Markets Brief: Key Earnings on Deck This Week, “Destructive” Tariff Threats, Plus Watching Signs of Stock Rotation

Trump’s Tariff Tactics

After a long weekend for US investors, attention is back on tariffs, with US President Donald Trump threatening European allies with 10% levies over their refusal to support his desire to take over Greenland.

Trump’s threats, and the possibility of European nations having to retaliate, rattled markets on the other side of the Atlantic Monday. “Higher tariffs from the US and Europe are a destructive way forward,” says Robert Bergqvist, Senior Economist at SEB.

The Greenland dispute adds to the geopolitical noise investors are having to navigate at the start of 2026. At the same time, investors are still waiting for the Supreme Court to weigh in on whether Trump’s use of tariffs under the International Emergency Economic Powers Act is legal.

“The new tariffs presumably would rely on IEEPA authority, which is what the Supreme Court is reviewing,” says Preston Caldwell, Morningstar’s senior US economist. “If the Supreme Court strikes down IEEPA tariffs, the Trump administration will have to rely on statutory authority, which historically has entailed lengthy process and paperwork. Hence, it would become likely much harder to slap countrywide tariffs on and off for arbitrary reasons.”

Speaking of the Supreme Court, Wednesday will bring oral arguments over whether Trump can remove Federal Reserve Governor Lisa Cook from the central bank. This at a time when investors have grown increasingly wary about Trump’s efforts to influence monetary policy and erode the Fed’s independence.

Big Bank Bumps

Fourth-quarter earnings season is now in full swing, and as investors await earnings from Big Tech in coming weeks, big banks have been in the spotlight. It was a bumpy start, as JPMorgan JPM and BankAmerica BAC stocks took a hit, while Citigroup C shares seesawed.

But it wasn’t necessarily earnings news that was driving the market. Again, it was news out of the White House as Trump proposed a 10% cap on credit card interest rates. As we wrote last week, bank executives and analysts panned the idea, saying it would limit credit availability to lower quality borrowers and hurt profits. As for the key takeaways from the actual earnings reports, the outlook looks pretty decent according to Sean Dunlop, a director at Morningstar who follows the big banks.

Here’s what Dunlop has to say:

• 2026 is setting up to be another solid year for banks if the current backdrop holds. Asset prices remain high. Interest rates are set to decline modestly, with Morningstar senior US economist Preston Caldwell forecasting two rate cuts in his December outlook, in line with CME estimates. And we expect still-solid 4.4% nominal gross domestic product growth … which in conjunction with a labor market that is weaker (but not dramatically so) looks like a decent setup for banks.
• Consumer health looks solid. Credit and debit card spending was up 6%-7% in nominal terms basically across the board for the banks, and consumer health, proxied by charge-offs, was very strong. Barring significant deterioration in the labor market, we’re looking at an environment where sentiment and spending continue to diverge sharply.
• Things might really be better at Citi. The bank reported sharply stronger results across segments, with particular improvement in wealth management and the retail bank, but every segment saw returns improve by more than 2.5 percentage points.

Key Earnings This Week

For many investors, the big earnings news is still a week off, when the likes of Microsoft MSFT, Tesla TSLA, and Apple AAPL report. In the meantime, the focus will be on regional banks and other key names.

Regional Banks: Throughout the week, regional banks will report. That includes Zions ZION and US Bancorp USB reporting Tuesday, and Truist TFC on Wednesday. Morningstar equity analyst Maoyuan Chen has this to say about what she will be watching:

• Consumer health looks solid. The money center banks that have already reported have shown credit and debit card spending up 6%-7% in nominal terms across the board. Credit costs were mostly stable.
• Regional banks’ net interest income will face some headwinds in 2026 from two or three rate cuts from the Fed. How much growth the regional banks can achieve will depend on balance sheet growth. We currently forecast around 3%-4% growth, but we could see bank lending growing faster from more commercial real estate loan growth (a headwind in the past three years) or higher commercial lending growth from a pickup in middle-market M&A deal activity.
• 2025 was a busy year for bank acquisitions, including deal announcements from PNC-FirstBank, Fifth Third-Comerica, Huntington-Cadence, and Huntington-Veritex. We will be watching out for execution updates on these deals and other regional banks’ appetite for inorganic opportunities.

Airlines: United Airlines UAL reports Wednesday. “With Delta having already reported and showing some softness among the leisure market in the fourth quarter, I’ll be watching how that played out for the other airlines and certainly listening for how their bookings are stacking up so far this year,” says Nicolas Owens, equity analyst at Morningstar. “The industry has returned to a low single-digit growth mode after several big rebound years postpandemic.”

GE Aerospace: Thursday will bring fourth-quarter earnings from GE Aerospace GE, which is up some 77% over the past year, thanks to a rally that began in the spring of 2025. For Owens, “the biggest question is just how their supply chain is holding up, as they have so much demand to meet from Airbus for new engines and from existing engine operators for parts.”

Stock Market Rotation or Another Head Fake?

As we alluded to earlier this month, stock market strategists have predicted 10 of the last two rotations out of tech stocks. Will those forecasts be wrong yet again? So far, 2026 has started off in rotation mode for stocks. It’s visible at the sector level, with tech stocks performing the worst while basic materials are out in front. The rotation can also be seen on a market capitalization basis, as small caps have jumped ahead of large caps. It’s even visible by style, with value outpacing growth.

Will this early rotation continue? We’ll know more as earnings season progresses. For now, check out our story on what the early 2026 rotation is looking like.