Weekly Market Update – January 2, 2026

Quick Takes

• Wall Street closed out the first trading day of 2026 with weekly losses. The S&P 500 and the small-cap Russell 2000 Index were both down -1.0% for the week, while the tech-heavy Nasdaq Composite Index fell -1.5%. But non-US stocks saw gains, led by emerging markets.
• The 10-year and 30-year US Treasury yields rose +6 basis points to 4.19% and 4.87% respectively, while the 2-year Treasury yield fell by -1 basis point to 3.47%. The Bloomberg US Aggregate Bond Index returned -0.2%, offsetting the prior week’s +0.2% return.
• Economic data last week was relatively light, highlighted by Pending Home Sales—a leading indicator of housing activity—which rose at the sharpest monthly rate since February 2023 as lower mortgage rates and wage growth fueled homebuyer momentum.

Source: Bloomberg. Data as of January 2, 2026.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

US stocks and bonds fell in the holiday-shortened week

Wall Street closed out the first trading day of 2026 with weekly losses. Other than Friday, the S&P 500 Index saw daily declines for the holiday-shortened week (US markets were closed Thursday in observance of the New Year’s Day holiday). Trading volumes were relatively light throughout much of the week. Overall, the S&P 500 and the small-cap Russell 2000 Index were both down -1.0% for the week, while the tech-heavy Nasdaq Composite Index fell -1.5%. The Artificial Intelligence (AI) trade began to unwind at the start of the week, with the big AI technology firms seeing losses. Within the S&P 500, the Energy sector was one of the few sectors to post positive returns for the week as heightened geopolitical tensions drove oil prices higher, particularly early in the week. However, in the early hours of Saturday morning, the US executed Operation Absolute Resolve, capturing Venezuelan leader Nicolás Maduro with stunning speed and success. Maduro was apprehended in his compound in the capital city of Caracas after the five-hour operation and is now being held in New York, where he faces narcoterrorism charges. With Maduro’s nearly 13-year tenure in power now ended, oil prices are expected to drop sharply when trading opens Monday. WTI Crude Oil futures prices opened down about -0.8% Sunday evening to about $57. President Trump said at a press conference on Saturday that the US would “run the country until such time as we can do a safe, proper, and judicious transition.”

Unlike their US counterparts, overseas equities saw gains last week. The developed markets MSCI EAFE Index rose +0.5%, following the prior week’s +1.2% increase. The MSCI Europe Index and the MSCI United Kingdom Index led gainers with increases of +0.9% and +0.6%, respectively, and are both now riding six-week winning streaks. In emerging markets, the MSCI Emerging Markets Index jumped +2.3% following the prior week’s +2.1% gain. The MSCI Asia Ex Japan Index and the MSCI China Index were up +2.6% and +1.9%, respectively. The US Dollar Index was up +0.4% after a -0.6% loss the prior week. 

Like stock trading, bond trading was quiet, with US Treasuries performance mixed. The 10-year and 30-year US Treasury yields were up +6 basis points, to 4.19% and 4.87% respectively, while the 2-year US Treasury yield was down -1 basis point to 3.47%. The Bloomberg US Aggregate Bond Index returned -0.2%, essentially offsetting the prior week’s +0.2% return. Non-US bonds, as measured by the Bloomberg Global Aggregate ex US Bond Index, were also down -0.2% following a +0.8% return the prior week.

Economic data last week was relatively light, highlighted by Pending Home Sales—a leading indicator of housing activity—which rose at the sharpest monthly rate since February 2023 as lower mortgage rates and wage growth fueled homebuyer momentum. Separate Home Price Indexes from the Federal Housing Finance Agency (FHFA) and S&P Cotality Case Shiller showed house prices edged up in October. On Tuesday, the Federal Open Market Committee (FOMC) minutes from its December 9–10 policy meeting showed risks to the labor market have increased, while the upside risks to inflation have diminished somewhat. The minutes revealed that while most central bank officials believed further rate cuts “would likely be appropriate if inflation declined over time as expected,” some members felt their economic outlooks suggested “it would likely be appropriate to keep the target range unchanged for some time” following the December 25-basis point rate cut. Market reactions to the minutes were fairly muted, and odds for a January rate cut are about 15%, near where it ended the prior week, according to the CME FedWatch tool. Lastly, weekly initial jobless claims unexpectedly dropped well below Wall Street expectations, their third straight week lower and one of the lowest readings of the year. 

