Power Lunch - Stocks falter as earnings season begins 1/13/26

Episode Date: January 13, 2026

JPMorgan Chase stock falls despite the bank beating on top and bottom lines in its earnings. Crude oil prices climb back up.  And can stocks keep on running? Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch alongside Kelly Evans. I'm Dominic Chewin for Brian Sullivan today. Now, President Trump is just now, again, still speaking at the Detroit Economic Club. We're going to continue to monitor those comments and bring you any of further details as they become available to us right now. But in the meantime, our own Aiman Javers joins us now with a little bit more on kind of what we're seeing here with regard to the Treasury side of things. Yeah, Dom, that's right. We just have this Treasury release out. The federal deficit hit a record in December on an agenda. unadjusted basis, the U.S. government had a $145 billion deficit for the month of December.

That is just a bit smaller than the $150 billion deficit expected by economists surveyed by Dow Jones. But then if you look at the adjusted basis, this accounts for standard calendar differences month to month. The U.S. ran a $112 billion deficit in the month of December. Fiscal year to date, the U.S. is running a $602 billion deficit, which is a decrease of 15% from this time of Euro. ago. Then on the tariff revenue, that's the other key figure here, tariff revenue dipped slightly in December, taking in $28 billion in customs duties, bringing the total of tariff revenue during Trump's term here to $265 billion. Now, the revenue decline came after the president, lowered those tariffs on grocery store items in an effort to reduce prices for consumers. You remember that

headline last month, guys, and that's why we're seeing those tariff revenues tail off a little bit in December as the president tries to make that adjustment. Yeah, a big December number, Aeman, but we're down 15% on the budget year on year so far from last fiscal year. That's a big improvement and probably the biggest single fee of factor is tariffs, although like you said, they've been leveling off now. Yeah, absolutely. When you raise revenue, it affects the deficit, and that's a good thing. Yeah, Aiman, we appreciate it. Not a huge move in the bond market, Aman Javers, but let's take a look at the reaction with U.S. yields across the curve here. You can see reacting to the Treasury statement, the 10-year yield. I'm not quite sure how to interpret

but this chart, Dom, as well, I think we're moving a little bit. Yeah, we're relatively steady right now. There we go. The yields have gone lower right now. Bond prices higher, right? On the 10 year, exactly, as you might expect, the U.S. dollar keeping an eye on as well.

Rick Santelli joins us now with more from Chicago. Rick? Well, listen, anything where we get a lower deficit is good news. The Treasury market didn't even blink on that information, no matter how you slice it. Even with the double-digit improvement on a year-over-year basis, 144 billion in one month is too much. And when you add in all the other countries

that might be making subtle progress, but in unison still represent a huge borrowing area and add in all the issuance we've already seen in this very early year, almost record issuance across the globe, and yet interest rates haven't really reflected it. So there's some interesting dynamics. The real moral of the story, according to my sources, there's a lot of capital out there right now looking for a home.

So we want to really monitor the good, the bad, and the ugly with regard to deficits. But also remember, we did have slightly positive news on CPI this morning. We're starting to get a little bit further under 3%. That isn't a bad thing. And if you look at all maturities, 2s, 10s and 30s, they all move lower at 8.30 Eastern. but there's a lot of other moving parts here. And we did have a 30-year bond auction that went quite well. Now, quickly, if you look at a two-year, you know, yesterday we closed it the highest yield since dees of 9th.

So we'll talk about, what, a month plus? And if you look at 10s, they closed at the highest yield since the first few days of September, four and a half months. But look at that 30 here. The 30 years since the 5th of December has been in an eight basis point closing range. And really, all Treasury yields beyond seven-year have been in very tight ranges. We have issuance. We have deficits. Even slightly less deficits.

It doesn't seem to be moving markets much. A very interesting dynamic indeed. Kelly, Dom, back to you. All right, Rick, and that 10-year yield to your point there has been hovering from since that beginning of December between 4.1 and 4.2%. So, again, a lot of consolidation maybe at this point. Now, let's get a check on the broader markets overall. the major averages are taking a breather from the record rally as earning season kicks off unofficially.

Our next guest says he's, and I love this, quote unquote, uncomfortably bullish for the year with an 8,000 year-end price target on the S&P 500. That's very bullish, uncomfortably so or otherwise. Michael O'Roney is the chief investment strategies over at State Street Investment Management, which has about $5 trillion in assets under management, massive ETF provider as well out there. Thank you so much for joining us here. Let's go through what separates cautiously optimistic from uncomfortably bullish. So uncomfortably bullish, I think we just were watching the president, and he seemed really happy. And we know people love him or hate him. Put that aside.

