Wall Street Starts Off 2026 With a Bang!
US stocks rose to all-time highs on Friday as investors assessed the December jobs report to end a jam-packed first full trading week of 2026.
The S&P 500 (^GSPC) gained 0.6%, notching a new record. The Dow Jones Industrial Average (^DJI) rose around 0.5% to also post an all-time high close. The Nasdaq Composite (^IXIC) jumped 0.8%, marking a winning week for all three major averages.
Markets on Friday were focused on two potential catalysts: the December jobs report and the chance of a decision from the Supreme Court on the legality of Trump's sweeping tariffs.
The nonfarm payrolls report, which returned to its normal cadence following disruptions from the government shutdown, showed the US added 50,000 jobs in December. Payroll growth fell short of economists' expectations of about 70,000 positions added, sealing bets that the Federal Reserve will stand pat on interest rates in less than three weeks.
The unemployment rate declined to 4.4%, from 4.6% in November, carrying 2025's labor market theme of a “no-hire, no-fire” economy through the end of the year.
Wall Street was also on alert for a tariffs ruling from the Supreme Court, which could carry huge implications for US economic strategy if the levies are found to be unlawful. Friday came and went without a decision. The court indicated its next opinion day would come Wednesday, Jan. 14.
Meanwhile, investors are weighing the latest developments in the US moves on Venezuela. Trump said he has canceled a second wave of attacks in the country, citing cooperation over US plans to rebuild its crumbling energy infrastructure. The White House has called a meeting with global oil majors on Friday to discuss the fate of Venezuela's huge reserves.
On the home front, Trump said he has directed Freddie Mac and Fannie Mae to buy $200 billion in mortgage-backed securities, in a bid to lower mortgage rates and address growing affordability concerns. Markets are assessing the potential fallout, given details around that plan remain unclear.
Sean Conlon and Pia Singh of CNBC also report the S&P 500 ends Friday with another record close, scores a winning week:
The S&P 500 rose to new highs on Friday, notching a weekly gain, following the release of the latest jobs report.
The broad market index closed up 0.65% to 6,966.28, a fresh record close. It also notched a new all-time intraday high in the session. The Nasdaq Composite gained 0.81% to 23,671.35. The Dow Jones Industrial Average added 237.96 points, or 0.48%, to end at 49,504.07, scoring a new closing record as well.
The three major averages posted a winning week. The S&P 500 is up more than 1% week to date, while the Dow and Nasdaq have each jumped roughly 2%.
The December jobs report showed nonfarm payrolls increasing by 50,000 last month, less than the 73,000 that economists polled by Dow Jones had estimated. That data, though slightly weaker than expected, showed a U.S. economy that’s still trudging along, with investors anticipating that growth will ramp up.
The unemployment rate inched down to 4.4%, while economists had forecast 4.5%. Traders took that as a sign that improvement in the economy would happen soon.
Considering the latest payrolls data alongside the JOLTS and ADP reports released this week, Anthony Saglimbene of Ameriprise Financial believes the consensus around the U.S. employment backdrop is that it has “softened” but is also “remaining firm.” This reflects a “low-hire, low-fire” environment, he added.
“What could have been a risk is that you could have seen employment fall off a little bit more than expected, and I think that would have maybe kind of concerned investors,” the chief market strategist said. “We get through the week on the employment side with mostly as-expected numbers, which I think is a positive.”
The December report was the first month of jobs figures unaffected by the record-setting U.S. government shutdown. That stoppage posed data collection challenges for the Bureau of Labor Statistics with regards to October and November: The agency said that a full October jobs report wouldn’t be released, and the November report was delayed.
“This nonfarm payrolls report is the first report in a couple months that the data is clean,” Saglimbene said. “Looking at these numbers, it suggests that the Fed probably doesn’t need to cut in January, and maybe they don’t need to cut in March as well.”
Shares of homebuilders supported the broader market Friday after President Donald Trump directed “representatives” to buy mortgage bonds as a way to drive rates down for homebuyers. D.R. Horton jumped more than 6%, as did PulteGroup. Lennar advanced more than 7%. Home improvement stocks such as Home Depot also gained.
