Southwest Airlines shares climbed over 4% on Friday after JP Morgan issued a rare double upgrade on the carrier, citing growing confidence that a stronger earnings outlook could reshape investor expectations ahead of results later this month.

The analysts lifted their rating and raised their price target to a Street-high $60 from $36, implying roughly 40% upside from Thursday’s close.

JP Morgan said the rally was driven less by near-term earnings and more by anticipation around Southwest’s guidance for 2026.

Analyst Jamie Baker said an earnings-per-share outlook of $5 for that year now looks “attractively probable,” a figure that would far exceed the current market consensus of $2.98.

According to Baker, such an outlook would handily outperform peers and could reignite debate around the underlying strength of Southwest’s business, even as the broader domestic airline market remains challenging.

The analysts cautioned that the market may initially be slow to embrace a bold EPS target, given Southwest’s uneven history with guidance and its past reliance on alternative metrics rather than earnings per share.

A shift in how Southwest tells its story

Southwest has historically avoided providing EPS guidance, preferring measures such as revenue per available seat mile.

However, recent strategic changes mean those metrics may no longer capture the full picture.

The airline has rolled out a series of revenue-enhancing initiatives, including the controversial decision to end its long-standing “bags fly free” policy and move away from open seating.

As a result, JP Morgan expects Southwest to begin guiding investors using EPS, with full-year 2026 seen as a logical starting point.

“In our view, igniting a debate between the health of its core and the impact of an admittedly challenging domestic backdrop, while we don’t expect Southwest to abandon quantifying its initiatives, the pending shift to an EPS guide has sent us back to the drawing board,” JP Morgan analysts said.

Baker said the firm’s confidence stems partly from Southwest’s earlier, now-withdrawn guidance that pointed to earnings before interest and taxes of $3.8 billion in 2026.

Even assuming a more conservative outcome, the analysts see an EBIT floor of around $3 billion, well above the consensus estimate of $1.9 billion, translating into roughly $5 in EPS.

Even a lower guide of $4.50 per share, they said, could still justify a sharp re-rating toward their $60 target.

Stock outperforms peers in 2025 despite profit slump

Southwest has already been one of the standout US airline stocks last year, with shares up over 30% over the past 12 months.

That compares with gains of 16% for Delta Air Lines and 11% for United Airlines, while American Airlines shares are down roughly 11% over the same period.

The performance has come despite a sharp hit to profitability.

In the first nine months of the year, Southwest’s profit fell about 42%, underscoring the gap between near-term financial strain and investor optimism around its transformation plan.

Analysts say the stock’s resilience reflects company-specific factors rather than a broad recovery in airline demand.

“What’s helping Southwest’s stock is clearly the initiatives, not the demand environment,” said Savanthi Syth, an airline analyst at Raymond James.

Revenue initiatives take shape

A key part of that transformation begins on Jan. 27, when Southwest will formally abandon open seating in favor of assigned seats across its all-Boeing 737 fleet.

The airline will also introduce extra-legroom seats in the front rows, sold at a premium.

Southwest has estimated that assigned seating and extra-legroom options could generate about $1 billion in pretax earnings next year and $1.5 billion in 2027, providing a significant boost to profitability.

Despite Friday’s rally, skepticism remains.

Data compiled by LSEG show that 26 analysts rate the stock a hold on average, with a median price target of $42, suggesting the market is still divided on how much of the turnaround is already priced in.

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Intel (NASDAQ: INTC) rallied as much as 9% on Friday morning after the US President, Donald Trump, praised the semiconductor behemoth and its chief executive, Lip-Bu Tan, in a social media post.

INTC shares have been in a sharp uptrend over the past six months – a rally that has “doubled” the value of the Trump administration’s stake in the chip manufacturer.

“The United States government is proud to be a shareholder of Intel,” the President wrote on Truth Social – touting the firm’s recently launched chips that were “designed, built, and packaged in the USA.”

His remarks followed a “great meeting” with the “very successful” Intel leader, Lip-Bu Tan.

Is federal support all that’s driving Intel stock?

