Market Recap - Week of January 12 through January 16, 2026

The S&P 500 index edged down 0.4% this week as several big banks began the quarterly earnings season with weaker-than-expected revenue.

The S&P 500 ended Friday's session at 6,940.01. Despite the slight weekly drop, the market benchmark is up 1.4% this month.

JPMorgan Chase, Wells Fargo, and Citigroup were among the banks that disappointed investors this week. JPMorgan and Wells Fargo both surpassed expectations for Q4 adjusted earnings per share, but revenue missed Street views amid declines in investment banking.

JPMorgan Chief Executive Jamie Dimon issued a warning that "markets seem to underappreciate the potential hazards - including from complex geopolitical conditions, the risk of sticky inflation and elevated asset prices."

On the upside, real estate jumped 4.1%, followed by a 3.7% climb in consumer staples and a 3% increase in industrials. Energy, utilities, and materials also edged higher.

Last Week’s Economic Reports

Headline/core CPI rose 2.7%/2.6% y/y
Retail sales rose 0.6% m/m
Total existing home sales rose 5.1% m/m but only 1.4% y/y.
The median existing home sale price was $405,400, up only 0.4% from a year ago. In the context of 2.7% inflation, we see that home sales are rising only because prices are falling in real (inflation-adjusted) terms.

Up Next

Earnings reports expected next week include Netflix, 3M, US Bancorp, Johnson & Johnson, Charles Schwab, Procter & Gamble, GE Aerospace, Abbott Laboratories, and Intel.

Economic data will include December pending home sales, the first revision to Q3 gross domestic product, and a delayed report on November personal consumption expenditures.

S&P 500 Sector and Stylebox Returns

How to read the stylebox: The horizontal axis represents investment style, which can be value, blend, or growth for stocks and mutual funds. The vertical axis represents market capitalization for stocks, categorized into large, medium, and small companies. The number in each box represents the percentage growth of the category that is the intersection of the column and the row. For example, large-cap value is in the top-left corner of the box, so the large-cap value category is up by 12.4% YTD (year-to-date).

Thought of the Week

In an effort to lower mortgage rates, President Trump recently directed two government-sponsored enterprises (GSEs) to purchase $200bn worth of mortgage-backed securities (MBS). While the details of these purchases remain in flux, the announcement helped 30-year mortgage rates slide to a 3-year low. However, multiple factors influence mortgage rates, most of which aren’t impacted by MBS demand. These fundamental drivers may prove more consequential for the outlook for mortgage rates.

Due to their similar duration profiles, 30-year mortgage rates track closely with 10-year Treasury yields. In simple terms, 10-year yields can be decomposed into three drivers: real policy rates, inflation, and a term premium that compensates investors for additional risks borne over longer investment horizons. Abnormally low policy rates, quantitative easing, and subdued inflation suppressed these drivers in the decade after the GFC. However, that period was an anomaly. 10-year yields averaged 2.4% in the 2010s vs. 7.2% in the 25 years before the GFC. Additional rate cuts could lower mortgage rates but might prove counterproductive if they boost inflationary pressures. Even without further rate cuts, tariffs could lift inflation, while the term premium today is already low and could be pressured higher by fiscal concerns. Mortgage rates also reflect a mortgage's pread, or the gap between mortgage rates and 10-year Treasury yields. This spread embeds origination and servicing costs and compensation for prepayment, liquidity andc redit risks. This spread could narrow as GSEs ramp up MBS purchases, even with the Fed reducing its holdings.

All to say, increased MBS demand could modestly reduce mortgage rates, but not sustainably. Moreover, even at 6.1%, mortgage rates remain low by historical standards, and investors shouldn’t expect them to return to the artificially low levels of the 2010s.

Source: JP Morgan (edited)

Thank you to all who attended this month's market Update webinar!

You can watch the replay here:

https://www.youtube.com/watch?v=816v5DohZiE

The episode is also available wherever you listen to podcasts!