The stock market is off to a choppy but higher start to 2026. Despite some high-tension events and highly fluid geopolitical situations, investors are trying to focus on the economic data and the upcoming earnings season, even though the happenings in Venezuela, Iran, Ukraine and the EU are stealing the daily headlines.
Fortunately, Mr. Market cares less about geopolitics than about the quarterly numbers, with everything else globally taking second seat. So, let’s get into some of those market-moving events, then look at sales and earnings forecasts for the next month to gain some insight on the level of confidence in this uptrend.
The December jobs summary reported 50,000 new jobs, well within the Goldilocks category — as a “low-hire, low-fire” number. It’s slightly fewer than the 73,000 expected, and cool enough to allow the Fed to resume rate cuts enough to avoid a slowdown, but the unemployment rate improved, from 4.5% to 4.4%.
In other financial news, President Trump ordered Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds, reinforcing expectations for increased mortgage-market support. Additionally, the October Housing Starts report (at 4.6%) showed single-unit starts up 5.4% month over month, their highest level since July. This massive injection of demand into the bond market lowered yields, which directly translated into lower rates for consumers. Following that news, several lenders updated their pricing, pushing the 30-year fixed rate to as low as 5.87% for top-tier borrowers.
Turning to tech stocks, at the Annual CES show in Las Vegas, Nvidia CEO Jensen Huang highlighted the massive demand for memory and storage, sending those stocks sharply higher as the AI trade that was consolidating found a fresh set of leading names to pile into. In addition, President Trump touted a great meeting with Intel CEO Lip-Bu-Tan, which sent INTC shares higher by double-digit percentages.
Before the Federal Reserve meets on Jan. 28 to determine interest rates and monetary policy, investors and the market will be served up the key inflation and employment data in the first two weeks of the fourth-quarter reporting season that begins this week, with the money center banks first to post numbers. Also, both the Consumer Price Index (CPI) and Producer Price Index (PPI) will be released this week.
As of the final weeks of 2025, FactSet’s estimate for the fourth-quarter (Q4) 2025 S&P 500 year-over-year earnings growth rate is 8.3%. This figure represents a slight upward revision from earlier in the quarter (on Sept. 30, the initial estimate sat at 7.2%). If the 8.3% growth rate holds, it will mark the 10th consecutive quarter of earnings growth for the index.
The aggregate S&P EPS estimate for the quarter is $70.34. Analysts are projecting a year-over-year revenue growth rate of 6.1%. The estimated net profit margin for the S&P 500 for Q4 2025 is 12.4%, which is above the five-year average of 12.1%. The Information Technology (+16.5%) and Financials (+12.3%) sectors are expected to be the strongest contributors to year-over-year earnings growth.
As of January 2026, FactSet and major market analysts project that the S&P 500 will enter its third consecutive year of double-digit-percentage earnings growth. While 2024 and 2025 were characterized by extreme concentration in the “Magnificent Seven” tech stocks, the 2026 forecast sees a significant broadening.
There were also several mega deals announced, signaling 2026 will be a big year for mergers and acquisitions. In one of the largest media deals in history, Netflix issued a $82.7 billion bid for Warner Bros. Discovery. The WBD board is reportedly favoring this over a competing bid from Paramount Skydance due to Netflix’s immediate cash flow accretion.
Rio Tinto (RIO) and Glencore (GLNCY) announced the two mining giants are in advanced discussions to merge. If completed, the deal will create the world’s largest copper miner, with projected 2026 production of over 1.6 million metric tons (tonnes), surpassing all global competitors.
Constellation Energy (CEG) announced a $26.6 billion acquisition of Calpine Corporation, a move that solidifies its lead in the nuclear and clean energy sector to power AI data centers. Blackstone agreed to acquire TXNM Energy for $11.5 billion, representing a massive bet by private equity on the utility infrastructure needed for the AI revolution.
Not to be outdone for high-profile headlines, Meta Platforms (META) announced it was acquiring Manus, a developer of autonomous AI agents, for around $2 billion to bolster its AI capabilities. Some analysts see this acquisition holding the kind of potential of what Instagram and WhatsApp delivered to Meta.
Adding to the parade of M&A deals, private equity firm Hg Capital entered an agreement to take the enterprise software company OneStream Inc. (OS) private for $6.4 billion, while ServiceNow Inc. (NOW) finalized a $7.75 billion deal for Armis, a leader in cyber-exposure and asset security.
Lastly, the market is embracing the beginning of the One Big Beautiful Bill Act (OBBBA) taking effect in early January. Many of the provisions are already at work, such as “no tax on tips,” where workers can now claim dollar-for-dollar deduction on up to $25,000 of tipped income. There is also no tax on overtime. Hourly workers can deduct overtime pay premiums up to $12,500 single or $25,000 married per year. And auto loan interest is now deductible up to $10,000 of the loan, subject to income caps.
So, the market is beginning 2026 hot, with the Russell 2000 outperforming the Dow, S&P and Nasdaq. This tells us that the broadening out of the market looks genuine.
The gap in performance for the first nine days of the year is striking:
Russell 2000 (RUT) +5.8%
Dow Industrials (DJIA) +3.0%
Nasdaq Composite +1.9%
S&P 500 (SPX) +1.8%
If the money center banks deliver on the top and bottom lines and provide bullish guidance, a bullish tone will be in place, which could produce some strong gains. Yes, there are serious hot spots around the globe, and the next two weeks are pivotal, given a lot of “good news” is already priced into the S&P.
The bulls have the ball, and strong forward guidance will allow them to drive down field with confidence. My Breakout Blue Chip Trader advisory service will be acting aggressively regarding leading stocks during earnings season. To get all my trades as earnings season unfolds, click the link here and be on the receiving end of my best trades!