While Intel stock has meaningfully gained from federal support in recent months, it’s not all that has contributed to the rally.

The multinational has made real progress on manufacturing technology that signals it’s slowly but surely gaining ground against rivals, including Advanced Micro Devices and Nvidia.

For example, INTC has recently launched the Core Ultra Series 3 or “Panther Lake” processors – it’s first sub-2-nanometer offering built on the 18A node.

These new chips offer notable performance gains over predecessors (77% in gaming, and 60% in multithreaded workloads), reinforcing that the firm’s advanced process works at scale.

The next major milestone for Intel is its upcoming 14A process – slated to enter risk production in 2027.

A simple reason to remain invested in INTC shares

While Intel shares aren’t entirely out of the woods just yet, they’re attractive as a long-term holding for one simple reason – everyone wants this firm to succeed, according to Futurum’s top executive, Daniel Newman.

In a recent CNBC interview, Newman noted TSMC can’t possibly make enough chips to meet the worldwide demand.

According to him, INTC isn’t positioned to replace Taiwan Semi – at least not in the near-term – but it could emerge as a reliable “second”, and even that would prove sufficient for it to experience a multi-year rally given the sheer scale of AI demand.

Intel’s strategic importance as a substitute supplier for the semiconductor industry is why the likes of SoftBank and Nvidia have poured billions into the Nasdaq-listed firm.

How Wall Street recommends playing Intel

In the near-term, technicals paint just as rosy a picture for INTC stock as well.

Not only is the company trading handily above its major moving averages (50-day, 100-day, 200-day) at the time of writing, its longer-term relative strength index (100-day) sits at 58 currently – indicating bulls still have more room to run.

According to Barchart, while the consensus rating on Intel sits at “hold” only, Street’s price targets on it go as high as $52, signaling potential for another 20% upside over the next 12 months.

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Apple shares extended a rare period of weakness this week, slipping 0.5% to $259.04 on Thursday and marking the stock’s seventh consecutive session of declines dating back to Dec. 30.

While the pullback has been relatively modest — Apple shares are down about 5.4% over the streak — the persistence of the losses has drawn investor attention.

According to Dow Jones Market Data, the run represents Apple’s longest losing streak since an eight-day skid in May.

Friday trading offered tentative relief, with the stock hovering near the flatline as investors looked to see whether Apple could avoid another red close.

Analysts see catalysts ahead of earnings

Despite the recent weakness, analysts at Evercore said there are near-term factors that could help stabilise and potentially lift the stock.

The firm reiterated its Outperform rating on Apple and raised its price target to $330 from $325 in a research note published Friday.

The upgrade was driven by expectations of strong financial performance for the quarter ended in December, which Apple is scheduled to report on Jan. 29.

“Our checks coupled with industry data points suggest that there is near-term upside to AAPL estimates driven by robust iPhone demand + minimal memory cost headwind,” Evercore analysts led by Amit Daryanani wrote.

On the demand front, Apple had previously guided investors to expect revenue growth of 10% to 12% for the December quarter.

That would mark the company’s first double-digit revenue growth quarter since fiscal 2022.

Evercore believes Apple may have exceeded even those expectations.

The firm cited strong demand across North America, China and India, with only modest weakness in Europe.

It also noted that sales appear to have skewed toward higher-end iPhone models, a trend that typically supports higher average selling prices and margins.

“Demand has also skewed towards the higher-end models,” Daryanani wrote.

Alphabet overtakes Apple in market value

Apple’s stock rout has coincided with a notable shift in market leadership.

Alphabet has overtaken Apple to become the world’s second-most-valuable publicly traded company.

Alphabet closed Wednesday’s session with a market capitalisation of $3.89 trillion, edging past Apple’s $3.85 trillion.

It marked the first time Alphabet has surpassed Apple in market value since 2019.

The gap widened Thursday as Alphabet shares rose about 1%, lifting its market capitalisation to roughly $3.94 trillion, while Apple’s slipped to around $3.84 trillion.

As of Friday, Alphabet’s valuation stood near $3.98 trillion.

