Wall Street Week Ahead: Investors bank on US earnings strength as policy noise grows louder

NEW YORK: Investors will be counting on a strong corporate earnings season to keep the rally in US stocks intact as they digest a wave of domestic policy proposals and heightened geopolitical tensions to start the year.

After banks and other financial firms kicked off fourth-quarter reports, a more diverse set of companies including Netflix, Johnson & Johnson and Intel will post results in the coming week as earnings season picks up steam.

Following robust performance in 2025, major equity indexes overall have climbed to start the new year, even as they gyrated this week and volatility measures crept higher.

“Because of the amount of noise we have around geopolitics and policy, it is literally an imperative that earnings actually carry the news cycle,” said Art Hogan, chief market strategist at B Riley Wealth.

“While the bar is set pretty high for this quarter, those companies that can meet and beat and raise guidance for the full year 2026 are actually going to get rewarded and will probably be a much-needed tailwind for markets.”

On Thursday, the S&P 500 rose closer to record highs, although the benchmark index remained down on the week. After strong gains in 2025, shares of major banks including JPMorgan and Wells Fargo pulled back following their results.

Among the factors pressuring bank stocks was President Donald Trump’s newly proposed 10 percent cap on credit card interest rates, a surprise move that blindsided the industry and also followed the president’s new plan to stop Wall Street firms from buying up single-family homes.

On the international stage, Trump’s aggressive moves and words have also kept investors on edge.

The latest global focus centered on Iran, where Trump threatened intervention on behalf of protesters in the country though he later was adopting a wait-and-see posture.

The uncertainty has boosted safe-haven bids for gold this year while pockets of equity markets such as energy shares have fluctuated, but the major stock indexes have largely been unbothered by news developments so far.

“The market has largely shrugged off a lot of the geopolitical and domestic political issues, but there’s certainly a lot to be worried about there,” said James Ragan, co-chief investment officer and director of investment management research at D.A. Davidson. “There’s always a chance that the president tries to get ambitious, set out some bold policies, and the market’s going to have to decide whether it’s important enough to react to that.”

US stock markets are closed on Monday for the Martin Luther King Jr. holiday, but earnings rev up after that, headlined by Netflix results on Tuesday. The streaming giant will draw added attention due to its high-stakes battle with Paramount Skydance for Warner Bros Discovery in a deal that stands to shake up the media landscape.

Focus will be on corporate outlooks, with hopes high for 2026. S&P 500 companies overall are expected to increase earnings by more than 15 percent in 2026, with each of the 11 sectors expected to post profit growth of at least roughly 7 percent.

“I continue to believe that the most important thing right now is earnings,” said Chris Fasciano, chief market strategist at Commonwealth Financial Network. “If we continue to get good earnings, I think that will be supportive for the market.”

Investors are also waiting for the US Supreme Court to decide on the legality of Trump’s global tariffs, a ruling that could set off asset price volatility. The court on Wednesday also will hear arguments over Trump’s attempt to remove Federal Reserve Governor Lisa Cook, bringing fresh attention to the central bank’s independence amid persistent criticism from Trump that the Fed has not lowered interest rates sufficiently. Such concerns about Fed independence erupted this week after news of a criminal investigation into Fed Chair Jerome Powell. Trump told Reuters this week he has no plans to fire Powell, whose term as chair ends in May, while he is expected to nominate a new Fed leader soon.

The end of Powell’s chair term “will mark a critical inflection point for the independence narrative,” Wedbush strategists said in a report this week. “A lack of Fed independence could stoke inflation fears and make the US debt more expensive to finance.”