Amidst the temporary shelving of tariff policy uncertainty and a mixed December U.S. non-farm payrolls report—where the "soft landing" narrative for the U.S. economy still dominates markets and interest rate cut expectations remain unchallenged—market risk appetite staged a powerful comeback last Friday, leading to across-the-board gains for the three major U.S. stock indices at the close. Global AI computing power industry leaders, especially Nvidia, TSMC, Broadcom, and Micron Technology, spearheaded the day's robust rally, helping the benchmark S&P 500 index and the tech-heavy Nasdaq 100 index, often seen as a global tech stock barometer, post gains in the first full trading week of 2026. Friday's strong stock market rebound propelled the Dow Jones Industrial Average and the S&P 500 to once again set new all-time closing records. Throughout the week, the Dow, centered on large-cap value companies, led the gains among major U.S. indices with a weekly increase exceeding 2%. The tech-focused Nasdaq Composite rose just under 2% for the week, while the S&P 500 gained approximately 1.6%. The international oil benchmark, Brent crude futures, also exhibited its strongest weekly gain in months. After markets digested news of a U.S. military operation leading to the arrest of Venezuelan President Nicolás Maduro and the Trump administration's large-scale takeover of the country's oil industry, oil prices saw a significant rise, their largest in months. By the close of U.S. markets on Friday, Brent crude futures had risen over 3.7% for the week, while U.S. WTI crude futures climbed about 2.6%.
Looking ahead to this week, the second full trading week of 2026, it is shaping up to be a "super heavyweight week." The U.S. government is scheduled to release Consumer Price Index (CPI) data on Tuesday, followed by the Producer Price Index (PPI) and the retail sales data, often dubbed the "terror data," on Wednesday. On Tuesday, January 13th, the U.S. will release December CPI figures, with Wall Street analysts widely anticipating a significant month-over-month rebound in core CPI. Subsequently, PPI data for October and November, along with November retail sales figures, will be published. Given that consumption accounts for roughly 70% of U.S. GDP, retail sales data serves as a crucial indicator for investors assessing the current state and future prospects of the U.S. economy, hence its market nickname; its release often triggers significant volatility across financial markets, including stocks. These upcoming key economic data points will undoubtedly be the primary focus for global traders this week, as they use this information to gauge whether the U.S. economy remains on a "soft landing" trajectory and if cooling inflation might prompt the Federal Reserve to continue cutting rates beyond the three reductions implemented in late 2025. Particularly, traders in interest rate futures and bond markets will scrutinize the CPI and PPI data for insights into potential policy actions by Fed officials at this month's monetary policy meeting and the trajectory of rate cuts for the remainder of the year. As of last Friday, traders still largely expected a 95% probability that the Fed would hold rates steady in January, while pricing in two rate cuts for the full year.
The U.S. corporate earnings season is also set to begin, with Wall Street's largest commercial banks leading the way with their reports. Consequently, this latest earnings season represents not only a major test for the consensus expectation among these financial giants that the U.S. bull market will extend into 2026—Wall Street analysts generally expect the S&P 500 to continue its bull run and potentially target the 8,000 level—but also a significant challenge for the share prices of these very banks, which are already at or near record highs buoyed by the prolonged bull market, a recovery in investment banking, and surging client trading volumes. Wall Street giants JPMorgan Chase (JPM.US) and Bank of New York Mellon (BK.US) will report Q4 earnings on Tuesday, officially kicking off the season. Other major financial institutions like Bank of America (BAC.US), Wells Fargo (WFC.US), and Citigroup (C.US) are scheduled to report on Wednesday local time. This week will also see earnings releases from other prominent companies, including Wall Street investment banking powerhouses Goldman Sachs (GS.US) and Morgan Stanley (MS.US), as well as the world's leading contract chipmaker, TSMC (TSM.US), all reporting on Thursday local time. For the "AI bull narrative" currently driving U.S. stocks, TSMC's performance is critically important; its report is considered a bellwether for the AI computing supply chain. Investors will scrutinize its results to gauge whether global demand for AI computing clusters from leaders like Nvidia and Broadcom remains exceptionally strong, and to assess the health of demand for chips used in consumer electronics like smartphones, tablets, and PCs.