Succession discussions add to investor focus

Adding another layer of scrutiny, Apple is also navigating internal discussions around leadership succession.

According to a report from The New York Times published Thursday, hardware engineering chief John Ternus has emerged as the leading internal candidate to eventually succeed Chief Executive Officer Tim Cook.

The report said Cook, 65, has signalled to senior leaders that he wants to reduce his workload after more than a decade at the helm.

People familiar with the discussions told the newspaper that if Cook steps down as chief executive, he would likely transition into the role of chairman of the board.

Ternus, 50, joined Apple in 2001 and currently serves as senior vice president of hardware engineering.

Those close to the process described him as having a management style similar to Cook’s — measured, collaborative and closely attuned to Apple’s global supply chain.

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European markets and politics ended the week on a mixed note, with London equities nudged higher by renewed mining deal speculation, while a powerful storm disrupted daily life across parts of northern Europe.

Political uncertainty also loomed in France, where a confidence vote over the Mercosur trade pact threatens fresh turmoil.

Meanwhile, Italy’s prime minister called for a cautious rethink of Europe’s diplomatic approach to Russia, underscoring widening debates over security, trade and economic resilience.

London stocks rise on mining M&A

London stocks edged higher on Friday, lifted by miners after a burst of deal speculation in the sector.

Glencore jumped after confirming it had held preliminary talks with Rio Tinto over a potential merger, stoking bets on further consolidation in commodities.

Rio and Anglo American also gained as investors weighed the chances of fresh offers in a still-underpowered UK market.

Broader sentiment was helped by calmer bond yields and hopes that global rate cuts later this year could support growth.

Still, traders said volumes were thin, and caution persisted ahead of key US data that could sway central bank expectations.

Storm Goretti batters northern Europe

Storm Goretti barrelled across northern Europe on Friday, triggering widespread power cuts and transport disruption as heavy winds and rain lashed several countries.

Utilities reported hundreds of thousands of homes without electricity, while fallen trees and flooding shut roads and rail lines, and forced flight and ferry cancellations.

Authorities in affected regions warned of dangerous travel conditions and urged residents to stay indoors where possible.

Emergency crews worked through the day to restore power and clear debris, but officials said it could take time to fully repair damaged networks.

The storm added to recent bouts of extreme weather that have tested Europe’s infrastructure and resilience.

France faces Mercosur confidence vote

French opposition parties moved to topple the government on Friday over a controversial trade deal with South America’s Mercosur bloc, setting up a high-stakes confidence vote that could force snap elections.

Critics warned the pact would undercut French farmers and environmental standards, tapping into deep public unease over globalisation and rural livelihoods.

The government defended the agreement as vital for exports and geopolitical influence, but struggled to quell a rebellion that united left and right lawmakers.

If the no-confidence motion passes, it would mark a rare parliamentary defeat and throw French politics into fresh turmoil just months after the last election.

Meloni urges G8 dialogue rethink

Italian Prime Minister Giorgia Meloni urged Europe to reopen dialogue with Russia on Friday, arguing that diplomatic channels were needed even as she ruled out any swift return to the G8.

Speaking ahead of a summit, Meloni said isolating Moscow indefinitely was counterproductive, but stressed that readmission to the elite club of democracies remained far off while the war in Ukraine continues.

Her comments highlighted a growing debate within Europe over how to balance pressure on the Kremlin with longer-term security interests, though many capitals remain wary of any steps that could be seen as rewarding aggression.

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Netflix stock (NASDAQ: NFLX) has tumbled roughly 27% since hitting a peak in late June 2025.

The losses have been particularly steep following the December 5 announcement of its $72 billion equity acquisition of Warner Bros. Discovery’s studios and streaming division.

Netflix stock briefly dipped further in early January as a hostile Paramount bid complicated the picture, yet a disconnect remains between the market’s pessimism and the strategic logic underpinning the deal.

Investors are grappling with a central question: is the selloff justified, or does it overlook long-term upside buried beneath near-term execution risks?​

Netflix stock trajectory after the Warner deal

The market reaction was swift and unforgiving.

