The stock market finished the first full trading week of 2026 with the Dow Jones Industrial Average and the S&P 500 at record highs, following the release of the latest jobs report.
Source: Investing.com
Wall Street’s major indices posted a winning week. The 30-stock Dow rose 2.3%, the benchmark S&P 500 added 1.6%, while the tech-heavy Nasdaq Composite and the small-cap Russell 2000 jumped 1.9% and 4.6% respectively.
The week ahead is expected to be an eventful one as investors continue to gauge the outlook for the economy and interest rates.
On the economic calendar, most important will be Tuesday’s U.S. consumer price inflation report for December, which could spark fresh turmoil if it comes in higher than expectations. The CPI data will be accompanied by the release of the latest figures on producer prices, which will help fill out the inflation picture, as well as the December retail sales report.
Source: Investing.com
Elsewhere, the fourth quarter earnings season is set to get underway, with JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, , BlackRock, Delta Air Lines, and Taiwan Semiconductor among some of the big names scheduled to post results.
In addition, the Supreme Court could issue a Trump tariffs ruling this coming week after not doing so on Friday.
Regardless of which direction the market goes, below I highlight one stock likely to be in demand and another which could see fresh downside. Remember though, my timeframe is just for the week ahead, Monday, January 12 – Friday, Jan. 16.
Stock To Buy: Morgan Stanley
Morgan Stanley stands positioned to deliver one of the most impressive earnings performances in the financial sector this quarter, driven by a significant revival in mergers and acquisitions activity, robust initial public offering underwriting business, and exceptional performance across its core investment banking operations.
The company’s Q4 update is scheduled to come out before the market opens on Thursday at 7:30AM ET. Market participants expect a sizable swing in MS shares following the print, with options markets pricing in a potential move of +/-4.2% in either direction post-earnings.
Source: InvestingPro
Analyst sentiment is bullish: all nine of the latest earnings revisions have been to the upside, citing the investment banking powerhouse’s positioning in high-growth areas like AI-related financing and capital markets.
Morgan Stanley is seen earning $2.41 per share, representing an 8.5% increase from the prior year, while revenue is forecast to jump 9.4% year-over-year to $17.72 billion. This growth is expected to be fuelled by a resurgence in global M&A activity as well as strength in IPO underwriting and trading revenues.
Recent quarters have shown Morgan Stanley successfully capturing market share in high-margin advisory services while maintaining its leadership position in equity and debt underwriting that generates substantial fee income during favorable market conditions.
Source: Investing.com
From a technical standpoint, MS shares closed around $186.50 on Friday, trading above key moving averages and showing bullish momentum ahead of the report. A beat-and-raise scenario could propel the stock toward $200 in the near term, making it an attractive buy for those betting on continued financial sector strength.
InvestingPro’s AI-powered quantitative model rates Morgan Stanley with a ‘GOOD’ Financial Health Score of 2.65, reflecting its robust capital position, liquidity, and multi-decade dividend reliability.
Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading. Tap here and save 55% on all plans as part of our New Year’s sale!
Stock to Sell: Capital One Financial
On the flip side, , a major player in credit card lending, is likely to encounter significant selling pressure this week following President Trump’s announcement of a temporary 10% cap on credit card interest rates. The policy, aimed at easing consumer burdens, directly threatens the profitability of lenders heavily reliant on credit card interest income.
Capital One, with its substantial exposure to consumer credit cards stands out as particularly vulnerable. The company’s average credit card interest rates typically range from 20-30%, meaning a 10% cap would eliminate the vast majority of net interest income that represents the core profit engine for the entire organization.
The proposed interest rate cap creates immediate and severe implications for Capital One’s financial performance, as the company would face the choice between accepting dramatically reduced profitability or exiting significant portions of the credit card market that would no longer generate adequate returns.
Source: Investing.com
Even before this headline, COF was grappling with rising charge-offs and slowing loan growth, making it vulnerable to further downside.
Shares closed near $250 on Friday, but if earnings (due Jan. 22) show any deterioration in credit quality—or management comments cast doubt on future profitability—the stock could retest $229 or lower, down another 8-10% from current levels.
Whether you’re a novice investor or a seasoned trader, leveraging InvestingPro can unlock a world of investment opportunities while minimizing risks amid the challenging market backdrop.
Subscribe now to get 55% off all plans with our New Year’s holiday sale and instantly unlock access to several market-beating features, including:
- ProPicks AI: AI-selected stock winners with proven track record.
- InvestingPro Fair Value: Instantly find out if a stock is underpriced or overvalued.
- Advanced Stock Screener: Search for the best stocks based on hundreds of selected filters, and criteria.
- Top Ideas: See what stocks billionaire investors such as Warren Buffett, Michael Burry, and George Soros are buying.
Disclosure: This is not financial advice. Always conduct your own research.
At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF. I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.