Market Commentary

For the week ending 1/2/2026

 

The markets may have struggled toward their much talked about “Santa Claus Rally” this year, but they still closed out 2025 with impressive double-digit annual gains for the third consecutive year.

The S&P 500 gained 16.4% for the year, the Nasdaq climbed 20.4%, and the Dow closed out 2025 ahead 13.0%.

All three indices did have to weather some profit-taking and cooling off in the final trading sessions of December 2025. But, they also opened the 2026 trading year on a positive note, driven by continued optimism, particularly for tech stocks, as investors positioned for continued growth in 2026.

Weekly initial jobless claims came in lower than expected at 199,000 versus consensus 208,000 and the previous week’s upwardly revised 215,000. Weekly continuing jobless claims also came in lower at 1,866,000 versus the consensus 1,935,000 and the prior week’s downwardly revised 1,913,000. The latest claims data supports the ongoing narrative of a resilient labor market.

Manufacturing data, on the other hand, came in mixed. While the final December S&P Global Manufacturing PMI came in at 51.8, in-line with consensus expectations, new orders declined for first time in a year. Output growth remained solid. International sales continued to fall, in part linked to tariffs. Firms reported that employment growth was sustained into the end of 2025, with job creation reaching the most pronounced since August.

The AI boom that fueled much of the stock gains in 2025 is expected to remain a primary theme for 2026, with AI-related stocks jumping at the start of the new year on Friday.

Market participants remain optimistic about further interest rate cuts by the Federal Reserve in 2026, which would likely help sustain the bull market. The current Fed fund rate range is 3.50-3.75%.

After a mild news week during the holiday stretch on Wall Street, a substantial geopolitical event grabbed headlines over the weekend. Early Saturday morning the U.S. conducted a “large scale strike” on Venezuela. U.S. forces captured and later indicted Venezuelan President Nicolas Maduro and his wife Cilia Flores. They were taken to the U.S. to face charges which, for him, will include narco-terrorism conspiracy, among other charges. President Trump later said that the U.S. is “going to run” Venezuela until the country achieves a safe, proper transition of power. Secretary of State Rubio on Sunday declined to offer additional details on that, but did note control is being exercised through its naval embargo on oil exports. Venezuela, notably, has the largest proven oil reserves in the world. Wall Street and the world will be watching as this situation progresses.

For the week, the S&P 500 closed down -1.1% to 6,858, the Nasdaq dropped -1.5% to 23,236 and the Dow slid -0.7% to 48,382.

Oil rose 1% to $57.32/bbl. Gold fell -4.6% to $4,345/oz, and the yield on the Ten-Year Treasury rose slightly to 4.19%.

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