MW Investors have shrugged off threats to the economy. With fourth-quarter earnings due, will company CEOs?
By Bill Peters
Earnings Watch: JPMorgan and Delta start off the fourth-quarter earnings season amid high expectations, a more expensive market and questions about the Fed's independence
JPMorgan Chase reports quarterly results on Tuesday.
When Delta Air Lines Inc. and JPMorgan Chase & Co. kick off fourth-quarter earnings this week, we'll get the first look at whether corporate America's enthusiasm matches up with that of investors, amid worries about the job market and deeper questions about the Federal Reserve's ability to manage the economy independently.
For the fourth quarter, at least, Wall Street still expects another round of solid results for the companies in the S&P 500 Index.
In a report on Friday, FactSet forecast earnings-per-share growth of 8.3% for the fourth quarter. That's below the average over the past five years, but it would still mark the 10th quarter of consecutive growth. Profit margins, meanwhile, are expected to stay strong, at 12.8%.
That report said analysts nudged their estimates higher for those results during the quarter - a sign of optimism, and something they don't normally do - even as concerns endured about higher prices, tariffs and the impact of the longest-ever government shutdown. The tech sector helped drive that confidence, despite enduring questions over stratospheric spending on artificial intelligence.
But as expectations stay high, stocks have gotten expensive. The S&P 500, as of last week, had been trading at more than 20 times estimated earnings.
"It'll be very hard to justify stocks and stock-market investors being positive and optimistic if the outlook for the companies is softening or not improving," Sheraz Mian, director of research at Zacks, said in an interview.
Investors rode into 2026 hopeful that a cocktail of lower interest rates, tax breaks, easing inflation and tariff clarity would loosen up consumer spending. But the fourth-quarter results - and the more-important financial forecasts that will accompany them - will follow a December jobs report that showed signs of a still-weak but firming labor market, and a Justice Department criminal investigation into Federal Reserve Chair Jerome Powell over whether he lied to Congress about cost overruns for renovations to the central bank's headquarters, which Powell and others have cast as a pretext for an attack on the Fed's independence.
Stocks on Monday appeared unfazed by the investigation, at least for now. But JPMorgan $(JPM)$ and the other banks could field questions about the state of the Fed on calls with reporters and analysts, amid broader pressure by President Donald Trump to get Powell to cut interest rates more aggressively.
"As the long-term outlook goes, the independence of the Fed is extremely relevant, and we have plentiful evidence that monetary policy driven by politics tends to end up with inflationary results," Giuseppe Sette, president of the AI-driven analytics firm Reflexivity, said in a email.
"However, the short term might be more resilient," he continued. "We've seen the market effectively shake off Ukraine for a longer while. We've seen it shake off Venezuela. We've seen it shake off Iran and even the Greenland discussions."
Markets are also still waiting for the Supreme Court to rule on the legality of Trump's emergency-powers tariffs, after justices held off on a ruling on Friday. Nancy Tengler, the chief executive of Laffer Tengler Investments, said she'd want to know how the companies reporting in the weeks ahead might rework their production and supply chains if the court ruled against the government.
However, the Trump administration has other ways to place duties on imports. And she said that many companies had already largely rerouted their production and shipping infrastructure, or made other adjustments, to account for the higher import taxes.
"You may see some pops in better-than-expected guidance," she said, referring to the financial outlooks companies provide during quarterly earnings. "But I just don't think it's going to amount to much."
Heading into the results, some Wall Street analysts were hopeful that Trump's so-called "Big Beautiful Bill" legislation - which cut taxes but also cut or slapped restrictions on some public assistance - might give consumers fatter tax refunds or otherwise jolt spending, helping chains like Walmart Inc. $(WMT)$ and brands like Nike Inc. $(NKE)$.
Lower interest rates and less-aggressive price increases could also help, as companies run out of room to charge more without putting a bigger dent in demand. However, analysts said wealthier consumers would likely benefit more from any policy changes or easing borrowing and living costs.
"The K-shaped economy that everybody keeps talking about is certainly still intact," Eric Clark, chief investment officer at Accuvest Global Advisors, said in emailed comments. "The upper part of the K, the higher income, with real assets and homes, they're doing pretty well, and they're spending really well. The small part, the lower-income cohorts, are struggling, because inflation is still present in a lot of parts of our lives."
"Retail sales have been strong, but it's not been broad," he continued. "Consumers are being very choiceful. They're asking, 'Is this item an interesting item? If it's discretionary, do I love it?'"
As more companies report, Tengler said she'd also be watching for remarks about spending and hiring plans. Those details would come amid the current inertia of the "no hire, no fire" job market, and as analysts watch for the impacts of AI on headcount.
Bob Lang, founder and chief strategist at Explosive Options, also said he'd be watching for hiring trends.
"A lot of companies were able to get away with keeping employment high, keeping their payrolls up, because they were able to raise prices and offset some of that increased cost in employment," he said.
"I don't think that they're going to have that ability to do that going forward," he added later. "I think inflation has come down quite a bit."
JPMorgan (JPM) and Delta $(DAL)$ report on Tuesday. Bank of America Corp. (BAC), Wells Fargo & Co. $(WFC)$, Citigroup Inc. (C), Morgan Stanley $(MS)$ and Goldman Sachs $(GS)$ also report during the week.
Expectations for the banks are higher, as regulators back away from the industry. Analysts were upbeat about dealmaking, investment banking, mergers and acquisitions and IPOs.
However, Mian, at Zacks, said higher interest rates and concerns about the economy had weighed on loan demand. Credit quality could be another focus. But he said concerns about credit quality and delinquencies had leveled off.
Delta, meanwhile, reports in the wake of what Melius Research analyst Conor Cunningham called a "lost year" for the airlines, punctuated by the government shutdown. But Delta's push toward wealthier fliers has been a plus for the carrier's sales.
"Not all airlines were able to take on a challenging environment and minimize downside to estimates, but Delta and United managed the best, while others struggled," Cunningham said in a note last week.
The Big Tech companies that report in the weeks ahead - like Microsoft Corp. $(MSFT)$, Nvidia Corp. (NVDA), Alphabet Inc. $(GOOG)$ $(GOOGL)$, Amazon.com Inc. (AMZN) and Apple Inc. $(AAPL)$ - will face concerns about financing for the AI infrastructure buildout, which has driven up energy costs, and circular deal-making. But Tengler said that for investors, there are still few places to find growth.
"We keep hearing that the tech trade is dead," Tengler said. "I've been keeping track: We've heard it every summer since 2022, and yet that's where all the growth has come in, not just in the economy and the capex side of things, but in stock-price performance."
She added: "We're still seeing a big, huge spread between technology earnings growth and the rest of the market."
-Bill Peters
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(END) Dow Jones Newswires
January 12, 2026 16:20 ET (21:20 GMT)
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