Markets Weaken Amid Fed Investigation
January 12, 2026
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Markets are opening weaker this morning following the news of the criminal investigation launched into Federal Reserve (Fed) Chairman Jerome Powell. Concerns over Fed independence are driving bond yields higher, counter to the goals of President Trump and the Treasury. Credit card and bank shares are also falling premarket after Trump proposed a one-year cap of 10% on interest rates.1
Last week, the S&P 500 Index rose 1.58%,2 while the Russell 2000 jumped 4.68% as investors rotated into small-cap stocks to start 2026.3 In the fixed-income market, major headlines came late Thursday when the Trump administration announced plans to purchase $200 billion in mortgage-backed securities (MBS).4 This action is expected to lower mortgage rates and improve housing affordability. Mortgage bonds were approximately 10 basis points (bps) tighter following the news.5 On Friday, the nonfarm payroll data revealed a 50,000 increase in jobs, below expectations and accompanied with additional negative revisions of 76,000 for prior months.6 However, investors appeared to focus on the decrease in the headline unemployment rate to 4.4%, down from the revised 4.5% in the prior period, along with the Bureau of Labor Statistics’ release from the previous day highlighting a 4.9% productivity increase for the third quarter of 2025.7,8 The investment-grade corporate market was one bp tighter on the week,9 even with the primary market pricing nearly $100 billion in deals (the heaviest since 2020).10 As noted last week, the market was poised to absorb the elevated supply.
Investors will see the first 2026 earnings reports this week, starting with JPMorgan Chase on Tuesday.11 The consensus is calling for an estimated earnings growth rate for the S&P 500 of 8.3% year-over-year for the fourth quarter of 2025, which may yet again be a low bar.12 Tuesday also marks the Consumer Price Index (CPI) release for December, with the Street expecting the headline number to remain unchanged from November at 2.7%.13 The Producer Price Index (PPI) and retail sales for November are both slated for Wednesday.14 Additionally, the market did not receive the Supreme Court’s tariff ruling on Friday, so it will continue to watch for a ruling this week.15 The largest commercial real estate finance event of the year is kicking off on Monday.16 Watch for headlines from the annual ICR conference, which will provide insight into the consumer in 2026. Finally, rhetoric surrounding Greenland appears to be escalating, so I’ll keep monitoring headlines and watch for details on potential developments.
Sources:
1Bloomberg – U.S. Bank Shares as Trump Slams Credit Card Rates; 1/12/26
2,3,5,6,9Bloomberg
4Bloomberg – Trump’s $200 Billion MBS Order Asserts New Power Over Markets; 1/9/26
7Bureau of Labor Statistics – Employment Situation Summary; 1/9/26
8Bureau of Labor Statistics – Productivity and Costs; 1/8/26
10Goldman Sachs
11Market Beat – JPMorgan Chase & Co. (JPM) Earnings Date, Estimates & Call Transcripts; as of 1/12/26
12FactSet – Earnings Insight; 1/9/26
13MarketWatch – Economic Calendar; as of 1/12/26
14MarketWatch – Economic Calendar; as of 1/12/26
15CNBC – Supreme Court holds off on Trump tariff ruling for now — what’s at stake for economy; 1/8/26
16Morningstar – CREFC Set to Host Largest Gathering of Commercial Real Estate Finance Leaders Next Month in Miami; 12/16/26
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