A Stacked Calendar Meets a Seasonal Slowdown

👋Hello and welcome to Monday! 🌅 

Here’s what we’re watching this week:

• Big banks kick off earnings as investors weigh growth momentum against economic uncertainty.

• AI demand puts TSMC in focus as the chip sector tests revenue durability.

• Inflation, retail sales, and Fed speakers are on deck as the S&P enters a January’s historically-slow seasonal patch.

• Seasonally, January’s early strength tends to ebb after the 7th trading session of the month.

Let’s jump in. 🦘🦘🦘

💵What’s the market pricing in for the week ahead?

As the market adjusts risk exposure in the wake of this weekend’s news of the Department of Justice opening a criminal investigation into Federal Reserve Chair Jerome Powell, the spotlight is back on inflation this week, with December’s Consumer Price Index landing Tuesday. The last reading showed price pressures cooling to 2.7%, and investors will be watching closely to see if that trend sticks. Adding to the mix: delayed wholesale inflation data from October and November, which could offer another clue on how much pricing power businesses still have.

All of it feeds straight into the Fed’s next decision. Policymakers are split on whether rate cuts should start as soon as late January, and a parade of Fed speakers this week could tip their hand.

Beyond inflation, the calendar stays busy. November retail sales will help gauge how strong the 2025 holiday season really was, while delayed new home sales data will test whether housing can shake off stubborn affordability issues. The latest budget deficit report will also shed light on how much tariff revenue is flowing into government coffers.

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📈What Earnings Are Saying This Week

Wall Street’s report card kicks off Tuesday, and it starts with a familiar headliner: JPMorgan Chase. The nation’s biggest bank opens Q4 earnings season after a strong showing from banks last quarter—and after announcing it’s taking over the Apple Card. Expectations are high, but CEO Jamie Dimon has already poured a little cold water on the celebration, warning that economic uncertainty is still very much in the picture.

More big banks follow close behind. Wells Fargo reports Wednesday after flagging slower net interest income growth, while BNY Mellon and Goldman Sachs round out a busy week for financials.

Outside the banks, investors will check in on two key parts of the economy. Taiwan Semiconductor’s results will test whether the AI boom is still translating into outsized chip revenue, while Delta Air Lines’ earnings will offer clues on whether travel demand is fully recovering after last year’s shutdown-related disruptions.

🤔 Which companies are poised to possibly over- or underreact to earnings this week?

The largest company to report earnings this week, J.P. Morgan, has a history of very close to the market makers’ expected range during the trading session immediately following earnings (keep reading below the next table for more details on how this is calculated).

Of the 20 largest companies reporting earnings this week, Taiwan Semiconductor has the strongest tendency to overshoot the implied price range immediately following earnings.

On the other side of the coin, of the top 20 companies reporting this week, Sify Technologies shows the greatest likelihood of staying inside its post-earnings expected range (keep reading below the next table for more details).

👇 Below is a look at this week’s biggest earnings reports, sorted by market cap:

Macro had a busy last week, and Venezuela stole the headlines. Fresh efforts to restart the country’s oil machine put downward pressure on the inflation outlook, since Venezuela sits on nearly a fifth of the world’s proven crude reserves.

Markets quickly connected the dots: more supply could mean cheaper oil and gas, and U.S. energy stocks popped as investors penciled in improved earnings visibility.

Meanwhile, the labor picture sent mixed but market-friendly signals. December ADP data showed weaker private payroll growth, reinforcing the idea of a “jobless recovery,” while the ISM Services report suggested the U.S. economy is climbing out of its slowdown without stalling. Add in the softest year-over-year private wage growth since 2021, and the message is clear: productivity gains—helped by AI—are easing wage pressure, boosting margins, and keeping inflation in check, even as they raise bigger questions about where future income growth comes from.

In the end, the S&P 500 powered to an all-time high perch. As today’s chart shows, so far in January, the S&P 500 has been climbing at the rate of its average January gains (not all sessions) since 2000.

Seasonally, however, January’s early strength tends to ebb through month-end after the 7th trading day, which is today’s session.

We should point out, however, that while the average returns tend to diminish during this period, the win rate (the percentage of times the index closes each trading day higher) generally remains positive.

This week, the materials (XLB) sector is expected to be the most volatile sector, with energy (XLE) and technology (XLK) coming in with the next highest levels of implied volatility.

Conversely, the consumer staples (XLP), communication services (XLC), and real estate (XLRE) sectors are expected to have the lowest volatility

Monday

• Fed Speakers: Richmond Fed President Tom Barkin

Tuesday

• Consumer Price Index

• New home sales, NFIB small business optimism index (December), U.S. budget deficit

• Fed Speakers: Richmond Fed President Tom Barkin, St. Louis Fed President Alberto Musalem

• Top Earnings: JP Morgan Chase, Bank of New York Mellon, Delta Air Lines

Wednesday

• U.S. retail sales

• Producer Price Index, Business inventories, Existing home sales, Federal Reserve Beige Book 

• Fed Speakers: Minneapolis Fed President Neel Kashkari, New York Fed President John Williams, Atlanta Fed President Raphael Bostic, Philadelphia Fed President Anna Paulson

• Top Earnings: Bank of America, Wells Fargo, Citigroup

Thursday

• U.S. import/export prices

• Initial jobless claims, Empire State Manufacturing Survey, Philadelphia Fed manufacturing survey

• Fed Speakers: Richmond Fed President Tom Barkin

• Top Earnings: Taiwan Semiconductor, Morgan Stanley, Goldman Sachs, BlackRock, JB Hunt Transport Services

Friday

• Industrial production/capacity utilization

• Top Earnings: PNC Financial Services, State Street, M&T Bank, Regions Financial

Volatility in the form of the CBOE Volatility Index (VIX) crept to a 13-day closing high ahead of what was expected to be the Supreme Court’s tariff decision on Friday. This came even as the S&P 500 was sitting less than 1% below its all-time high.

Once it was announced that the Supreme Court decision had been delayed, however, volatility collapsed, sending the VIX down to a seven-day low close. While this removed the upside trend from volatility, this weekend’s DOJ probe news has caused volatility to spike to three-week highs. This opens the door to the possibility that several of this week’s trading sessions can move outside of the historical ranges shown below.

📋Here’s a curated list of top value-added insights that uncover what’s happening way beyond the usual financial media headlines.