Market Update: January 2026

Bond vigilantes crashed the party.

The first half of January has delivered a reality check to the post-election euphoria. While corporate America—led by JPMorgan Chase ($JPM) and Goldman Sachs ($GS)—posted stellar earnings, the bond market refused to play along. The 10-year Treasury yield climbed to a 4-month high of 4.23%, acting as a gravity well for equity valuations. Political noise regarding the Fed Chair nomination and a surprise grid overhaul injected volatility, leaving the S&P 500 (GSPC) closing the week at 6,940.

Closing Snapshot (Jan 16)

Equities

  • S&P 500 (GSPC): 6,940.01 (Daily: -0.06%)
  • Nasdaq Composite (IXIC): 23,530.02 (Daily: -0.06%)
  • Dow Jones (DJI): 49,359.33 (Daily: -0.17%)
  • Semiconductors (SOX): 7,837.30 (Daily: +1.15%)

Fixed Income & Commodities

  • 10Y Treasury Yield (TNX): 4.23% (4-month high)
  • Gold: $4,595/oz (-0.6%)
  • Crude Oil (WTI): $59.40 (+0.4%)
  • Bitcoin: ~$95,400 (down from >$97,500)

What Worked

Policy-driven growth and banking resilience were the clear winners this week.

  • Semiconductors: The historic US-Taiwan trade deal—lowering tariffs to 15% in exchange for $250B in investment—lit a fire under the sector. Micron ($MU) surged 8% on the news, aided by a nearly $8M insider buy.
  • Big Banks: Financials proved they can thrive in a higher-rate environment. Morgan Stanley ($MS) and Bank of America ($BAC) beat estimates, validating the "soft landing" thesis for credit quality.
  • PNC Financial ($PNC): Gained 4% on earnings, highlighting the rotation into high-quality regional exposure.

What Didn't Work

Rate sensitivity and regulatory shockwaves punished defensive sectors.

  • Power Providers: Constellation Energy ($CEG) and Vistra ($VST) plunged 10% and 8% respectively following reports of a Trump administration grid overhaul. The regulatory moat these firms enjoyed is suddenly in question.
  • Precious Metals: After hitting record highs earlier in the week, Gold retreated 0.6% and Silver dropped over 3% as real rates rose. The 4.23% yield on the 10-year is making non-yielding assets expensive to hold.
  • European Equities: Markets across the Atlantic closed lower, rattled by the "Greenland tariff" proposal and fears of a renewed trade war.

The Surprise

The Fed Chair Uncertainty. Markets hate uncertainty, and President Trump's hint that Kevin Hassett might not be the nominee to replace Powell sent shivers through the bond market. Consensus expected a smooth transition; instead, we got a spike in yields. This personnel drama is now a material market input, arguably outweighing the softer-than-expected inflation data released earlier in the week.

Month Ahead Setup

As we move deeper into Q1, the market faces a complex setup: strong earnings growth (+8% YoY for Q4) battling against restrictive yields.

Key Questions

  • The Yield Ceiling: Can the S&P 500 maintain current valuations if the 10-year breaks 4.30%?
  • Policy Clarity: Will the administration clarify the grid overhaul and Fed Chair nomination, or will policy-by-headline continue to drive volatility?
  • Tech Leadership: With the US-Taiwan deal inked, can the SOX index lead a broader rally, or is the trade already priced?

Positioning remains elevated, but the rotation out of utilities and into cyclicals suggests the underlying bid for growth is intact—provided rates stabilize.