Weekly Update 1/23/2026: US Third Quarter GDP is Revised Up to a Robust 4.4%
- Johnson & Johnson releases earnings beating revenue expectations while raising 2026 guidance
- Travelers releases earnings beating earnings and revenue expectations on strong quarter
- Kinder Morgan releases earnings beating profit and revenue estimates
- CACI releases earnings beating profit estimates while raising guidance “for all metrics”
Domestic Economic News
Wall street started off on a tumultuous note when trading began Tuesday as Trump threatened increasing tariffs if NATO allies did not agree with him on his drive to take over Greenland and the Monday overnight plunge in Japanese bonds on concerns over that country’s finances. The latter arguably had a more immediate pronounced impact as intermediate and longer term bonds sold off globally. Here in the US, while the two-year Treasury was relatively stable, the yield on our ten and thirty year rose 6 basis points and 8 basis points respectively. In late Tuesday trading the ten year yield was pushing 4.29% and thirty year yields were at 4.92%. That definitely rattled equity traders as well – mortgage rates for example are based off of the US Ten-year Treasury so this was an unwelcome surprise. The global market selloff was first triggered by domestic issues in Japan, where yields on 30-year debt surged over a quarter percentage point on concerns about Prime Minister Sanae Takaichi’s plans to cut taxes and boost spending. The jump threatened to unravel so-called carry trades — which involve buying global assets with low-interest loans in Japan — and helped push up bond yields elsewhere.
The moves show that investors’ previous willingness to shrug off Trump’s actions — including the White House’s capture of Venezuela’s leader, its threats to nearby countries, and renewed attacks on the Federal Reserve — is beginning to erode. But Trump’s demand for US control over Greenland is stoking investor anxieties about potential worst-case scenarios, including a rupture in the NATO alliance, a full-blown trade war, or European steps to foment market turbulence as a way to force the Trump administration to back down. “Our bet is that in the base case the severity will ultimately still be contained as investors bet on some version of a compromise,” wrote Krishna Guha, head of central bank strategy at Evercore ISI. “But the impacts would be very severe if this goes off the rails, and there will be long-lasting implications, including for the dollar.” Volatility across US bonds, equities and the dollar over the past month had sunk to the lowest since at least 1990. That’s in part because traders have largely learned to tune out Trump’s daily salvos, wagering that the worst of his threats won’t come to pass. The tactic, honed after the April market meltdown drove him to pause his tariffs, became known as the TACO trade — with investors seeing selloffs as a chance to buy. As European leaders grappled with how to push back against Trump, some analysts saw using the market consequences as one way to deter him. “If I were an advisor to some European governments, I would say you almost need to create a little bit of market volatility because Donald Trump cares about that a lot, probably more than other politicians,” said Michael Krautzberger, chief investment officer for public markets at Allianz Global Investors, Germany’s largest asset manager. The widespread view among investors is that the US and Europe will reach a diplomatic solution on Greenland. But the chaotic style of White House negotiations, with Trump adding French champagne to his list of tariff threats, put a chill on market confidence. At La Financière de l’Échiquier, Alexis Bienvenu expressed the following: “There is a bit of fear in the market of how far he can go on new types of threats,” the portfolio manager said. “We know that in many cases Trump has threatened companies and countries with very high tariffs, but at the end he engages in negotiations,” he added.
Helping diffuse tensions and boost stock and bond prices in early Wednesday trading was President Trump ruling out the use of military force in Greenland in his speech to the World Economic Forum in Davos. He insinuated however that he would weigh Europe’s response to his demands when considering the US commitment to the North Atlantic Treaty Organization going forward. So the drama will continue of course. Trump said that he was seeking “immediate negotiations” on acquiring the sovereign Danish territory for national security reasons. The easing of tensions continued into Thursday trading as President Trump indicated he would not impose tariffs on European countries after all and that they had the framework of a deal on Greenland, without sharing much in the way of specifics. It is always better of course to continue to dialogue and diffuse tensions. Stocks got a lift Thursday also on the strong economic data that came out which we cover below.
In important US economic news, The US economy expanded in the third quarter by slightly more than initially reported, supported by stronger exports and a smaller drag from inventories. Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased at a revised 4.4% annualized rate, the fastest in two years, according to Bureau of Economic Analysis data out Thursday. The report showed one of the strongest back-to-back quarters for growth since 2021, when the economy was still recovering from the pandemic. Companies dialed back the tempo of goods imports after an early-year rush to beat President Donald Trump’s sweeping tariffs. Consumer and business spending have also held up well despite erratic trade policies. Against a backdrop of robust growth, along with a steadier job market and inflation that remains above the Federal Reserve’s target, policymakers are expected to leave interest rates steady at next week’s meeting. Separate data out Thursday showed initial applications for US unemployment benefits remained low. US jobless claims held steady at 200,000 in a sign companies are reluctant to lay people off. The GDP report showed the central bank’s preferred inflation metric — the personal consumption expenditures price index, excluding food and energy — rose an unrevised 2.9% in the third quarter. Consumer spending — the main growth engine of the economy — advanced at a 3.5% annualized pace last quarter. That reflected the fastest pace of outlays for services in three years, while spending on goods also accelerated from the previous quarter. Business investment expanded at a 3.2% rate, driven by continued outlays on computer equipment. Investment in data centers, which house the infrastructure for artificial intelligence, climbed to a fresh record. Because swings in trade and inventories have distorted overall GDP in the past year, economists are paying closer attention to final sales to private domestic purchasers, a narrower metric of consumer demand and business investment. This measure climbed at a 2.9% rate, the same as the prior quarter.