Did the December non-farm payrolls report outline a slowing trajectory for the U.S. labor market, and will CPI and PPI ignite stronger rate cut expectations? The heavily anticipated December non-farm payrolls report released last Friday provided global investors with the final crucial piece of data for the U.S. labor market in 2025. When the specific results were published, the market observed that, excluding periods of global economic recession, 2025 marked the weakest year for U.S. job growth since 2003. Aggregating the December data, the U.S. economy added approximately 584,000 jobs in 2025, significantly lower than the over 2 million added in 2024. This is the first time annual job growth has fallen below 1 million since 2003 (excluding 2008, 2009, and 2020). However, the stock market's positive reaction to Friday's report indicates that the "soft landing" logic for the U.S. economy still dominates, suggesting the future outlook for the labor market might not be as dire as some economists predicted. "Labor market conditions are cooling, but far from collapsing," wrote Neil Dutta, head of economic research at Renaissance Macro, in a report on Friday. The U.S. unemployment rate unexpectedly fell to 4.4% in December, its lowest level in four months. If investors focus more on whether the economic situation is improving or worsening—rather than its current absolute state—then the labor market undoubtedly shows positive signs of improvement as we enter 2026. The December jobs data painted a picture of "low growth but not out of control," interpreted by markets as highly favorable for the "soft landing" narrative and reinforcing a "Goldilocks" scenario. The unexpected drop in the unemployment rate to 4.4% made it easier for markets to categorize this as a "low hiring, low firing" type of labor market slowdown, rather than a recessionary acceleration. Following the release of slightly below-expected but温和 payroll numbers and the surprising drop in unemployment, S&P 500 index futures rose, highlighting market acceptance of the soft landing logic and the lack of pressure on rate cut expectations. Overall, this jobs report was seen as "just right"—exactly what the market wanted to see—reflecting continued economic resilience without negatively disturbing the soft landing expectation, while also not prompting a reassessment of Fed rate cut expectations. Interest rate futures still price in two to three Fed rate cuts for 2026, higher than the median projection of just one cut indicated in the latest FOMC dot plot.
According to Wall Street giants like Goldman Sachs and Morgan Stanley, the macro narrative of a U.S. "soft landing" is expected to intensify in 2026—meaning the U.S. economy is projected to grow faster than market expectations. Goldman Sachs recently stated in a research report that the strong growth resilience seen in 2025 is expected to continue robustly into 2026. As tax cut details from the Trump administration's "Big and Beautiful" act begin to take effect alongside more favorable loose financial conditions, coupled with significant alleviation of headwinds from tariffs and inflation, the U.S. economy's "soft landing" trajectory is anticipated to materialize in 2026. However, market experts including Dutta, BlackRock's Rick Rieder, and Pantheon Macroeconomics' Samuel Tombs pointed out on Friday that teenage unemployment remains quite high. The unemployment rate for the 16-24 age group now stands at 10.4%, up from 9% last year and also higher than the 8% recorded in December 2023. Coupled with an increase in the number of unemployed people jobless for over 27 weeks—reaching 1.95 million in December, up from 1.56 million a year ago and now accounting for a quarter of all unemployed—this indicates a clear lack of vitality in the U.S. labor market. Regarding Fed rate cut expectations or the market's projected trajectory, the December jobs data failed to exert significant downward or upward pressure. Therefore, market focus has now sharply shifted to whether the upcoming CPI and PPI reports will further dampen or fuel expectations for rate cuts.