But when we look at this, there's a lot for investors to be happy about. So we're going to get fiscal stimulus from the One Big Beautiful Bill Act. The economy's already expanding. You get monetary policy easing. That's going to help. You mentioned we're kicking off earnings season. Those earnings numbers are going to be great. We're going to have double-digit earnings growth again.

The consumer has been resilient and will be supported by tax refunds and also by the World Cup and celebrating the 250th anniversary of the Declaration of Independence. Sprinkle in a little deregulation and continued AI spending, those are the ingredients to be bullish on, but uncomfortably so, right? Because what you're almost saying is we've had such a good run, you know, and it feels a little crazy to say, after all the double-digit gains we've had back-to-back, it's going to keep going. I think there's two things that contribute to my discussion.

comfort. First is that valuations are certainly higher than normal, but we know they're a poor predictor of short-term price performance. And valuations are high, credit spreads are tight, most measures of market volatility are fairly complacent. So the margin for error is small, and the risk of disappointment is big. And I think you're seeing that, right? Today, J.P. Morgan blew out the top and bottom line numbers, yet given the new cycle, they're actually down a little bit on the day. Do you think they're down because of the new cycle or because of the earnings? I don't think they're down because of the earnings at all. I think they're down more because of their potential to push back on policy around credit cards

and capping interest rates from that perspective or credit card rates. The other part of this certainly is kind of the heavy hand of the Trump administration as they turn to a more populous policy. Now, again, this is kind of a natural transition. And from my perspective, whether it's kind of, you can see it, when they announced preventing defense companies from doing share buybacks and dividends, the stocks are down. That very same night, given the policy, kind of the objective of increasing the defense

budget so massively, the stocks rallied. And you could see this volatility. So, Kelly, for me, the big takeaway this year is midterm election years tend to be more volatile. The average intraday decline in a midterm election year is 19%. And the other three years, it's 12%. So you should expect more volatility, but that doesn't mean we'll end up in a not in a good spot. Right. We've heard the May through, I guess, November period is often the weakest and the

cell in May. But, you know, can we all sort of say with such confidence, well, it probably will get weak in the middle, heading up to midterms, and then we rally at the end? I mean, can it be so easy as just to say, that's probably what's likely to happen? Or is that the fact that that is the most likely playbook that everyone can see tells us that something very different could take place? Well, I think that the headline, certainly as the year was concluding, the VIX closed below 14, for the first time in more than a year. Wow. And I know being at home, maybe you are all were celebrating the holidays somewhere.

I was reading and I was like, boy, that just seems. You were celebrating the VIX. Yeah, I was, I was keeping an eye on the VIX. And Tom, it just seemed like it was so low, too low, too calm. Cheap insurance is what I've been, what I've heard it called now. So seeing it kind of tick up here, given the headlines, given the potential for the Supreme Court announcement tomorrow, given some of the policy interference, for lack of a better word. I expect this to inject more volatility. But overall, the ingredients for this bull market

remain pretty strong. I'll give you quickly, there's been four times since 1926 where we've had three consecutive years of 15% returns on the S&P and higher. So in those four times, only once did the fourth year decline. That was 2022. In the other three, Kelly, we went on to have 15% or higher returns in that fourth year, 1998 was the last one. This reminds me a lot of 1998. Right. So in terms of 1998, if we're going to juxtapose it or kind of compare it to that,

sentiment was very different in 1998 than arguably it is right now. So from your standpoint, is there enough consumer and investor sentiment to keep this momentum going, or there is a case to be made anyway that people are becoming a little bit more cautious because they see what's happening around and they say, hey, you know what? it's been a great run. Maybe we should kind of be a little bit more conservative. The great news is people are cautious and they are a bit nervous and anxious about this rally. To your point, when the TMT bubble bursted, it was more like, how could we be so dumb? We're in a new paradigm. How can you not own stocks? How can you not own pets?com?

That's everything. We're not in that scenario. So in fact, it gives me greater conviction that this rally has room to continue from that perspective. I often talk to clients and investors. If your client is calling you and telling you on the phone, why don't we own more? Why don't we buy more? That's the time to be nervous. In fact, Tom, what they're doing is they're calling

and they're nervous, they're anxious. That's probably a healthy skepticism for this rally. Fascinating. Uncomfortably bullish. That's the phrase. I hope all our 401Ks can follow that. You heard the president, he practically guaranteed it. Right.