Stan Choe of the Associated Press also reports Wall Street rises to more records after unemployment rate improves:
U.S. stocks hit records Friday following a mixed report on the U.S. job market, one that may delay another cut to interest rates by the Federal Reserve but does not slam the door on it.
The S&P 500 climbed 0.6% and topped its prior all-time high set earlier in the week. The Dow Jones Industrial Average added 237 points, or 0.5%, and likewise set a record, while the Nasdaq composite led the market with a 0.8% gain.
The moves came after the U.S. Labor Department said employers hired fewer workers during December than economists expected, though the unemployment rate improved and was better than expected. It reinforced how the U.S. job market may be in a “ low-hire, low-fire” state and may hopefully avoid a recession.
On Wall Street, power company Vistra soared 10.5% to help lead the market after signing a 20-year deal to provide electricity from three of its nuclear plants to Meta Platforms. Big Tech companies have been signing a string of such deals to electrify the data centers powering their moves into artificial-intelligence technology.
Oklo jumped 7.9% after saying it also signed a deal with Meta Platforms that will help it secure nuclear fuel and advance its project to build a facility in Pike County, Ohio.
Homebuilders and other companies involved in the housing market were strong in their first trading after President Donald Trump announced a plan to lower mortgage rates. Trump on late Thursday called for the purchase of $200 billion in mortgage bonds, similar to how the Fed in the past has bought bonds backed by mortgages to bring down mortgage rates.
Builders FirstSource, a supplier of building products, jumped 12% for one of the biggest gains in the S&P 500 along with Vistra. Among homebuilders, Lennar rallied 8.9%, D.R. Horton climbed 7.8% and PulteGroup rose 7.3%.
They helped offset a 2.7% drop for General Motors. The auto giant said it will take a $6 billion hit to its results for the last three months of 2025 related to its pullback from electric vehicles. That’s on top of the $1.6 billion in charges GM took in the prior quarter. Fewer tax incentives and easier fuel-emission regulations have been eating into demand for EVs.
WD-40 tumbled 6.6% after reporting a weaker profit for the latest quarter than analysts expected. Chief Financial Officer Sara Hyzer said the soft numbers were primarily because of timing issues, not weaker demand from end customers, and the company stood by its financial forecasts for the upcoming year.
All told, the S&P 500 rose 44.82 points to 6,966.28. The Dow Jones Industrial Average added 237.96 to 49,504.07, and the Nasdaq composite climbed 191.33 to 23,671.35.
In the bond market, Treasury yields were mixed.
Friday’s improvement in the unemployment rate was enough to get traders to ratchet back expectations for a cut to interest rates at the Fed’s next meeting, which is scheduled for later this month. Traders are now forecasting just a 5% chance of that, down from 11% a day before, according to data from CME Group.
But traders nevertheless still largely expect the Fed to cut rates at least twice this upcoming year.
Whether they’re correct carries high stakes for financial markets. Lower interest rates can goose the economy and push up prices for investments, though they can also worsen inflation at the same time. And inflation has stubbornly remained above the Fed’s 2% target.
“Until the data provide a clearer direction, a divided Fed is likely to stay that way,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management. “Lower rates are likely coming this year, but the markets may have to be patient.”
The yield on the 10-year Treasury eased to 4.16% from 4.19% late Thursday. It tends to track expectations for longer-term economic growth and inflation.
The two-year Treasury yield, which more closely tracks forecasts for what the Fed will do with short-term interest rates in the near term, rose to 3.53% from 3.49%.
A separate report released Friday morning suggested sentiment among U.S. consumers is strengthening, particularly among lower-income households. Perhaps more importantly for the Fed, the preliminary report from the University of Michigan also said expectations for inflation in the coming 12 months may be at their lowest level in a year. That could give it more freedom to cut interest rates.
Hopes for both lower interest rates and a solid economy have helped other areas of the stock market climb recently, wresting leadership away from the Big Tech and AI stocks that dominated the market for years. The smaller stocks in the Russell 2000, for example, climbed 4.6% this week, much more than the 1.6% rise of the S&P 500.
