Stocks Pull Back on Fed Uncertainty, Bank Weakness

Published as of: January 12, 2026, 9:20 a.m. ET 

(Monday market open) Stocks, Treasuries and the dollar stumbled today after the U.S. Justice Department opened a probe into Federal Reserve Chairman Jerome Powell over the Fed's office building renovation project. In a video response, Powell called the renovation focus a pretext and added, "This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions—or whether instead monetary policy will be directed by political pressure or intimidation." New worries about Fed independence unnerved investors, and volatility surged.

"This is another attempt by the president to force out Powell and/or other members of the Fed," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research (SCFR). "Even though Powell's term is up in May, the president has made no secret of his desire to replace Powell with someone who will lower interest rates. To the extent that it gets traction, it is likely counterproductive. Attempts to weaken the independence of the Fed undermine the dollar and the Treasury market. We can see some steepening of the Treasury yield curve this morning as yields move up."

A second source of early pressure is President Trump's weekend proposal to cap credit card rates for one year at 10%. Bank and credit card shares took the brunt of the blow. All this got the week started on a sour note after stocks hit record highs Friday and before an obstacle course the next few days dominated by Fed speakers, inflation data, and the start of earnings season with JPMorgan Chase (JPM) early tomorrow. A 10-year Treasury note auction looms today with results due this afternoon—an early chance for buyers to weigh in on the Powell news—and analysts see tomorrow morning's December Consumer Price Index up 0.3% monthly and 2.7% annually.

1. Weak jobs growth could affect consumer: Though the market initially seemed relieved Friday by December's nonfarm payrolls report, investors can't necessarily ignore soft jobs creation. Economic growth depends quite heavily on consumer spending, and spending depends on people keeping and being able to find jobs. When jobs growth stalls, it can create anxiety even among those still working, as they're less sure of finding a job if they lose their current one. That showed up in last week's New York Fed Survey of Consumer Expectations, which found that the prospect of finding a job if unemployed was the worst in the history of the report. Nonfarm payrolls growth of 50,000 last month was below expectations, and jobs "growth" over the last three months is a negative 22,000. "December's report did confirm that hiring momentum was weaker at the end of 2025 than initially thought," said Kevin Gordon, head of macro research and strategy at SCFR. "If that continues, consumer spending expectations will likely move lower, which might weigh on growth in the first half of the year."
    
2. Early-year rally lifting more boats: The year began with a broad-based rally, evident in improved market breadth. By late Friday, more than 70% of S&P 500 companies traded above their 50-day moving averages, up from 30% in late November. Wider breadth is a sign that gains extend well beyond a few big names. "Last week's 5% gains in the small-cap Russell 2000 Index (RUT), along with the 2.6% move higher in the S&P 500 Equal Weight index (SPXEW), suggest a broadening of the rally and generally a healthier bull market," said Nathan Peterson, director of derivatives research and strategy, SCFR. "Sectors such as health care, industrials, biotech, materials and financials have been the biggest beneficiaries of the rotation trade." Cyclical sectors, including discretionary, materials, industrials, and energy, all performed well last week, which could reflect hopes for robust consumer spending, a dovish Fed, and fiscal stimulus from tax and spending policies signed into law last year. Homebuilders, metals miners, defense firms, and infrastructure companies opened the year strong.
    
3. Tech gains not universal: Though semiconductor stocks hit fresh all-time highs last week, the rally excluded some well-known names. Investors appear to be more discerning, not treating all mega-cap tech stocks equally. Alphabet (GOOGL) hit a fresh all-time high Friday and Amazon (AMZN) rose more than 8% last week, but Apple (AAPL) fell 4% and Nvidia (NVDA) finished the week lower, as well. The tech sector is barely up for the year, partly reflecting Apple and Nvidia weakness. "What's interesting is that Nvidia is down on the week despite an HSBC upgrade and positive analyst commentary following CEO Jensen Huang's keynote presentation at the Consumer Electronics Show," my colleague Peterson said Friday. Also, last week's semiconductor rally wasn't driven by the chip leaders of 2025, like Nvidia, Broadcom (AVGO), and Advanced Micro Devices (AMD). The recent rally was mostly fueled by gains in the semiconductor equipment manufacturers and memory chip stocks. "While the expansion in market breadth is an encouraging sign for the bulls, it appears 2026 will be a 'stock pickers market' and investors may need to be mindful of the potential for leadership changes," Peterson added.