Netflix shares fell roughly 3% on December 5, the announcement day, while Warner Bros. Discovery surged 3%.

By December 8, as Paramount launched a hostile $108 billion counterbid, Netflix sank 3.4% and hit its lowest level since April.

Over the subsequent month, the stock declined another 13% as regulatory uncertainty mounted, with President Trump publicly questioning the deal’s antitrust implications on December 8.​

The $82.7 billion enterprise value acquisition, structured as $23.25 in cash plus $4.50 in Netflix stock per WBD share, requires Netflix to assume Warner Bros.’ substantial debt burden.

The company projects $2 billion to $3 billion in annual cost synergies by year three, yet analysts remain unconvinced these savings justify the price tag at current valuation multiples.

What analysts say

Wall Street consensus has shifted decidedly cautious.

On December 8, Rosenblatt Securities downgraded Netflix from Buy to Neutral, cutting its price target from $152 to $105, a 31% reduction that reflected the firm’s skepticism.

Pivotal Research followed suit, downgrading its rating from Buy to Hold and slashing its target from $160 to $105, citing “an extended period of uncertainty and risks.”​

On January 5, CFRA added to the downbeat chorus, reducing Netflix from Strong Buy to Hold and cutting its price target from $130 to $100.

However, a constructive counterpoint exists.

Canaccord Genuity reaffirmed its Buy rating, arguing that Warner Bros.’ iconic franchises and globally recognized production assets could strengthen Netflix’s competitive moat once integration completes.

The core tension animating analyst notes centres on timing: will Netflix’s content library leverage, cost synergies, and scale prove sufficient to justify current debt levels, or will regulatory hurdles and integration complexity destroy shareholder value over the next 18 to 24 months?

The regulatory pathway remains unresolved. Deal completion is expected no earlier than Q3 2026, with breakup fees of $5.8 billion underscoring execution risk.​

The market’s pessimism reflects genuine jeopardy.

Yet if Netflix clears regulatory approvals and integration succeeds, the studio assets could unlock subscriber and revenue upside.

For now, investors are pricing in downside, not optionality, a calculus that could shift once management proves competence on integration milestones.

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The S&P 500 climbed 0.7% to a fresh intraday record high on Friday, following the release of December’s employment report, which showed a mixed labor market picture that calmed recession fears.

The Nasdaq Composite gained 0.9%, while the Dow Jones Industrial Average added 213.52 points, or 0.43%, closing at 49,480.41 as of midday trading.

The gains cap the first full trading week of 2026 with solid weekly advances: the S&P 500 is up roughly 0.9% week-to-date, while the Dow and Nasdaq have each risen approximately 1.8% and 1.2%.​

The employment data reinforced a narrative Wall Street has embraced since late 2025: the Federal Reserve is likely to remain on hold in January.

This certainty reduced volatility and signalled the market’s willingness to hold equities through the first quarter earnings season, a key psychological shift for the market.​

Market snapshot: Indexes, breadth and sector movers

Nonfarm payrolls increased by just 50,000 in December, falling sharply short of the 73,000 forecast by Dow Jones consensus economists and marking a sharp slowdown from November’s revised figure of 56,000.

Critically, prior months saw downward revisions totalling 76,000 jobs: 68,000 in October, reduced from an initial 105,000 decline, and 8,000 in November, signalling a tighter labor market than headline estimates suggested.

The unemployment rate ticked down to 4.4%, slightly better than the anticipated 4.5%, while wage growth accelerated to an annual 3.8%, exceeding expectations of 3.6%.​

This mixed signal, weak job creation paired with falling unemployment and accelerating wages, left room for bulls to claim the labor market remains resilient.

Leisure and hospitality, the largest job gainer, added 47,000 positions, while healthcare rose 21,000.

By contrast, retail employment dropped 25,000, and government added only 2,000 jobs.

The breadth of gains tilted toward defensive sectors and cyclicals, with financials and industrials outperforming.