In stock markets abroad, indexes rose across much of Europe and Asia.
The French CAC 40 climbed 1.4%, and Japan’s Nikkei 225 jumped 1.6% for two of the world’s bigger gains.
Alright, busy first week of trading so let me get right to it.
First, as shown below, the Consumer Discretionary sector led the S&P sectors this week, surging 5.8%, followed by Materials (+4.8%) and Industrials (+2.5%):
Amazon (AMZN) makes up 23% of the Consumer Discretrionary sector (Tesla makes up 21%) and it surged 9% this week, inching closer to its 52-week high:
While Amazon's performance this week was impressive, there were other more impressive top performing US large cap stocks over the past 5 sessions:
Once again, Chinese biotech Regencell Biotscience Holdings led the pack higher after gaining a jaw-dropping 17,500% last year, but many other stocks caught my attention this week.
Like what? Like Kratos Defense (KTOS), Oklo (OKLO), Bloom Energy (BE), Sandisk (SNDK), Applied Digital Corp (APLD), Nuscal Power Corp (SMR), Victoria's Secret (VSCO), Lam Research Corp (LCRX), Microchip Technology (MCHP) and Intel (INTC) (see full list here).
Interestingly, despite the whole Venezuela attack, energy stocks were not among the very top gainers but some did very well like SLB (SLB), Valero (VLO) and Haliburton (HAL).
Basically, oil service stocks and refiners that will benefit as Venezuela fixes its decrepit oil infrastructure.
If anything, this week was a strong week for a number of industries as performance was spread out among a number of them: defense, homebuilders, mining, tech, etc.
I truly believe 2026 will be a stock picker's year but it will not be easy and I expect a lot of volatility.
Once again, this year will reward nimble traders who know how to navigate the noise.
And you can't just look at US large caps this year, check out this week's top performing mid and small cap stocks (full list here and here):
A lot of biotechs I track closely took off this week, powering the small cap Russell 2000 index up almost 5%.
In fact, the 5-year weekly charts of the S&P Biotech ETF (XBI) and Russell 2000 ETF (IWM) are making new highs and looking great here (buy every dip as long as it remains above 10-week exp moving avg):
There are a lot of biotechs that don't figure into the indices and doing spectacular already and I foresee others taking off as news comes in, so be mindful that it's an industry where experts perform best.
I'll give you one example that took off this week, MoonLake Immunotherapeutics (MLTX) after the FDA cleared existing SLK data For HS BLA Path. Stock was trading at cash levels after the huge dump back in October:
Didn't take a genius to take risk at those levels (welcome to the wacky world of biotech).
Alright, let me end this comment by stating I didn't feel like writing a long Outlook 2026 this year mostly because I've been spectacularly wrong in previous years and so have many others.
We know this year will be a continuation of last year, AI will remain a dominant theme, expect a fever pitch when OpenAI goes public.
We also know SpaceX will file for an IPO and that too is positive for Risk On markets.
But as the first week of the year taught us, there are many unknowns including the Supreme Court's decision on tariffs due out next week and a lot more in geopolitics and markets.
Remember my advice, stay nimble and sweep the table when up big (trim positions).
Also, as far a the broadening trade, keep an eye on the S&P Equal Weight ETF (RSP) as it keeps making a new high (extremely bullish):
Below, former Federal Reserve Vice Chairman Roger Ferguson joins 'Squawk Box' to discuss the December jobs report, impact on the Fed's interest rate outlook, and more.
Also, CNBC's "Closing Bell" team discusses markets, investment strategy and more with Rich Saperstein, founding principal and chief investment officer of Treasury Partners.
Third, CNBC’s “Power Lunch” team discusses markets and the AI trade with Julian Emanuel of Evercore ISI.
Fourth, CNBC’s “Power Lunch” team discusses health care and pharma stocks as momentum in the sector builds with Jared Holz of Mizuho.
Lastly, CNBC's "Closing Bell" team discusses whether the market technicals indicate that stocks can go higher and more with Jeff deGraaf, chairman and head of technical research at Renaissance Macro Research.
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