On January 13th, early Tuesday local time, the U.S. will release December CPI data. Wall Street analysts generally anticipate a notable month-over-month rebound in core CPI. Morgan Stanley forecasts a 0.36% MoM increase for December CPI, while Bloomberg Economics projects 0.38%, both significantly higher than the average 0.08% MoM growth seen in October-November. Analysts believe this rebound may primarily stem from statistical distortions related to the federal government shutdown rather than a genuine rise in inflationary pressures, and the market is likely to view it as a one-time technical factor. Following CPI, two other key U.S. economic releases are scheduled: PPI for October and November, followed by November retail sales data. Wall Street analysts generally expect core PPI growth to remain relatively温和 for these two months, suggesting limited impact on Fed rate cut expectations. The main point of interest is that, as a key gauge of upstream inflationary pressure, the U.S. PPI data will validate whether domestic cost-side price pressures continue to ease, providing an important input for the PCE inflation index scheduled for release later this month. Additionally, Wall Street analysts broadly expect a significant 0.7% MoM rebound in overall retail sales for November, following a flat reading in October. This anticipated rebound is largely attributed to a modest recovery in auto sales from a sharp drop caused by the expiration of electric vehicle tax credits, coupled with continued strength in robust online transaction volumes during the "Black Friday" and "Cyber Monday" shopping events.
In other major events, the market anticipates that the U.S. Supreme Court might issue its ruling on the Trump administration's tariffs this Wednesday, while the risk of a U.S. government shutdown re-emerges. After taking office in 2025, the Trump administration invoked the International Emergency Economic Powers Act to implement a series of tariff hikes via executive orders, bypassing Congressional approval. On January 9th local time, the U.S. Supreme Court indicated it would not issue a ruling on the tariff case that day. The Court stated that next Wednesday, January 14th, would be its next scheduled day for releasing decisions.
Wall Street giant JPMorgan Chase kicks off earnings season! Wall Street's bull market faith and the "AI computing power bull narrative" face a super test. When JPMorgan reports its Q4 earnings on Tuesday morning Eastern Time, the latest U.S. earnings season will officially commence. Wall Street analysts widely expect the collective reports from major banks this week to showcase record-breaking financial industry performance. The new earnings season begins in mid-January, with giants like Goldman Sachs, Morgan Stanley, and JPMorgan leading the charge. The earnings and future outlook provided by the management of these financial behemoths will significantly impact U.S. and even global stock markets, with expectations high for a strong start to the season fueled by better-than-expected growth and optimistic guidance. Regarding growth expectations for Wall Street's large banks in 2026, the primary profit engines are seen as the Net Interest Income (NII) recovery cycle and asset repricing. Goldman Sachs points out that market consensus may be significantly underestimating the resilience of strong growth in NII, investment banking, wealth management, and equities trading businesses. As Wall Street banks prepare to open the earnings season, Goldman Sachs published a report stating its "constructively positive" outlook for the U.S. bank sector in 2026, expressing optimism for the upcoming Q4 2025 earnings season. It expects strong results from JPMorgan and other giants, laying a solid foundation for the trend of continued profit expansion anticipated in Q4 2025 reports and the extension of the bull market into 2026. Goldman's analyst team recommends investors buy large diversified bank stocks on dips, citing names like Bank of America, JPMorgan Chase, and Citigroup. The team suggests that entering 2026, the large bank sector is on a "more favorable and sustainable" earnings path—with NII expected to continue recovering through 2027 after bottoming in mid-2024; capital markets and wealth management fees maintaining resilience with modest growth; and while revenues and profits improve substantially, expense growth remains stable, creating positive operating leverage. Regarding capital and buybacks, Goldman identifies "potential regulatory capital reforms and the pace of capital return" as key variables.