Small-cap equities also rallied, with the Russell 2000 participating in the week’s gains.​

Treasury yields remained choppy but ultimately drifted higher after initially spiking lower on the weak payrolls number.

The 10-year yield climbed to 4.187%, while the 2-year rose 1 basis point to 3.505%, as markets repriced the probability of a Fed rate cut in late January to just 5%, down from 12% earlier Friday.

The dollar index reached a four-week peak of 99.091, reflecting renewed confidence in the U.S. economy’s durability.​

Drivers and outlook​

Forward-looking catalysts include the Federal Reserve’s January 28 policy decision, next week’s retail sales and inflation data, and the start of earnings season.

The market has now priced in a 71% probability of 50 basis points in total rate cuts throughout 2026, though the timing remains uncertain.

Until the Fed signals a dovish pivot or economic data deteriorates sharply, risk appetite appears firmly in favour of equities.​

The gains reflect a market settling into 2026’s first full trading week with renewed conviction: no imminent rate cuts, but no recession either.

The traders will likely keep a close eye on Fed speakers and regional economic data next week to test that thesis.

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US job growth stalled in December, underscoring a labor market losing momentum, while geopolitical and policy uncertainty weighed on global sentiment.

Iran’s Supreme Leader warned protests could isolate the country further as security forces tightened controls.

In the US, OpenAI and SoftBank moved to secure clean energy for AI infrastructure with a $1 billion renewables investment.

Meanwhile, the Supreme Court delayed a ruling on Trump-era tariffs, prolonging uncertainty over trade policy, costs, and presidential authority.

US job growth stalls

US job growth remained stuck at stall speed in December, with employers adding just 50,000 positions as the unemployment rate dipped to 4.4%.

The modest gain fell short of expectations and capped the weakest year for hiring since 2003, with only 584,000 jobs created in 2025.

Restaurants and healthcare drove the gains, while retail, manufacturing, and construction shed workers.

Though the jobless rate ticked down from November’s 4.5%, the broader picture shows a labor market running on fumes, hiring has slowed dramatically from 2024’s pace, and downward revisions to prior months painted an even softer picture than first reported.

Iran’s leader warns of isolation

Iran’s Supreme Leader warned protesters that continued unrest risked leaving the country “cut off from the world,” as authorities tightened their grip after days of nationwide demonstrations.

In a televised speech, he accused foreign enemies of stoking the turmoil and urged Iranians to reject what he called Western plots to weaken the Islamic Republic.

Security forces intensified their presence in major cities, with reports of fresh arrests and internet restrictions aimed at curbing mobilisation.

The warning underscored Tehran’s growing isolation as new Western sanctions and diplomatic censure pile pressure on an economy already crippled by years of mismanagement and conflict.

OpenAI, SoftBank back AI power push

OpenAI and SoftBank Group announced a $1 billion investment in SB Energy, SoftBank’s renewable power unit, as the tech giants deepen their push into clean energy to fuel the AI boom.

The deal values SB Energy at roughly $5 billion and will help expand its solar and battery storage projects across the US and Asia.

With data centres consuming ever more electricity, the partnership aims to lock in reliable, low-carbon power for OpenAI’s massive computing needs.

The move highlights how AI firms are racing to secure energy supplies amid growing concerns about grid capacity and emissions.

US Supreme Court delays tariff ruling

The Supreme Court kept investors and importers in suspense on Friday, declining to rule on the legality of Donald Trump’s sweeping tariffs despite intense speculation that a decision was imminent.

Instead, the justices issued a single opinion in an unrelated criminal case, leaving one of the most consequential trade and fiscal questions of Trump’s second term unresolved.

At stake is not just the fate of hundreds of billions of dollars in duties, but also how far a president can stretch emergency powers to reshape trade policy.

Markets now face several more days of uncertainty over costs, refunds, and executive authority.

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Wheat kicked off the new year with a price surge, as the most actively traded futures contract on the CBOT climbed to 522 US cents per bushel on Thursday, marking its highest level since December 26.

At the time of writing, US wheat futures for the March contract were at 518 cents.