Chart of the Week

The National Association of Realtors (NAR) reported that Pending Home Sales jumped by +3.3% in November after the prior month’s +2.4% rise (revised higher from 1.9%). That was well above Wall Street expectations for a +0.9% increase. At 79.2, the seasonally adjusted US Pending Home Sales Index is at its highest level since February 2023 and is +2.6% higher than a year ago. From a regional perspective, sales were broad-based and increased in all census regions: the West rose +9.2% for the month and +2.4% for the year; the South was up +2.4% and +3.3% for the month and year; the Northeast was up +1.8% for the month and year; and the Midwest was up +1.3% and +2.2 for the month and year. “Homebuyer momentum is building…. improving housing affordability—driven by lower mortgage rates and wage growth rising faster than home prices—is helping buyers test the market,” according to NAR Chief Economist Lawrence Yun.

Pending Home Sales at Highest Level in Nearly 3 Years

US Pending Home Sales Index (Seasonally Adjusted)

Source: National Association of Realtors, The Daily Shot.

The Week Ahead

After two relatively light holiday-shortened weeks, the economic calendar returns to a full week of releases. The week begins with Purchasing Managers Indices (PMIS) from the Institute of Supply Management (ISM) and S&P Global. US Manufacturing PMIs from ISM are released on Monday, the S&P Global US Services PMIs will be reported on Tuesday, and the ISM Services PMI is released on Wednesday. Employment data will also be prevalent with JOLTs Job Openings on Wednesday, weekly Unemployment Claims on Thursday, and the headline event of the week on Friday with the December Employment Situation Report (Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings, Labor Force Participation, etc). Other notable reports include Consumer Credit by the Federal Reserve on Thursday and Housing Starts and Building Permits by the US Census Bureau on Friday, as well as preliminary January Consumer Sentiment from the University of Michigan on Friday.

Did You Know?

OIL SLICK – Starting the year in the $70s, the price of a barrel of WTI Crude Oil quickly jumped to a 2025 high of $80 on January 15 but then started a steady fall to $57 by May 5. It traded in a range of $60 to $65 from May to October and then began another slow decline into the end of the year, hitting a 2025 low of $55 on December 16 and ending the year at $57. A promise by President Trump to “drill, baby, drill” continued to see America produce more crude than any country on record, while the threat of tariffs on global growth weighed on prices. Many big countries like China and India also got their crude from shadow fleets, while OPEC+ reversed its production cuts and members pumped more than their official quotas. (Source: Seeking Alpha)

UNIVERSALLY OPTIMISTIC – All price targets by Wall Street strategists for where the S&P 500 will close out 2026 are positive. Of the 20 strategists’ price targets, the most bullish strategist has a target of 8,100, implying an +18.3% gain. Ten expect double-digit percentage gains, and just two forecast gains of less than +5%, with the average target calling for a gain of +10.7%. Most strategists would say to take their price targets with a grain of salt and use them as only a guideline for what they expect in the year ahead. (Source: Bespoke)

SAYOWARREN – Famed investor Warren Buffett stepped down as CEO of investment firm Berkshire Hathaway effective 12/31/2025. His successor is Berkshire Vice Chairman Greg Abel. Buffett began to cede the spotlight back in November when he informed investors in his Thanksgiving letter that he is “going quiet—sort of”—and reiterated his confidence in Abel. In Buffet’s final year, Berkshire Hathaway sold more stocks than it bought during 2025 and increased its cash reserves to a record $358 billion. (Source: The Wall Street Journal)

This Week in History

HELLO EURO – On January 1, 1999, the euro debuted as the new common currency linking 11 countries and becoming the first postwar challenge to the US dollar’s dominance of international trade and finance. It helped unite Europe and, for big business on the continent, was seen as a way to cut transaction costs and encourage cross-border mergers that would enable Europe to compete in the race for globalization. The euro was first used for noncash transactions, such as with credit cards or traveler’s checks; bills and coins didn’t start circulating until Jan. 1, 2002. Today, about 350 million people across 20 EU countries use the currency, according to the Central European Bank. (Source: The Wall Street Journal)