Shares of mining firms including Hecla (HL), Newmont (NEM), and Freeport McMoRan (FCX) climbed sharply this morning—led by 7% gains for Hecla—as gold and silver prices moved higher in the early hours. Silver jumped more than 8% to fresh highs and has been lifted by a wave of speculative buying over the last two months. Copper also rose 2.7%, with industrial metals helped by growing industrial demand during the data center build-up. Gold might have caught a morning bid due to uncertainty around the Fed.
 

Abercrombie & Fitch (ANF) plunged 16% in early trading. The retailer cut the high end of its holiday guidance, CNBC reported.

American Eagle Outfitters (AEO) dropped nearly 10% in early trading despite raising its fourth-quarter operating income forecast.

Bitcoin (/BTC) inched higher this morning and stayed above $90,000, possibly a sign of risk-on sentiment. Crypto-related stocks were mixed early. The Senate Banking Committee will hold a markup on comprehensive digital asset market structure legislation on Thursday.

Walmart (WMT) jumped 3% after Walmart and Alphabet (GOOGL) shared plans to launch a new experience that pairs Google's Gemini with Walmart and Sam's Club.

Intel (INTC) rose more than 10% Friday but fell 2% today. The chip firm received praise from President Trump, who met with the company's CEO. The U.S. government took a stake in Intel last year. Strength translated across the rest of the semiconductor sector, which rose nearly 3%. Big gainers Friday besides Intel included ASML (ASML), Oracle (ORCL), Western Digital (WDC), SanDisk (SNDK), Micron, and Broadcom. Many of these had fallen Thursday in a profit-taking surge.
 

This morning saw chip and other tech stocks step back with Nvidia down 1% before the open and Broadcom down 1.5%. ASML fell 1.2%. Weakness in these shares appeared to weigh on the Nasdaq early today ahead of earnings early Thursday from Taiwan Semiconductor Manufacturing (TSM), a key barometer for global chip demand.
 

Snowflake (SNOW) fell 2% ahead of the open following a downgrade to equal-weight from overweight by Barclays, which still sees a favorable setup for software in 2026 but cited valuation concerns and heightened competition.
 

Delta Air Lines (DAL) descended 1.4% this morning ahead of earnings early tomorrow. Analysts expect earnings per share of $1.53 on revenue of $14.7 billion. Last time out, in October, shares of Delta gained after earnings as investors cheered its better-than-expected guidance including improved 2026 profit margins. Premium travel trends could be in focus again for Delta and other airlines this quarter.
 

JPMorgan Chase dropped 0.8% early Monday ahead of earnings first thing tomorrow and as investors generally pushed bank shares down on the Trump administration's credit card proposal. Credit market conditions, loan demand, and net-interest income are among the watchwords as banks report. JPM is followed Wednesday by Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C). Earnings-per-share and revenue expectations for JPMorgan are $4.98 and $46.2 billion, respectively. With bank stocks hitting records lately, the bar might be high for earnings results to impress investors.
 

American Express (AXP), Visa (V), and Mastercard (MA) all fell 2% early. The proposal requiring issuers to limit interest rates on credit cards to 10% for one year creates heightened near-term volatility in the group, JPMorgan Chase said today when it raised its price target on AXP and kept its neutral rating.
 

Health care stocks could be in the spotlight this week amid the 44^th annual J.P. Morgan Healthcare Conference. S&P health care stocks are up 1.6% so far this year and 12% from a year ago. Biotechs are up about twice as much as health care overall year over year, possibly helped by lower interest rates that might lead to company acquisitions.

The PHLX Semiconductor Index (SOX–candlesticks) is up nearly 12% over the last three months but its biggest component, Nvidia (NVDA–purple line), is down 4% over that same stretch. Though not on this chart, Broadcom (AVGO), another major semiconductor firm, is also slightly lower over the last three months. This shows that investors may be turning toward other parts of the chip market where they may see more traction. Memory chip firm shares have spiked and so has chip equipment maker ASML (ASML), which easily outperformed the SOX since mid-October.