Wheat prices began the year at a robust 500 US cents on the first trading day. Concurrently, the associated futures contract on Euronext in Paris achieved its peak for the last seven weeks, reaching EUR 192 per ton.

The recent announcement of a price increase for wheat is directly attributable to the noticeable deterioration in the condition of winter wheat plants across several key US states, most notably Kansas, according to Commerzbank AG.

This adverse change has been observed and reported since the end of November.

Weather pattern affects crops

Agricultural analysts are pointing to the challenging weather patterns, including insufficient snow cover, extreme temperature fluctuations, and periods of dryness, as the primary factors compromising the health and expected yield of the winter wheat crop.

Since Kansas is a major producer of wheat, the reduced outlook for its harvest has a significant and disproportionate impact on global supply forecasts.

Consequently, this is triggering the upward adjustment in market prices to reflect the anticipated scarcity and higher production costs associated with a less-than-ideal growing season.

While the US Department of Agriculture released the data on Tuesday, the reduction in the percentage of crops rated good or excellent in Kansas, which is the most significant US growing state, was minimal.

Deterioration was notably more pronounced in the neighboring states of Nebraska and Oklahoma.

Given the continuing drought in the Plains, further declines are possible. The USDA reports data for these states on a monthly schedule during the winter season.

Weekly data at the federal level will not be available again until the beginning of April.

US winter wheat acreage

The USDA is scheduled to release its initial estimate for US winter wheat acreage next Monday.

A Reuters poll suggested this figure will likely be 32.41 million acres. This would represent the smallest acreage recorded in the past six years, according to Commerzbank.

Market participants anticipated US wheat stocks to total 1.64 billion bushels as of December 1, according to the Reuters survey.

This data will be released by the USDA, which will also publish figures on last year’s winter wheat planting, which amounted to 33.15 million acres.

Carsten Fritsch, commodity analyst at Commerzbank, noted:

That would be 4.5% more than last year.

Grain stocks

Meanwhile, the inventories of both corn and soybeans are projected to experience a substantial increase over the three-month period leading up to the start of December.

This significant accumulation is a direct consequence of the seasonal harvest cycle, during which the vast majority of the year’s crops are gathered and brought into storage.

For corn in particular, the influx from the harvest is expected to be exceptionally large, with projections indicating that stock levels will climb to unprecedented, record-breaking quantities by the beginning of December.

This surge in supply reflects the successful conclusion of the growing season and the subsequent post-harvest management of these key agricultural commodities.

Expected US corn stocks are projected to increase to 12.96 billion bushels, marking an almost 1 billion bushel rise compared to the previous year, the USDA report showed.

Meanwhile, soybean stocks are anticipated to reach 3.25 billion bushels, representing an increase of nearly 5% year-over-year.

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OpenAI and SoftBank announced a joint $1 billion investment in SB Energy on Friday to build and operate a 1.2-gigawatt data centre in Milam County, Texas.

On the surface, it reads like yet another megadeal in the booming AI infrastructure arms race.

But it signals something more urgent: electricity has become AI’s single largest production bottleneck.

Without solving the power problem, no amount of capital, chips, or code will matter.​

The economics are stark. A single gigawatt of continuous power supplies roughly 750,000 American homes.

Yet data centres are now clustering these demands in concentrated geographic zones, straining grids that were designed for steady, predictable industrial loads decades ago.

Between 2017 and 2023, data centre electricity demand more than doubled, driven almost entirely by AI-accelerated servers.

Lawrence Berkeley National Laboratory, operated by the US Department of Energy, estimates that data centre consumption will reach between 325 and 580 terawatt-hours by 2028, up from 176 TWh in 2023.

AI alone could account for 35 to 50% of all data centre power use by 2030, driving electricity demand that the International Energy Agency projects will exceed 250 TWh in the United States by 2026.​

Why power is AI’s hidden chokepoint

This growth trajectory exposes a hard truth: most American electrical grids cannot absorb this load. Grid interconnection queues now stretch seven years in some regions.