Sometimes you hear the message, you're like, We don't want stock prices to fall our home, but nothing can fall in price except oil. We're not supposed to use that G word around here. Guarantee. Michael M. Thank you. Michael Erone, State Street investment. We appreciate it.

Coming up, could President Trump's demand for a cap on credit card rates have further consequences for the baking sector? We were just discussing this with banking shares under pressure today, including J.P. Morgan. We'll get Erica Nogarians take on that right after this. Welcome back. We heard from J.P. Morgan this morning, and their earnings, so it's a pretty strong report.

They beat on the top and bottom lines. And yet, look at the chart on the left. the stock selling off today, despite that report. Investment banking revenue sure was a bit lighter than the street was looking for, but we'll talk about whether this is really more of a political overlay here. And the rest of the big banks will follow this week with Wells B of A, city tomorrow, Goldman and Morgan Stanley on Thursday. Joining us now is UBS Large Cap Bank and Consumer Finance Equity Research Analyst.

Erica Nogical, no more Christmas tree. She has a buy rating and a $380 price target. I still remember the tree, Erica. Anyway, Mom's tree. Anyway, so you many think our last guest just suggested that the pressure on the J.P. Morgan and the others today is not because of earnings. It's because of the credit card cap or other similar policies. Do you agree? I don't agree with that because I think the reaction to the credit card cap was really captured yesterday. You really saw that in stocks like Capital One.

I think we were just sort of spoiled at the largesse that JPMorgan usually leaves under the tree. And so when you look at the revenue, actually, they missed the street because some of the investment banking was pushed out in terms of revenues into the first quarter in terms of some big deals that hadn't closed in time for earnings. So it's a little bit of a temporary thing. Of course, it doesn't help that we got another social media post from the president on Credit Card Competition Act this morning. But I think it's mostly on a higher bar why J.P. Morgan is underperforming rather than the credit card cap rates that were tweeted over the weekend. Erica, it's Dom. We're at the simultaneously chatting with you and showing the charts of all of the other large banking institutions, investment banks that are here trading in the U.S., and they're all being dragged down probably by some of these J.P. Morgan's sentiments and results because of that. I wonder what the setup, given what today's price action is like after J.P. Morgan and given all the other downside moves, for the rest of the week, we get Wells and B of A, notable headliners tomorrow. Does this mean that the bar is now slightly lower than it was for J.P. Morgan Chase?

Yeah, so the bar is always actually the highest at J.P. Morgan Chase. But you're right, Dom. I think the bar is set a little bit lower in terms of the onslaught that we're getting tomorrow with Citigroup. and Wells Fargo and Bank of America. You know, that being said, I think some of the delay in realizing the investment banking fees are going to be felt throughout the industry. After all, we did have the shutdown, which pushed a lot of the pipeline into December after we found the resolution,

so we couldn't get everything done in time. So the phenomenon that we saw in terms of the IB delay in JPMorgan could be evident tomorrow with those three banks' numbers. But I think at the end of the day, we'll say, it doesn't really matter. All we're doing is moving revenues from one quarter to the next quarter. And it doesn't really change the story for the banks in terms of the capital markets boom that we expect for 2026. Erica, we'd like to get your view before we kind of get a move on from this topic.

We've been asking a lot of the bank analysts that we've had in the last week or so about the top picks. A lot of them have centered around the money center banks, the big guys out there. Is it the same for you? what are the best performers in 2026 in your mind? So I'm going to go out on a limb here, particularly topical with all of this headlines. And I'm going to say, out of my top three picks, I'm going to circle to Capital One. So Capital One had quite the day yesterday in terms of the credit card cap rate. And I'm sure it's been many times discussed on this program in terms of the probability of that happening.

But what is really evident to me, especially given this morning's tweet from the president about the Credit Card Competition Act and the potential impact of Visa and MasterCard is how valuable, how valuable the fact is that Capital One has one of four credit card networks after their purchase of Discover. So as we think about the landscape in 2006 and Jimmy Diamond himself said, hey, the near term looks pretty good. The big beautiful bill has a lot of stimulus. you know, maybe, maybe the consumer is actually doing quite okay. And that's good for credit card growth over the near term. Additionally, given the fact that Capital One has a network, they're a little bit more defensive in terms of how they can respond to some of these potential policy changes.

