Easing Inflation and Market Adjustment During Earnings Season

Weekly Market Commentary | Week of Jan 19^th, 2026

A Recap of Economic and Financial Trends from the Prior Week

By: Khadija Farooqi, The Quinnipiac University Global Economics Research Team

Last Week in Review

• Core inflation continued to ease, with core CPI rising 0.2% month over month and 2.6% year over year in December, while consumer spending and housing activity remained firm.

• Equity markets were mixed, with small-cap and value stocks outperforming as large-cap growth pulled back early in earnings season.

• Elevated bank earnings expectations, recent Fed policy moves, and emerging shifts in market structure shaped investor sentiment.

Economic Recap

U.S. inflation data released last week showed continued moderation in consumer price pressures alongside firmer wholesale inflation, as the Bureau of Labor Statistics reported core CPI rose 0.2% month over month and 2.6% year over year in December, below estimates, while headline CPI increased 0.3% month over month and 2.7% year over year; the shutdown-delayed November PPI showed producer prices rising 0.2% month over month and 3.0% year over year, driven primarily by higher energy prices. Consumer activity remained solid, with retail sales increasing 0.6% in November, beating estimates near 0.4%, though control group sales growth slowed to 0.4% from 0.6% previously. Housing data surprised to the upside, as new single-family home sales totaled a seasonally adjusted annual rate of 737,000 in October, ahead of expectations, while existing home sales rose 5.1% in December to a SAAR of 4.35 million, supported by easing mortgage rates that approached 6% by week’s end.

In Europe, Germany reported GDP growth of 0.2% in the fourth quarter and for full-year 2025, while the UK economy returned to growth with GDP expanding 0.3% sequentially in November; euro-area industrial output increased 0.7% in November for a third consecutive month, and investor sentiment improved to its strongest level since July 2025. In Asia, China reported exports surged 6.6% in December and its trade surplus reached USD 1.2 trillion for 2025. On the policy front, several central banks held rates steady, including Poland’s reference rate at 4.00% and South Korea’s base rate at 2.50%, citing stable growth and inflation dynamics, while the Federal Reserve implemented a 25 basis point rate cut to a 3.50% to 3.75% target range and emphasized caution around the timing of further policy adjustments.

Market Recap

Source: JPMorgan Asset Management, “Weekly Market Recap” (January 19^th, 2026). (Chart © JPMorgan Asset Management. Chart used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

U.S. equity markets finished the week mixed as earnings season began, with clear style and size dispersion across indexes. Large-cap benchmarks declined modestly, with the S&P 500 down 0.36% and the NASDAQ falling 0.66% over the week, while the Dow Jones Industrial Average slipped 0.28%. In contrast, smaller-cap and value-oriented segments extended their leadership, as the Russell 2000 rose 2.05% and Russell 1000 Value gained 0.65%, outperforming Russell 1000 Growth, which fell 1.19%. International equities also posted gains, with MSCI EAFE up 1.40% and MSCI Emerging Markets advancing 2.27%. Year-to-date performance continues to favor smaller-cap and value exposures, while large-cap growth has lagged early in the year. Market sentiment was influenced by the start of fourth-quarter earnings season, ongoing political and trade-related headlines, and policy uncertainty, contributing to choppier performance in mega-cap and growth-heavy indexes.

Market Themes

Bank Earnings Strength Meets Elevated Expectations

Fourth-quarter bank earnings releases showed solid underlying performance but share price reactions reflected investor sensitivity to management caution and already elevated expectations across the sector. Consensus currently estimates S&P 500 earnings per share growth of 6.9% year over year for the quarter, with sales, margins, and share count contributing 6.1, 1.6, and negative 0.8 percentage points, respectively, highlighting revenue growth as the primary driver. Despite this backdrop, shares of major banks declined following earnings releases, as JPMorgan Chase fell 0.97%, Wells Fargo dropped 4.61%, Bank of America declined 3.78%, and Citigroup lost 3.34% on the day, reflecting investor sensitivity to cautious management commentary rather than headline results. According to Jim Cramer, several institutions delivered solid quarters, with JPMorgan beating expectations despite weaker investment banking activity, Wells Fargo pressured by higher severance expenses, Bank of America posting modest top- and bottom-line beats with optimistic guidance, and Citigroup continuing to show progress in its turnaround, including strong net interest income growth. More broadly, sector-level earnings dispersion remains pronounced, with technology on track to account for 91% of year-over-year EPS growth this quarter, while consumer and healthcare sectors lag amid margin pressure from rising costs, reinforcing how concentrated earnings leadership continues to shape market reactions early in reporting season.

