US Stock Weekly Report

2026-01-11

Previous Week’s Market Review & Analysis

Macroeconomic Landscape: The week saw mixed labor market signals with the December 2025 Employment Situation Report, released on January 9, 2026, indicating a modest addition of 50,000 jobs, falling below expectations. The unemployment rate, however, declined to 4.4%, accompanied by strong wage growth of 4.1% over the last three months. Inflation data for November 2025 showed headline and core CPI at 2.7% and 2.6% year-over-year, respectively, reportedly hitting its lowest level in nearly five years. Federal Reserve Governor Stephen Miran on January 6, 2026, suggested over 100 basis points of rate cuts would be justified in 2026, a more dovish stance than many colleagues. The probability of a January rate cut decreased, with markets anticipating two cuts later in 2026. ISM Services PMI for December decelerated to 52.5, while the S&P Global US Manufacturing PMI registered 51.8, indicating slower expansion. Geopolitical developments, specifically a U.S. intervention in Venezuela on January 5, 2026, led to higher crude oil and gold prices. Ten-year Treasury yields edged slightly higher, reflecting fiscal and inflation concerns.

Market Performance Overview: U.S. equity markets posted solid gains, recovering from the end of 2025. The Dow Jones Industrial Average, Nasdaq, and S&P 500 closed the week up 2.3%, 1.9%, and 1.6% respectively. The Dow surged past 49,000, and the S&P 500 reached a new record high. Small-cap stocks, represented by the Russell 2000 Index, outperformed significantly with a 4.6% surge, signaling broadening market participation. Energy, utilities, industrials, and materials were strong performers, with energy companies and banks seeing notable jumps early in the week.

Key Events Analysis: The December 2025 jobs report was a key event, with its mixed signals prompting discussions on the Federal Reserve’s future policy path. Commentary from Fed officials, including Governor Miran's dovish remarks, highlighted internal policy debates. The geopolitical event in Venezuela on January 5, 2026, had an immediate impact on commodity prices.

Flows & Sentiment: U.S. Domestic Equity Mutual Funds saw outflows of $6.79 billion for the week ended December 30, 2025. However, ETF flows on Friday, January 9, recorded strong net inflows of $11.716 billion, with a significant rotation into U.S. Large Cap Blend and Growth categories. Consumer sentiment improved slightly in early January, yet lingering concerns over inflation and the labor market persisted.

Overall Assessment: The market initiated 2026 with a robust rally, driven by resilient, albeit moderating, labor market data and a generally risk-on investor mood. While job growth slowed, the decrease in unemployment and strong wage gains were constructive. Geopolitical developments provided a boost to energy and material sectors. The broadening of the rally to include small-cap stocks suggests underlying market strength, while the Federal Reserve's evolving stance on interest rates remains a central theme.

Next Week’s key market drivers & Investment Outlook

Upcoming Events: The upcoming week (January 12-18, 2026) is critical for economic data, with the release of the U.S. inflation figure for December (Consumer Price Index and Core CPI) on Tuesday, January 13. This will be followed by the Producer Price Index and Retail Sales for November on Wednesday, January 14. Fourth-quarter 2025 earnings season commences, featuring reports from major U.S. banks including JPMorgan Chase, Bank of America, and Wells Fargo, as well as Delta Air Lines and Taiwan Semiconductor Manufacturing. Statements from Federal Open Market Committee officials will also be closely monitored for further policy guidance.

Market Logic Projection: The forthcoming inflation data will be pivotal in shaping Federal Reserve monetary policy expectations, especially given the diverse opinions among policymakers on the future trajectory of rate adjustments. Strong corporate earnings, particularly from the financial sector, will offer crucial insights into the health of the broader economy and capital markets. The interplay between these macroeconomic indicators and micro-fundamental factors will heavily influence market direction.

Strategy & Allocation Recommendations: Maintain an overweight position in industrials and energy sectors, given sustained economic activity and potential geopolitical tailwinds. Consider tactical allocations to small-cap equities for continued breadth expansion. Investors should closely monitor inflation releases for potential shifts in the Federal Reserve's policy outlook.

Risk Alerts: Key risks include potential upside surprises in inflation data, which could temper easing expectations and introduce market volatility. Persistent geopolitical tensions, particularly those impacting commodity markets, remain a significant concern. The ongoing divergence in Federal Reserve members' views on monetary policy could also lead to uncertainty.