After a rocky start, Wall Street found its footing this week as blockbuster earnings from banks and chipmakers overwhelmed worries about Federal Reserve independence and geopolitical flashpoints. With markets closed Monday for Martin Luther King Jr. Day, investors are heading into the three-day weekend cautiously optimistic.

The Week by the Numbers

As of Thursday's close:

  • S&P 500: 6,944.47, up 0.26% Thursday but down 0.3% for the week
  • Dow Jones Industrial Average: 49,442.44, up 292 points (0.60%) Thursday, down 0.1% for the week
  • Nasdaq Composite: 23,530.02, up 0.25% Thursday but down 0.6% for the week
  • Russell 2000: Extending historic outperformance with a 10-day win streak against the S&P 500

Friday morning futures pointed to a continuation of Thursday's gains, with S&P 500 futures up 0.28% and Nasdaq futures climbing 0.46%.

The Earnings Story

This week belonged to earnings, with some of the world's largest financial institutions and technology companies delivering results that mostly exceeded expectations.

Banks Dominated:

  • Goldman Sachs: Surged 4.6% after fourth-quarter profit topped estimates, driven by strong equities trading and investment banking recovery
  • Morgan Stanley: Rose 5.8% on wealth management strength and better-than-expected trading revenue
  • BlackRock: Gained 2% after reporting record assets under management above $14 trillion
  • PNC Financial: Advanced 3% on earnings and revenue beats
  • M&T Bank: Beat estimates with Q4 adjusted EPS of $4.72 versus $4.47 expected

Chips Led Tech Higher:

  • TSMC: Jumped 4.4% after reporting Q4 profit up 35% and announcing plans to boost 2026 capital spending to $52-56 billion
  • Nvidia: Gained 2.1% on TSMC's results, which validate continued AI chip demand
  • Applied Materials: Surged 5.6% as the chip equipment rally broadened
  • AMD, Micron, Broadcom: All posted gains on the TSMC halo effect
"This was validation week for the bull case," said Adam Turnquist, chief technical strategist at LPL Financial. "When the world's most important chipmaker says AI demand is strong enough to warrant a $54 billion capex budget, and the largest banks say dealmaking is back, you pay attention."— Adam Turnquist, LPL Financial

The Concerns That Remain

Despite Thursday's rally, the week wasn't without its worries. Several factors kept a lid on gains and contributed to the weekly losses in the major averages:

Federal Reserve Independence: The ongoing DOJ probe of Fed Chair Jerome Powell and the broader questions about the central bank's autonomy continued to unsettle markets. While Powell released a defiant statement and 14 global central bank heads issued a letter of solidarity, the uncertainty hasn't fully dissipated.

Geopolitical Tensions: Headlines involving Iran, Greenland, and Venezuela created additional uncertainty. Oil prices plunged nearly 5% to $59 per barrel at one point after signals of Iran de-escalation, only to partially recover.

Rate Cut Expectations: The CME FedWatch tool shows a 95% probability that the Fed will hold rates steady at its January 28-29 meeting. More importantly, markets don't price in meaningful rate cut odds until June, pushing back the timeline many investors were hoping for.

Sector Standouts

Beyond banks and chips, several other themes played out this week:

Small Caps Extended Their Run: The Russell 2000 has now outperformed the S&P 500 for 10 consecutive sessions—the longest such streak since 1990. Small-cap optimism reflects hopes that domestically focused companies will benefit from a stronger economy and potentially favorable policy treatment.

Regional Banks Rebounded: After getting hammered earlier in the week amid Fed independence concerns, regional bank stocks rallied sharply Thursday and Friday. The KBW Regional Banking Index recovered much of its weekly losses.

Precious Metals Shined: Gold hit new all-time highs above $4,600 per ounce, while silver continued its remarkable 2026 start. The precious metals rally reflects both inflation concerns and geopolitical hedging.

The US-Taiwan Chip Deal

One of the week's most significant developments was the announcement of a trade agreement in which Taiwanese chip and tech companies will invest at least $250 billion in U.S. production capacity. This deal—still light on specifics—represents a major win for the administration's efforts to "reshore" semiconductor manufacturing.

For investors, the deal reinforces the theme that chip capital expenditure will remain elevated for years to come, benefiting equipment makers like Applied Materials, Lam Research, and ASML, as well as the foundries and designers at the center of the AI revolution.

Looking Ahead

With markets closed Monday for MLK Day, regular trading resumes Tuesday. Key events on the calendar include:

  • Tuesday, January 20: Trading resumes; potential volatility from three-day weekend news
  • Wednesday, January 21: Netflix Q4 earnings after the bell
  • January 19-23: World Economic Forum in Davos; President Trump addresses the gathering Wednesday
  • January 22: TikTok US sale expected to close
  • January 28-29: FOMC meeting; rate decision and press conference

Earnings season continues next week with reports from Netflix, Procter & Gamble, Johnson & Johnson, and others. The focus will shift from financials to consumer companies, providing insights into the health of American spending.

The Bottom Line

The week of January 12-16, 2026, encapsulated the push-and-pull dynamic that has characterized markets in early 2026. Strong corporate fundamentals—evidenced by earnings beats across financials and technology—provided support. But macro uncertainties around Fed policy, geopolitics, and trade kept rallies in check.

Heading into the long weekend, the path of least resistance appears modestly higher. But with Davos, the FOMC meeting, and continued earnings reports on deck, volatility is unlikely to disappear. Investors would be wise to enjoy the three-day break while they can.