Utilities typically project demand in years, not months. Yet AI data centre projects announce gigawatt-scale builds on quarterly timelines.

The result is gridlock, not shortage, but misalignment between infrastructure build cycles and AI deployment speed.​

The OpenAI–SoftBank investment sidesteps this bottleneck by securing dedicated generation.

SB Energy, a SoftBank subsidiary, is building “powered infrastructure” for the 1.2-gigawatt Milam County site, meaning it will secure or develop a power supply in advance of construction.

This is not a novel strategy; major cloud operators have been pursuing on-site generation and dedicated renewables contracts for years, but the scale and speed are unprecedented.

The $1 billion reflects the capital intensity: reliable, AI-grade power requires upfront investment in generation assets, transmission interconnects, and battery storage that utility-scale capex cannot keep pace with.​

What the deal means for markets and policy

Tactically, the partnership locks in three critical advantages: stable, long-term power pricing independent of volatile wholesale markets; faster site commissioning by pre-securing grid access; and reduced regulatory risk through private coordination rather than utility-led coordination.

SB Energy becomes both developer and infrastructure provider, collapsing the permitting and construction timeline by months.​

The broader implication is market-shaping. Hyperscalers are signalling that grid constraints, not capital scarcity, will determine AI infrastructure deployment.

This reshapes investment logic across renewable energy, battery storage, and transmission. Wind and solar developers near data centre clusters gain immediate offtake demand.

Regional transmission operators face pressure to prioritize data centre interconnections over traditional industrial or residential projects.

Local regulators, already overwhelmed by proposal volume, now confront concentrated power demands from well-capitalized tech firms with explicit White House backing.​

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US big banks are set to kick off earnings season next week, and experts are bracing for solid results.

According to Ken Leon, a senior CFRA analyst, the outlook for these banking giants is “very positive”, with several tailwinds that could lift both profits and stock prices.

Note that iShares’ big banks exchange-traded fund (ETF) has already been in a sharp uptrend – up nearly 60% versus its 52-week low at the time of writing.

Still, the CFRA analyst sees US bank stocks rallying further in 2026 on the back of the following tailwinds.

Rate environment favours bank stocks

Speaking recently with CNBC, Leon cited the current rate environment as a major positive for the US bank stocks.

The Federal Reserve is broadly expected to pause in January and lower rates further in the months ahead. What this stance means for big banks is predictable funding costs, offering a cushion against volatility.

With a more lenient monetary policy, lenders are positioned to expand margins, and investors gain confidence in their forward earnings.

How steepening yield curve benefit bank stocks

Another major tailwind for the Wall Street banks this year is the yield curve that’s shifted in their favour.

“We’re seeing a steepening yield curve that’s improving net interest margins,” Leon told CNBC, adding this dynamic enables banks to borrow cheaply on the short end while lending at a higher rate on the long end.

The result: healthier spreads and strong profitability in their core lending businesses.

Bank stocks to rally on loan demand

According to the CFRA expert, loan demand will remain resilient this year as “the US economy is still very good,” with growth projected at up to 3.0%.

That translates into steady expansion in traditional banking activities, from mortgages to corporate lending.

As businesses and consumers continue to borrow, bank stocks will benefit from both volume and pricing power.

Capital markets to drive bank earnings

Beyond traditional lending, Ken Leon sees capital markets as the real earnings catalyst. “The delta for earnings has been the capital markets,” he noted.

Mergers and acquisitions (M&A), equity underwriting, and initial public offerings (IPOs) surged in late 2025, with $146 billion raised – up 30%.

And that momentum will likely carry into this year, fueling fee income and accelerating investment banks’ bottom lines, he concluded.

Are US big banks expensive to own?

In the CNBC interview, Leon admitted that valuations aren’t cheap.

“When you look at things like price and net tangible book value, they’re expensive,” he acknowledged.

Yet with regulatory easing on the horizon – possibly enabling buybacks and higher dividends – he believes investors should stay the course.

For the CFRA analyst, the combination of strong fundamentals and capital return makes US bank stocks worth owning, even at the current elevated multiples.

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