Last Week
Wall Street closed out the first full trading week of the new year at record levels on Friday, with small caps leading the charge. The Russell 2000 surged 4.6%, the S&P 500 reached a new record after gaining 1.6%, and the Nasdaq rallied 1.9%. Tech stocks got a boost from news at the Consumer Electronics Show in Las Vegas. Advancing issues nearly tripled declining issues, with Consumer, Basic Materials, and Industrials topping the leaderboard. Oil & Gas stocks posted a 1.7% gain in volatile trading as investors digested the implications of the regime change in Venezuela.
The labor market dominated the economic data, with several updates presenting a mixed picture. U.S. private sector employment missed consensus estimates, job openings fell in November 2025, while job cuts in December unexpectedly dropped to an 18-month low. Finally, on Friday, the Bureau of Labor Statistics reported that employers added a modest 50,000 jobs in December. Although these reports suggest a slowing labor market on balance, they may not be soft enough to motivate the Fed to cut rates at their upcoming FOMC meeting. After digesting the data, J.P. Morgan forecasters withdrew guidance for a January rate cut and revised expectations to include a potential rate increase in 2027.
It was another steady week for the bond market, as the yield on the 10-year Treasury barely budged, finishing down 2 basis points to 4.17%. The Dollar strengthened to its highest level in a month, while Gold continued its meteoric rise to new record heights.
On the Chicago Sports Scene, the Bears did it again at Soldier Field on Saturday night, erasing a 15-point fourth-quarter deficit to beat the Packers 31-27. Bring on the 49ers!
This Week
Trading was off to a rough start after a weekend of news out of the Nation’s Capital shook investors’ confidence in the U.S. Dollar and equity markets. Specifically, federal prosecutors opened a criminal case against Fed Chair Jerome Powell, a move that could undermine the independence of the Fed. On Wednesday, another test of the President’s power might come if the Supreme Court rules on the legality of Trump’s tariffs.
Fourth-quarter earnings season kicks off with the big banks reporting their earnings. Earnings growth for the quarter is estimated to have been 8.3%, with most of the strength coming from the Tech sector.
On Tuesday, the Bureau of Labor Statistics releases the Consumer Price Index for December, with the consensus calling for a 2.7% year-over-year increase. Any surprises in that release would influence the upcoming monetary policy decision.
The Census Bureau is expected to report on retail sales for November on Wednesday. Despite the low level of consumer confidence, consumer spending has remained robust throughout the year.
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