And they have a ton of capital and they can buy back their stock cheaper. So that's me going out on the limb in terms of not just the Money Center banks and the spotlight for 26. You know, Stephanie Link said the same thing yesterday. She likes Capital One. And when you two ladies agree, it's a powerful force. Erica, thanks very much, Erica Nigerian at UBS. Meantime Energy shares Exxon Mobil hitting an all-time high today. One of the companies possibly looking to invest in Venezuela.

Brian Sullivan will join us with a special guest to discuss that when power lunch returns. Keep a close eye on oil prices because crude is now above $61 a barrel to its highest level in nearly two months today. The unrest in Iran is overshadowing expectations for more Venezuela supply. And that's just one of several energy headlines today. Brian Sullivan joins us from Washington, D.C., where he hosted a panel at the State of American Energy Conference earlier on. Perfect day, Brian, to get into what's going on with the price action here and whether it goes yet higher.

Yeah, Kelly, thank you very much. I mean, 60 is not high, but even $60 a barrel may be too high for this administration's liking. This is certainly a White House that is more friendly to oil and gas than the last one, but it's not all sunshine and roses. There is a growing conflict between the big oil producers and the administration over prices. The president, he wants lower prices. He correctly believes that energy is a huge input cost on inflation. But earlier today, I asked Marianne Manant, CEO and chair of Marathon Petroleum, about lower prices.

And if it would hurt oil production, here's a little bit of that Q&A from our panel this morning. I think there would be a commodity price where U.S. producers would have a challenge. just given the economics. What would that be? I think something below a $50 price is a concern. So 50 and below maybe the line in the oil sand where the industry will draw a line on production and maybe start cutting jobs.

But as you heard on Power Lunch just yesterday, we asked Interior Secretary Doug Bergam about where they would like to see power right now and 50 bucks a barrel was on his mind. If 60 used to be the break-even point, cutting red tape, I think we can certainly get it down to 50, where we can have a profitable, growing, vibrant, abundant oil and gas industry. So that could be a big thing to watch an oil and gas ahead, lower prices versus continued

record output and revenue. Now, another big topic was the president's post last night talking about data centers and big tech. You've seen it, no doubt, so I'll summarize the president basically saying what we talked about a few months ago at another conference, how big tech data center operators like Microsoft, meta, Google, and more will have to pay more to power electricity. And I asked EQT CEO Toby Rice about that and whether that's bullish for his company. The supply chains are there.

We're able to meet this. Now, the challenge is we don't have 15 years to get this done. We've got to get this done in a much more compressed window. So there's the challenge. But with clear regulatory environment, this industry will continue to amaze. And Microsoft this morning committing to help pay for all this power. And to wrap it up, Kelly and Dom, I want to put this at a perspective. Medicio Mark Zuckerberg saying the other day that they want to build over 100 gigawatts of power production in the years to come.

100 gigawatts is a couple of New York City's worth of power every year. Something will have to power that power. And that something is likely nuclear and natural gas. Talk more about this, some of these big themes from today. and talk more about energy's, America's energy future, and bringing Mike Summers. He is president, CEO of the American Petroleum Institute. It was their conference.

We were at earlier today, Mike. I know the conference is ongoing. What were the one or two so far big takeaways from that event today? Well, one of the things that we talked about today is what we call the demand decade. We know that energy demand is going to continue to grow over the course of the next decade. The real question is whether the American political environment is ready to unleash American energy. Are we going to have the right regulatory reforms in place? Are we going to be able to build infrastructure and change the permitting process to make sure that we can actually get

that energy from where it is to where it needs to be? And are we going to continue to lead the world in energy production as we are today? But you got my broader point, Mike. There is a little bit of a growing conflict. The administration wants lower prices, lower gasoline prices, lower inputs for inflation. But as you heard Marianne Manit, your event say this morning, there is a point at which it's too low, is there some sort of sweet spot for prices where both the White House and the oil and gas administration might be happy? Well, I give the President of the United States a lot of credit. The president has done a lot just this year alone in lightening the regulatory footprint of the federal government. We're able to build pipelines again because of this

administration. We've lifted the EV mandate. We've, of course, also allowed LNG to flow again in the Gulf Coast by getting rid of that LNG permitting pause. So it is, we're at a point now where they are lowering the regulatory cost for production in the United States. Demand is going to continue to increase both in the United States and abroad. And I'm confident that the United States is going to continue to be the world superpower for energy. 13 million barrels of oil produced every single day, record natural gas production.

