year, with international news and geopolitics leading the year- Venezuela, Iran, Greenland the most prominent, with Panama expected to join them soon with a ruling on ownership of two canal ports. As we’ve seen time and again though, equities have managed to shrug off the events. We don’t want to agree with the axiom “Nothing Ever Happens”, but…

While “NEH” paints broadly, we are seeing a different complexion in stocks to start the year. The S&P 500 is up about 1% YTD. However the equal-weight index is outperforming by over 200 basis points. Mid cap and Small cap indexes are outperforming by around 500bp. The driving force for that is a strong rotation in sector leadership.  

Unlike last year it’s not Tech dominating everything else- though semis are ripping higher. Three cyclical sectors- Energy, Industrials and Materials- are the top performers. They’re joined at the top by one defensive sector, Consumer Staples. Real Estate- the worst performing sector last year on a price basis, is also now among the leaders after pacing the market this week. Meanwhile, the two tech-heavy sectors- Communication Services and Info Tech- are struggling to stay above water and are underperforming the index.

Looking more closely at this week, the factor trends at play so far this year continued. Mid and small caps easily beat large caps and performance was titled much more favorably to Value versus Growth in the larger caps. 

Outside of the Harbaugh hire, the main event this week was the kickoff of earnings season, with Financials and the major banks up first. It was a tale of decent earnings but poor price reactions. Citigroup, Bank of America, Wells Fargo, JP Morgan, Regions, all finished the week down ~3% or more. PNC bucked the trend, as did Morgan Stanley and Goldman Sachs, but they’re much less involved in traditional banking functions. JP Morgan’s plans to increase spending by $9 billion in 2026, versus $4 billion in 2025, has raised eyebrows, especially with a relative lack of details, justified by competitive concerns.  

Real Estate, Consumer Staples, Industrials and Energy led the pack this week. REITS were strong across the board even as yields backed up several basis points across the curve. Major retailers, food and beverage names drove Staples higher, and tobacco names were up ~7%. For Industrials, Aerospace/defense names led along with construction and electrical names. Crude’s gains took Energy higher.

We noted the post-earnings weakness in financial stocks this week. Consumer Discretionary was also a laggard as travel and leisure names were pressured- Delta earnings guidance may not have helped- it was OK but the Street wanted more. Autos were also lower. Healthcare didn’t get a bump from the JP Morgan Healthcare conference. Med Devices and managed care sold off.  President Trump announced a “Great Healthcare Plan” but the details were lacking, with many programs already getting up and running. Meta weighed down Comm Services.

Tech was down on the week but there was a significant split between semis and equipment names (strong) and software (not strong, at all, with increasing concerns of AI displacing the products). Taiwan Semiconductor’s capex guidance increase, from $46 billion to around $54 billion helped energize the chip names. On Friday OpenAI announced it will begin testing ads within ChatGPT in the coming weeks. This was expected but some of the adtech names were weaker on Friday, including Alphabet and The Trade Desk.

Another interesting development on Friday was a proposal from the administration that PJM, the country’s largest electrical grid operator, hold an emergency auction that would force tech companies (that don’t have their own dedicated power production) to cover the costs of new power infrastructure. The power equipment makers rallied on the news but the Independent Power Producers (IPPs) fell- CEG, VST, TLN down ~10% today- as their pricing could get hit. This came after Microsoft outlined a plan to keep its energy demands from causing consumer electricity prices to rise. It’s a mid-term election year so keep an eye on that trend. Other tech news this week included Apple’s selection of Alphabet’s Gemini to run its AI platform.

There was more news from D.C. that impacted markets this week. After expressing support for a 10% cap on credit card interest rates late last week, President Trump backed a cap on swipe fees. Payments and consumer credit names (Mastercard, Visa, Synchrony, Capital One, American Express) were down 3-7%. In addition, homebuilders became the latest group to have their repurchase programs come under scrutiny from the administration, following defense contractors. 