For overall S&P 500 index profits in the fourth quarter, according to consensus estimates compiled by FactSet on Friday, analysts project that Q4 reports will reveal a tenth consecutive quarter of year-over-year profit growth for the index's components. They expect companies in the index to report aggregate earnings growth of 8.3% for Q4 2025, implying an acceleration from already robust year-ago profit figures. As the earnings season approaches, another company closely watched by Wall Street is TSMC. The key focus will be whether the chipmaking titan can deliver on its strong growth narrative as the core foundry for AI chips, particularly regarding sustained robust demand from major AI computing clients like Nvidia for advanced process nodes and CoWoS/3D advanced packaging. Markets will closely monitor TSMC's Q4 profits, future capital expenditure expectations, and management's revenue growth guidance for the full year. Revenue data released by TSMC last week showed December revenue of approximately NT$335 billion, a 20.4% year-over-year increase, though down 2.5% from November 2025. Cumulative revenue for the previous year reached NT$3.81 trillion, representing a 31.6% annual increase. Based on the latest institutional calculations, TSMC's Q4 revenue (October-December) totaled NT$1,046.08 billion, significantly higher than the NT$868.46 billion from the same period a year prior and also exceeding the NT$1.0359 trillion consensus forecast from LSEG based on predictions from 20 historically accurate analysts. This performance is largely consistent with the company's prior guidance range of $32.2 billion to $33.4 billion provided during its earnings call, landing near the high end. Last Monday, TSMC's Taiwan-listed shares surged as much as 6.9%, again hitting a record high and pushing the benchmark Taiwan stock index above the 30,000-point mark. This rally occurred after Goldman Sachs dramatically raised its 12-month price target for TSMC by 35% to NT$2,330, further reinforcing market confidence in the long-term strength of demand for AI-related computing infrastructure. TSMC's Taiwan shares recently closed at NT$1,680. Its U.S.-listed ADRs have surged approximately 8% since the start of 2026, bringing its market capitalization close to $2 trillion. The high-demand AI GPUs since 2023 and the recently explosive demand for AI ASICs are all reliant on TSMC. As the world's largest contract chipmaker, with the AI frenzy showing no signs of abating and continuing to sweep the globe, its clients—chip giants like Nvidia, AMD, and Broadcom—continue to benefit from surging demand for the core infrastructure of AI: AI chips. The massive increase in chip manufacturing contracts from these giants has driven TSMC's consistently stronger-than-expected performance expansion since last year, underpinning the logic behind the repeated new highs in its share price, both in Taiwan and for its U.S. ADRs.
According to data compiled by FactSet, Wall Street analysts project that 8 out of the 11 sectors within the S&P 500 will report profit growth for the quarter, indicating broad-based expansion with only the Industrials, Energy, and Consumer sectors potentially lagging. Looking ahead to the coming year, Wall Street expects this profit growth trend to continue. As reported by Bloomberg's Alexandra Semenova in late December, every prominent Wall Street strategist is bullish on U.S. stocks extending their bull market performance this year. Most of these forecasts are based on an expected acceleration in profit growth that outpaces consensus estimates. "Persistently strong and expanding profit margins are expected to translate modest revenue growth into double-digit profit growth, which should propel stock prices to continue their bull market trajectory," wrote Sam Ro, publisher of the stock market newsletter *TKer* and a financial contributor to Yahoo Finance, in December. "The extent of these earnings and price increases will depend on whether market valuations can remain near their historical highs."
Shutdown Risk and Tariff Ruling. U.S. federal government funds are once again facing a critical shortage, raising the risk of a government shutdown at the end of the month. To avert a shutdown after January 30th, Congress is accelerating work on appropriations legislation. Media reports indicate the House of Representatives has passed three spending bills, which could move to the Senate for consideration this week. This stage becomes a key market focus, as its progress will directly determine the level of shutdown risk at month-end. Rapid passage by the Senate would effectively stabilize market sentiment. Specifically, the three passed bills, referred to as a "minibus" spending package, would fund the Department of Energy, Department of Commerce, Department of Justice, as well as water projects, the Environmental Protection Agency (EPA), and federal research programs through the end of the fiscal year. Senate Majority Leader John Thune indicated that consideration of this package could occur as early as next week. "Time is very tight, and a government shutdown cannot be ruled out, but Congressional negotiations to avoid a shutdown appear to be making progress," said Michael Townsend, Managing Director of Legislative and Regulatory Affairs at Charles Schwab. Some U.S. media reported that the Supreme Court completed its opinion disclosure work last Friday but did not issue a ruling on the Trump tariffs. Speculation had previously suggested a ruling might come on Friday, but no decision was made then, and the timing for a final ruling remains unclear. The U.S. Supreme Court has stated that next Wednesday, January 14th, will be its next scheduled day for releasing decisions.
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