Wall Street Opens Year Lower; Fed Policy in Focus

Wall Street began 2026 in rather lackluster style, with each of the major benchmark indexes closing the week lower, with the exception of the Global Dow. A brief tech rally last Friday wasn’t enough to prevent stocks from closing the week in the red. The common year-end rally, known as the “Santa Claus rally,” never materialized as the market notched four straight losing sessions to close out December. Investors appear to be exercising caution as they await the Federal Reserve’s next move in response to sticky inflation and a cooling labor market. Among the 11 S&P 500 market sectors, only Energy, Utilities, Industrials and Materials moved higher, while Consumer Discretionary, Information Technology and Financials saw associated stocks fall the furthest. Ten-year Treasury yields edged slightly higher, reflecting ongoing fiscal and inflation concerns. Crude oil prices ticked higher, while gold prices edged lower.

Tariffs Weigh on Exports; PMI Signals Softening Momentum

Manufacturing improved in December but at a slower pace when compared to November. The S&P Global US Manufacturing Purchasing Managers’ Index™ registered 51.8 in December, down from 52.2 in November, and signaled the weakest expansion of the manufacturing sector in the last five months. New orders declined for the first time in 2025, and exports fell for the seventh straight month. Tariffs were reported to have weighed on export sales, especially to Canada.

Eye on the Week Ahead

The first full week of January 2026 should include the jobs report for December. November saw weakening conditions in the labor market, with the unemployment rate rising while job gains slowed.