On a negative note, pending sales of US existing homes fell in December by the most since April 2020, an unusually large drop after the housing market appeared to be gaining some momentum. An index of contract signings decreased 9.3% to 71.8 last month, according to data released Wednesday by the National Association of Realtors. The decline was regionally broad and well below the lowest estimate in a Bloomberg survey of economists. “The housing sector is not out of the woods yet,” NAR Chief Economist Lawrence Yun said in a statement. “After several months of encouraging signs in pending contracts and closed sales, the December new contract figures have dampened the short-term outlook.” Housing activity typically slows in winter months and picks up more in the spring selling season. While NAR adjusts the data for these patterns, the drop was still the largest for any December in data back to 2001. Yun said it’s unclear whether the figure was a one-off or the start of a worsening trend. Pending-homes sales tend to be a leading indicator for previously owned homes, as houses typically go under contract a month or two before they’re sold. Activity may pick up as soon as mortgage rates have kicked off the new year at some of the lowest levels since 2022, and home prices are growing at a much slower pace than last year. However, much of the outlook also depends on available inventory, which has struggled to recover to pre-pandemic levels. The recent bout of lower mortgage rates may be short-lived as US Treasury yields, which influence home-financing costs, have climbed to the highest level in months amid a rout in Japanese bonds and geopolitical factors as discussed above. Wednesday’s report showed contract signings dropped in all four regions, including double-digit slides in three. Yun said interpreting the figures in the winter, particularly December, can be “tricky” given the holidays, vacation time and winter weather. Meanwhile, addressing affordability concerns has been a key talking point lately for President Donald Trump ahead of this year’s midterm elections. He’s already laid out a slate of proposals aimed at the housing market including an executive order targeting institutional investors on Tuesday.
Interest Rate Insight and the Fed
US mortgage rates climbed from a three-year low as fears about a potential trade war over Greenland drove up yields for the government bonds that guide home loans. The average for 30-year, fixed loans was 6.09%, up from 6.06% last week, which was the lowest point since September 2022, data from Freddie Mac showed Thursday. President Donald Trump’s announcement of a plan to buy $200 billion in mortgage bonds, part of his broader affordability campaign, helped drive down borrowing costs last week. But the bond market reversed course after he threatened to levy tariffs on European countries that opposed his bid to take over Greenland. While Trump has since backed off on those tariffs, his initial remarks were enough to reignite trade-war fears and undo some recent progress on mortgage costs, according to Jake Krimmel, senior economist with Realtor.com. “As much as rattling the international order is a big part of his foreign policy and economic policy, that’s exactly what will keep upward pressure on mortgage rates,” Krimmel said in an interview. High borrowing costs have held back buyers and sellers for years, and an upward climb might temper the optimism industry experts had as rates came close to hitting 6%. The market could use a jump-start.
Impactful International News
European Union lawmakers are expected to vote on ratifying the bloc’s trade deal with the US, restarting the process after President Donald Trump walked back his latest threat to impose tariffs on European allies that opposed his plans to annex Greenland. European Parliament President Roberta Metsola told reporters in Brussels Thursday that Trump’s reversal was enough to justify voting on the measure, which could have a preliminary vote in the coming days. Parliament’s approval is the final EU step needed for the trade accord to enter into force. Lawmakers on Wednesday decided to indefinitely suspend the ratification process, citing the “coercive” threats by Trump. Hours after that vote, Trump defused the situation, saying he wouldn’t impose the levies, which were set to go into effect on Feb. 1. “This means we can continue with our discussions internally with he EU-US trade deal, which had been paused,” Metsola said before an emergency meeting of EU leaders. “I’ll be taking it forward with my colleagues to be able to proceed.” The trade deal was clinched last July and partially implemented. Many in Europe criticized the accord, which saw Brussels agree to remove nearly all tariffs on American products while accepting a 15% duty on most exports to the US and 50% on steel and aluminum.
Trump’s push for Greenland has marked a low point in transatlantic relations, with the EU threatening to unleash never-before-used retaliatory measures, including its so-called anti-coercion instrument. The measure was designed primarily as a deterrent, and if needed, to respond to deliberate coercive actions from third countries that use trade measures as a means to pressure the policy choices of the EU or its members. Trump’s U-turn came after a meeting with Secretary General Mark Rutte at the World Economic Forum in Davos, Switzerland, late Wednesday. Their accord for Greenland entailed the stationing of US missiles, mining rights aimed at keeping Chinese interests out and a bolstered NATO presence, Bloomberg previously reported. “When it comes to the protection of the Arctic, with a priority on Greenland, we have to spend more energy, more time, more focus on this because we know the sea lanes are opening up,” Rutte told Bloomberg News Editor-in-Chief John Micklethwait in an interview in Davos. Although Trump’s latest threat is off the table for now, the EU’s lead lawmaker on the US trade deal and chair of the parliament’s trade committee, Bernd Lange, said that “there is no room for false security” as “the next threat is sure to come.” More details on the deal struck on Greenland are needed “in order to decide how to proceed with the implementation of the EU-US trade deal,” he wrote on social media, adding that his committee would discuss the way forward on Monday. Even before Trump’s Greenland saber-rattling, the EU-US trade deal faced a rocky path in the Parliament. A group of EU lawmakers opposed the deal from the start, and criticism mounted after the US extended a 50% metals tariff to hundreds of additional products. The US then demanded changes to EU tech rules in exchange for rolling back the expanded tariffs, drawing further ire from opponents.
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Company Events
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