Financial News

Q1 2026 faces a critical valuation test: Can earnings justify the S&P 500 near 7,000 while the 10-year yield pushes 4.24%? With rate cuts repriced to June and the yield curve steepening to +65 bps, the valuation buffer is gone; the "easy money" multiple expansion phase has ended. Early Q4 results reveal a stark divergence: Financials are leading the rotation (JPM +7% revenue), yet "sell the news" reactions in strong performers like BAC suggest the bar for beats is dangerously high. The variant view: Consensus treats strong growth as bullish, but in this "No Landing" regime, robust data is bearish for multiples because it keeps the Fed sidelined. The trade is shifting from duration to economic sensitivity and pure AI infrastructure (SMCI, MU). Watch the 4.50% yield level—a break above this zone historically triggers rapid multiple compression, making the upcoming PCE print and March FOMC dot plot decisive for the quarter's trajectory.

The 'everything rally' fractured into a violent rotation this week as the 10-Year Treasury yield climbed to 4.23%, stalling the S&P 500 (-0.38%) but igniting a 2.0% surge in the Russell 2000 to fresh records. The catalyst was twofold: a 'Warsh Premium' pricing into bonds on rumors of a hawkish Fed Chair pick, and a domestic growth trade that favored small caps and semiconductors (Micron +7.8%) over broad tech. While JPMorgan anchored financials with a 7.6% earnings beat, the macro data flashed a hidden warning: Core Retail Sales rose 3.58% YoY, yet unit demand fell 1%—a classic stagflationary signal where revenue growth is purely inflationary. The variant view: the market is mispricing the risk of a trade war, with new tariff threats on Europe (Greenland dispute) largely ignored by consensus. Watch the 4.30% yield level next week; an official Warsh nomination could trigger a repricing that challenges the 6,900 support on the S&P 500, testing the durability of the soft landing narrative.

The 'sell-the-news' regime has officially arrived, stalling the S&P 500 at 6,940 as strong bank earnings failed to sustain the rally. Despite JPMorgan delivering $46.77B in revenue (+6.9% YoY) and Bank of America beating EPS estimates, the sector retreated (BAC -3.8%), signaling that "good" is no longer good enough for a market priced for perfection. Concurrently, the 10-year Treasury yield crept back to 4.23%, pressuring valuations just as the index tests the psychological 7,000 barrier. While financials fade, semiconductors are decoupling—Micron surged 7.8% on a $250B US-Taiwan trade investment—suggesting capital is rotating into structural policy plays rather than exiting equities entirely. The burden of proof now shifts to Netflix (Tuesday PM), where consensus revenue of $11.97B (+16.8%) must be accompanied by flawless guidance to prevent a broader tech correction; meanwhile, watch for volatility from any Fed Chair nomination rumors (Warsh vs. Hassett) emerging from Davos.

Taiwan Semiconductor ([[TSM]]) confirmed the AI supercycle with a massive $52-56B capex commitment, yet the S&P 500 finished the week flat as the "Warsh Premium" drove 10-Year yields to a 4-month high of 4.23%. While TSM consolidated Friday, the hardware complex ignored the rate spike—Micron ([[MU]]) surged 7.8% and Super Micro ([[SMCI]]) jumped 10.9%—validating the infrastructure buildout thesis. The variant view: The Russell 2000 hitting a record high despite rising yields signals that "animal spirits" and M&A hopes are currently overpowering cost-of-capital headwinds, a divergence that typically resolves violently. A key confirmation signal emerged in Micron, where an insider purchased $8 million in stock near all-time highs. Watch the 4.30% yield level next week; a breach likely triggers algorithmic selling in risk-parity funds, threatening the rotation trade.