Economic Review

• The final reading for the S&P Global US Manufacturing PMI weakened in December to 51.8 but still marked 35 months above the key 50.0 expansion level. That was unchanged from the flash estimate two weeks ago, and marks the lowest reading since June, but is up from 49.4 a year ago. New Orders fell to 49.1 versus 51.3 in November, which is the lowest reading since December 2024 and reverses the expansion trend (results above 50 signal economic expansion). On the positive side, Employment rose from the prior month and is at the highest level since August as firms filled vacancies in anticipation of a stronger 2026. Although remaining historically elevated, both Input Prices and Output Prices rose at their slowest rates for 11 months. Confidence in the Outlook also remained positive despite easing slightly since November.
• According to the S&P Cotality Case-Shiller 20-City Home Price Index, US housing prices increased +0.32% in October, an improvement from an upwardly revised +0.17% the prior month (originally +0.13%). That was better than expectations for a +0.10% gain. This was the third month of price gains following five months of declines, as lower mortgage rates bring some buyers back into the market. Of the 20 cities tracked by the index, only four rose over the month, with regional divergences persisting as Midwestern and Northeastern markets, led by Chicago (+5.8%) and New York (+5.0%), outpaced Sun Belt cities like Tampa (–4.2%) and Phoenix (–1.5%). On a year-over-year (YoY) basis, the 20-city index was up +1.31%, above expectations for a +1.10% rise but down from a +1.39% annual increase the month before (revised higher from +1.36%). Chicago reported the highest annual gain (+5.8%), followed by New York and Cleveland (+5.0% and +4.1%, respectively), while Tampa posted the lowest annual return (-4.2%). 
• The competing Federal Housing Finance Agency (FHFA) House Price Index (HPI) showed US home prices were up +0.4% in October after a -0.1% decline the prior month (revised down from the originally reported 0.0%). The results were well above Wall Street expectations for a +0.1% rise. The government data showed home prices up +1.7% year-over-year, unchanged from the prior month’s annual rate. House prices were up in 7 of the 9 regions on a monthly basis and ranged from -0.4 percent in the East South Central division to +1.0 percent in the West South Central division. The 12-month changes ranged from -0.7 percent in the West South Central division to +5.3 percent in the Middle Atlantic division.
• The Texas Manufacturing Outlook Survey worsened December, with the General Business Activity still negative at -10.9, down slightly from an unrevised -10.4 the prior month and far below the expected reading of -6.0. The Production index, a key measure of state manufacturing conditions, contracted for the first time since February, plummeting to -3.2 from +20.5 in November. New Orders fell -11 points to -6.4, Capacity Utilization plunged -24 points to -4.5, and the Shipments index fell to -10.6, its lowest reading in 17 months. The Company Outlook index fell further into negative territory to -11.9 and the Outlook Uncertainty index fell -16 points to zero. The Employment index dipped to -1.1, while the Hours Worked index dropped -17 points to -7.5. Prices Paid was up a mere +0.7 points to +36.0 while Prices Received fell -2.6 points to +8.2. The Texas Service Sector General Business Activity weakened for the month, falling to -3.3 from -2.3 the prior month (unrevised). The Texas Service Sector Company Outlook improved to -2.9 from an unrevised -4.2 the prior month.
• The Chicago Purchasing Managers Index (PMI), a barometer for the region’s business and manufacturing conditions (also known as the Chicago Business Barometer), rose to 43.5 in December from an unrevised 36.3 the prior month, which was the first time the index was below 40 since January. That easily beat Wall Street expectations for a 40.0 reading. Readings below the 50 level indicate contraction, and it has been in contraction territory for 25 consecutive months now. Three components rose versus two the prior month. The improvement was driven by a sharp increase in the New Orders index, which shot up by +11.8 points, almost completely unwinding last month’s drop. In addition, the Production index also jumped by +9.6 points, climbing back above its 2025 average to reach its highest level since March. Prices Paid dipped -1.1 points.
• Weekly Initial Jobless Claims fell -16,000 to 199,000 for the week ending December 26, better than expectations for 218,0000. The prior week was revised higher to 215,000 from 214,000. The number of people already collecting unemployment claims (i.e., Continuing Claims) fell -47,000 to 1,866,000 for the week ending December 19, which was worse than expectations for 1,902,000. The prior week’s reading was revised lower to 1,913,000 from 1,923,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.