But demand is also increasing as well for. all energy sources. If we're going to make sure that we can continue to do this and lead the world, we need a regulatory environment that supports it. And that means permitting reform in 2026. I think this has been one of the biggest myths or falsehoods or just incorrect statements made about oil and natural gas globally in the last few years, which this idea that if we see an increase in, say, EVs, I bought an EV, I like electric cars. They're fast and fun. to drive. But if we see an increase in that, we're going to see a huge decrease in the usage of oil. The IEA was a little bit on that train. They've now reversed course. Everybody now sees

demand continuing to rise. Just look at Norway, super high EV penetration, but high oil and gas use as well. Is that kind of what people have gotten wrong about this industry the last few years? Well, we're finally back to a point where we're talking about energy reality, not myth-making by energy analysts. The truth of the matter is all energy sources are going to see increases. We are not in competition with other sources of energy production. We're actually working with other sources of energy because we know we're going to need it all. But the core is going to continue to be natural gas in oil produced here in the United States. Yeah, it really is.

And then finally, Mike, obviously Venezuela. and Iran, we are rooting for the people of those countries. Venezuela has been an economic disaster forever. Their oil infrastructure is literally rotting. It's literally falling down. It's an environmental risk as well. We know kind of what's happening in Iran. That's about a combined four million barrels a day. I asked Marianne Manit of Marathon earlier about this. She said they were ready. I know you talked to everybody in the industry is the U.S. oil and gas industry ready to step up if we see some major supply disruptions for one or both of those nations. Iran in particular, their oil company, Nyok, they may hold their workers, they may hold the power

in how this revolution ends up because if they stop working, cut off the money, that regime is likely dead. Is the U.S. oil and gas industry ready to pick up the slack here? These are two tremendous opportunities. First of all, in Venezuela, if we get security and policy right, if we get rule of law, in place and sanctity of contracts and we're actually able to produce there in a secure way because as you know, the guerrillas are very powerful back in Venezuela right now. We need to make sure that it's a secure environment for our workforce to work. So we're excited about the opportunity in Venezuela, but they have to have things put in place right now, prerequisites,

before we're going to have the kind of investment that we want to see in the country of Venezuela. Iran is a huge opportunity as well. But truly, what we're looking at right now, now is freedom for the Iranian people. They've been living under this repressive regime since 1979. There's tremendous opportunity. I think what you're seeing in the markets today are real concerns about what the response would be if the United States intervened and the potential for strikes in Saudi Arabia and other key oil regions throughout the world. So we're watching this very closely, but for Iran, the opportunities are significant because they're producing all of this oil right now. They're the sixth largest producer of oil in the world right now, and they're doing

it without Western engineering techniques. If we could go in there and really be able to produce in Iran, again, the sky is the limit for that country, both for natural gas and for oil. But again, we're going to need a lot of more oil and natural gas from the United States because we continue to be the core of production throughout the world. Mike Summers, president of the API, big event today. a great event. Thank you for having CBC there, Mike. We do appreciate it. Talk to you soon. Thank you very much. Thank you, Brian. Yeah, Kelly and Dom, just quickly, the numbers are staggering. Remember, it only took 1.21 gigawatts to get Michael J. Fox back to the future. Now we're talking about 100 gigawatts. That's a lot of power.

It is. Thank you for putting it in context for us. Brian, as always. Brian Sullivan, we'll see you tomorrow. More power lunch next. Stocks may be at session lows right now, but take a look at Intel, which is standing out today and hitting a new 52-week high, maybe an all-time high. Yeah, Dom's nodding. He's my data guy. It's getting close. It's up 9% after getting upgraded to buy a key bank. They put a $60 price target on it, citing robust hyperscaler demand for 2026. And this is the best part. The shares are up 30% since the start of the year, which was, you know, last week, making it the best performing or one of the best performing stocks since Jan 1. All right. So now, in a series of never-before-seen interviews, Becky Quick spoke to Warren Buffett

about his philosophies on business, philanthropy, and life, and how his perspectives have changed over the decades. Buffett's three kids, Susie Howey and Peter also joined Becky to discuss the monumental task their dad had given them to eventually give away his entire fortune. That premieres tonight, 7 p.m. Eastern time right here, Kelly, on CNBC. Looking forward to it, Dom. Thanks. Thank you for watching. Closing bell starts right now.