NYSE Proposes Regulated Platform for Tokenized Securities Trading

The New York Stock Exchange announced plans to develop a platform for trading and on-chain settlement of tokenized securities, marking a proposed step toward integrating blockchain-based processes into regulated U.S. equity market infrastructure. Subject to regulatory approval, the platform is designed to support 24/7 trading, near-instant settlement, stablecoin-based funding, and tokenized shares that retain the same economic and governance rights as traditionally issued securities. The initiative forms part of Intercontinental Exchange’s broader digital asset strategy, including preparations for round-the-clock clearing and the potential use of tokenized collateral in collaboration with major banks. Exchange leadership emphasized that the proposed venue is intended to align with existing market structure principles and regulatory standards, indicating an effort to incorporate tokenization within established frameworks rather than launching a parallel market. No launch timeline was disclosed, with implementation contingent on regulatory clearance.

Chart of the Week

Source: J.P. Morgan Asset Management, “Weekly Market Recap,” PDF, accessed January 2026. (Used under fair use for educational commentary by The Quinnipiac Global Economics Research Team.)

Mortgage rates remain closely tied to longer-term Treasury yields, as 30-year mortgage rates track the 10-year Treasury through components including real policy rates, inflation expectations, and the term premium. While recent announcements directing government-sponsored enterprises to purchase $200 billion of mortgage-backed securities helped push 30-year mortgage rates to a three-year low, the underlying drivers of rates remain shaped by inflation dynamics, fiscal pressures, and term premia. Although increased MBS demand could compress mortgage spreads modestly, the analysis suggests such effects are unlikely to be sustainable, particularly if tariffs or fiscal stimulus lift inflation or raise term premia and mortgage rates at roughly 6.1% remain low by historical standards relative to pre-global financial crisis norms.

Market Outlook

Incoming data continue to reflect an environment of moderating inflation alongside resilient economic activity, with consumer spending, housing, and global growth indicators providing mixed but generally supportive signals. The Federal Reserve’s cautious guidance following its latest rate cut has reinforced uncertainty around the pace of future easing, a dynamic that will remain in focus as policymakers meet next week to assess incoming inflation and activity data. Market performance has broadened beneath the surface, with leadership rotating toward small-cap and value stocks and earnings outcomes increasingly sensitive to expectations rather than absolute results. As earnings season progresses, investor attention is likely to center on profit sustainability, sector-level differentiation, and how macro conditions, policy uncertainty, and evolving market structure developments interact.

Calendar Events

Economic Data:

• Jan. 22 (Thu): GDP, first revision (Q3); Personal income (Nov, delayed); Personal spending (Nov, delayed)

• Jan. 23 (Fri): S&P flash U.S. manufacturing PMI (Jan); S&P flash U.S. services PMI (Jan); Consumer sentiment (Jan)

Major Corporate Earnings:

• Jan. 20 (Tue): Netflix (Q4 2025)

• Jan. 21 (Wed): Johnson & Johnson (Q4 2025); Charles Schwab (Q4 2025)

• Jan. 22 (Thu): GE Aerospace (Q4 2025); Procter & Gamble (Q2 2026); Intel (Q4 2025)

Sources

BlackRock Investment Institute. “Weekly Market Commentary and Global Outlook Archives.” BlackRock.https://www.blackrock.com/corporate/insights/blackrock-investment-institute/archives

CNBC. “Jim Cramer Reviews Earnings From JPMorgan, Wells Fargo, Bank of America and Citigroup.” January 14, 2026. https://www.cnbc.com/2026/01/14/jim-cramer-reviews-earnings-from-jpmorgan-wells-fargo-bank-of-america-and-citigroup.html

J.P. Morgan Asset Management. “Economic Update.” J.P. Morgan Asset Management, https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/economic-update/

J.P. Morgan Asset Management. “Weekly Market Recap.” J.P. Morgan Asset Management, https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/weekly-market-recap/

T. Rowe Price. “Global Markets Weekly Update.” T. Rowe Price Insights, https://www.troweprice.com/personal-investing/resources/insights/global-markets-weekly-update.html

Yahoo Finance. “NYSE Moves Toward On-Chain Markets With Tokenized Securities Platform.” January 19, 2026. https://finance.yahoo.com/news/nyse-moves-toward-chain-markets-140548932.html