The U.S. stock market experienced another volatile week driven by comments from U.S. President Trump. Trump's threat to impose tariffs on eight European countries supporting Greenland initially triggered a sharp market decline, but his abrupt reversal days later, canceling the planned tariffs, allowed markets to recoup most of their losses. For the week, the Dow Jones fell 0.53%, the S&P 500 dropped 0.35%, and the Nasdaq declined by less than 0.1%. Yung-Yu Ma, Chief Investment Strategist at PNC Financial Services Group, commented, "The movement over the past few days has resembled a brief but steep roller coaster ride. I'm not sure if it's completely over, but at least the most intense phase appears to have passed."
Looking ahead, market focus will shift back to macroeconomics, monetary policy, and corporate earnings, with the Federal Reserve's policy meeting expected to be the main event. The market widely anticipates that the Fed will keep the federal funds target rate unchanged at 3.50%–3.75% when it announces its decision on Wednesday, Eastern Time. Investors will closely scrutinize the number of dissenting votes and the content of the accompanying statement and commentary to gauge the timing and pace of future rate cuts.
HSBC economists stated in a report, "We expect Fed Chair Powell to emphasize that future interest rate adjustments will depend on the evolution of economic data." Current data shows money markets have fully priced in a 25-basis-point rate cut for July, with a significant probability of another cut before year-end.
On the earnings front, approximately one-fifth of the S&P 500 constituents are scheduled to report quarterly results next week, including four members of the "Magnificent Seven": Apple, Microsoft, Meta, and Tesla. After delivering double-digit returns for three consecutive years, the S&P 500 has risen approximately 1% year-to-date in 2026. The index currently trades at a valuation of over 22 times forward earnings, significantly above its long-term average of 15.9 times. Chris Galipeau, Senior Market Strategist at Franklin Templeton, noted, "This implies that earnings reports must deliver compelling results." He added, "We might get distracted by economic data or geopolitical events like Greenland, but ultimately, corporate profits are what drive the market."
A key theme of this earnings season is whether companies are starting to see real benefits from AI-related investments. Late in 2025, concerns emerged about the return on massive capital expenditures directed toward data centers and other infrastructure, which weighed on tech and other AI-related stocks. PNC's Ma said, "The crucial point is that the market needs to hear that large companies in the S&P 500 are continuing to advance AI applications and related strategies. This will convince investors that AI is not just an 'infrastructure build-out story' but is genuinely creating value."
Simultaneously, investors will remain highly vigilant for geopolitical "black swan" events and other potential policies from the Trump administration. Galipeau warned, "If the Greenland situation spirals out of control, combined with factors like tariff threats, it would undoubtedly dent market confidence and could put significant pressure on stocks."
Overview of key international economic events for the coming week (Beijing Time): Monday (Jan 26): U.S. November Durable Goods Orders MoM, Germany January IFO Business Climate Index, U.S. January Dallas Fed Manufacturing Index Tuesday (Jan 27): U.S. November FHFA House Price Index MoM, U.S. November S&P/Case-Shiller 20-City Composite Home Price NSA YoY, U.S. January Conference Board Consumer Confidence, U.S. January Richmond Fed Manufacturing Index Wednesday (Jan 28): Bank of Canada Interest Rate Decision and Monetary Policy Report, Australia December CPI (Unadjusted), Germany February GfK Consumer Confidence Index Thursday (Jan 29): Fed FOMC Interest Rate Decision, Fed Chair Powell's Press Conference, Eurozone January Economic Sentiment Indicator, U.S. November Trade Balance, Banco Central do Brasil Interest Rate Decision Friday (Jan 30): Eurozone Q4 GDP Growth Rate Preliminary, France Q4 GDP, U.S. December PPI, U.S. January Chicago PMI.
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