A busy week ahead amid a Fed blackout period

Summary

The S&P 500 reached a record high on Monday before ending the week down 0.4%, as investors weighed macroeconomic data, alongside the early stages of earnings season, which delivered mixed results so far. Safe-haven assets including gold and silver rallied, while the U.S. dollar weakened. Year to date, the S&P 500 is up 1.4%. The 10-year U.S. Treasury yield rose 6 basis points on the week, closing at 4.24%.

As of Tuesday, January 20, equities are retreating as markets react to President Trump’s sharpened rhetoric regarding Greenland and the threat of additional tariffs on countries that oppose the deal.

CPI and producer prices point to sticky costs

The Bureau of Labor Statistics released December CPI last Tuesday, showing headline inflation rose 0.3% month over month and 2.7% year over year. Core CPI, excluding food and energy, increased 2.6% annually. While price pressures appear to be moderating, inflation remains above the Federal Reserve’s 2% target.

Persistently elevated inflation suggests the Fed may delay additional rate cuts until later in 2026. Producer price data released Wednesday reinforced this view, showing broad-based increases in producer and trade prices and signaling ongoing cost pressures across supply chains. Futures markets are currently pricing in a 95% probability that the Fed leaves rates unchanged at its January 28 meeting.

Claims fall, but jobs data remain mixed

Weekly initial jobless claims fell below 200,000, a level typically associated with a tight labor market. The data suggest layoffs remain limited, and that labor conditions may be stabilizing, even as hiring activity slows. Continuing claims also declined and remain just under 2 million, reinforcing the view that the labor market retains underlying strength.

Political concerns

Political developments weighed on markets early in the week. Reports of a Department of Justice investigation into Federal Reserve Chair Jerome Powell drew investor attention, raising concerns about central bank independence. Analysts warned that heightened political scrutiny could influence long-term inflation and interest rate expectations.

Later in the week, tariff threats from the U.S. toward European partners related to the Greenland dispute rattled investor sentiment. Equity futures dipped, and European markets declined as participants repriced geopolitical risk . The International Monetary Fund warned that escalating trade tensions could weigh on global growth.

The week ahead

Markets enter the week focused on inflation and labor data, as investors look for confirmation that the economy is slowing toward a soft landing. While the Federal Reserve is in its blackout period ahead of the January 27 to 28 policy meeting, several developments could influence sentiment.

On Tuesday, the Supreme Court is expected to rule on the constitutionality of President Trump’s IEEPA tariffs. A decision against the administration could have meaningful implications for global trade and the domestic economic outlook.

Midweek data will further clarify conditions at home. Wednesday’s reports on pending home sales and construction spending will offer insight into whether elevated mortgage rates continue to restrain housing activity or if demand is beginning to stabilize. Thursday’s weekly jobless claims will be closely watched, as a material increase would challenge the prevailing narrative of economic resilience.

Earnings season also accelerates, with investors focused on cost pressures, wage trends, and capital expenditure plans. Globally, attention turns to Davos, where the World Economic Forum convenes leaders to discuss geopolitics, trade, and international monetary policy. Market participants will continue to monitor developments surrounding U.S. policy rhetoric on Greenland and potential trade policy implications.