Global Markets - China taps the brakes, Europe up modestly, Takaichi Trade sends Japan higher

Commodities & Crypto - European gas rips, crude sees sharp swings, metals higher

Another major topic for markets this week was the DOJ’s investigation into costs of the Federal Reserve’s major construction project. This took the prior tensions between the administration and the Fed to a whole new level. The administration has seen significant blow back from across the globe and yields have been calm considering the news. Fed governor Barr came out swinging in an interview with Yahoo Finance, saying the inquiry amounted to “an assault on the independence of the Fed." However, White House economic advisor, and what looks like ex-Fed Chair candidate Kevin Hasset downplayed the investigation, saying it was just a request for information and expects “nothing to see”. On the candidacy front, Trump said he wanted to keep Hasset where he was, praising his media and communication skills. Prediction markets immediately took Hasset’s odds down from 30-40% to 15-20%, with Warsh the clear front runner now. 

Economic data this week continued to show things continue more or less on trend. Employment is holding up and inflation remains steady but above target. Inflation data were the headlines this week and were slightly cooler overall. December CPI was the main release. It was slightly below estimates on the core reading. It also came with sea-salt sized grains however, as the lack of any data from October significantly complicates analysis. For instance, the monthly changes for October and November can’t be calculated. In any event, Headline rose 0.3% in December from November, and 2.7% over the year. The 12-month reading was unchanged from November. Core rose 0.2% and 2.6%, with the 12-month change also steady. The data, in all its incompleteness continues to show inflation remaining above the Fed’s 2% target. Food prices rose 0.7% m.m (+3.1% y.y) while tariff-related categories were mixed: appliances -4.3% m.m, TVs -0.6%, computers -1.3%, toys -0.5%, while household furnishings rose 0.5%, footwear 1.1% and apparel 0.6%. Electricity prices ticked lower but are still up ~7% y.y.  Yields fell initially on the print but quicky bounced back to erase a good chunk of the move.

PPI for October and November was also released. November headline PPI (+0.2%) was slightly above October (+0.1%). However ex-food, energy and trade declined from 0.7% to 0.2%. Energy prices were a significant contributor. Final Demand Goods rose 0.9% versus the prior month (0.4%) but Energy went from -3.2% to +4.6%. Final Demand Services were unchanged m.m.

Weekly initial claims printed a sub 200k number, moving even lower than prior week’s low print and below estimates. Continuing claims also remained at low levels, moving back below 1.9m. The ADP weekly report had private employers adding 11.75k jobs/week over the four weeks ending December 20, edging up slightly from last week.

The Empire and Philly Fed Manufacturing reports improved from last month. Philly showed an improvement in current New Orders, though the outlook for future New Orders declined. Empire also showed an improvement in New Orders while the outlook slipped a little lower.   

New and Existing Homes continued to show an improving, though modest, trend. New sales fell 0.1% m.m in October but at 0.737M came in above expectations. Existing Home sales of 4.35M beat estimates and grew 5.1% from last month.

Retail Sales were better than expected (+0.6% m.m vs 0.4%), improving from last month’s 0.1% decline. The control group that goes into the GDP calculation was inline at 0.4% and down from 0.6% the prior month. Autos, building materials and miscellaneous retail stores were among the best growth, while department stores declined ~3%. 

Treasury yields rose several basis points on the week, following generally solid economic data and Kevin Warsh taking the lead to be the next Fed chair. The US Dollar Index ended the week higher and broke into the 90’s, strengthening against the major crosses. 

Markets will be closed on Monday for Martin Luther King Jr. Day. Earnings will get heavier, led by Financials again but broadening. The biggest US data will come towards the end of the week with the PCE price index- the Fed’s preferred measure of inflation. Flash S&P Manufacturing and Services PMIs will be released as well. In more Supreme Court news, oral arguments in the Lisa Cook case will be held and the Fed blackout period begins. We also get Pending Home Sales, weekly jobless claims and final Q3 GDP.  

On a more global scale, the World Economic Forum will take place in Davos. President Trump will lead the largest US delegation ever to attend the event, after the administration spent the first year of Trump 2.0 resetting global trade and foreign policy pillars. Trump has said he will unveil a strategy to make housing more affordable in the US at the gathering. The ECB will release the minutes from its latest monetary policy meeting, and for commodities the monthly IEA Oil Market Report will be released.  China will release Q4 GDP and Japan’s central bank will have a policy rate decision.

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