Govt Abstract
U.S. equities maintain optimistic momentum alongside bettering market breadthSmall cap, Midcap, and Worth management persistsParabolic positive aspects in valuable metals unwind sharplyInflation, employment, and shopper confidence information stay mixedS&P 500 firms on tempo for fifth consecutive quarter of double-digit EPS growthNasdaq and the continued evolution of capital markets
U.S. fairness markets started 2026 with a constructive tone, extending the optimistic momentum established by way of the again half of final 12 months. January efficiency was characterised by broad participation, bettering breadth, and continued management from economically delicate and worth‑oriented segments of the market. The general market backdrop remained supportive, underpinned by resilient development expectations, steady monetary situations, and robust company stability sheets.
In contrast to late‑cycle environments marked by slender management, January’s advance was notable for its range of winners throughout market capitalizations and sectors. Equal‑weight indices outperformed their cap‑weighted counterparts, small‑ and mid‑capitalization shares delivered strong absolute positive aspects, and cyclical sectors usually outpaced defensives. This rotation mirrored investor confidence within the sturdiness of financial exercise and an ongoing recalibration towards stability following final 12 months’s development‑heavy management.
From a macro perspective, markets continued to profit from a good mixture of easing inflation pressures, regular labor market situations, and a Federal Reserve firmly in wait‑and‑see mode. Rates of interest remained properly‑contained, credit score situations stayed accommodative, and liquidity remained ample, permitting threat belongings to soak up coverage and geopolitical headlines with out materials disruption. Towards this backdrop, January served much less as a turning level and extra as a affirmation of tendencies already in movement: broader participation, selective rotation, and an emphasis on earnings sturdiness quite than pure a number of growth.
Wanting forward, the early‑12 months setup seems constructive. Whereas volatility is more likely to ebb and circulate as markets digest incoming financial information and coverage developments, the underlying basis coming into 2026 displays wholesome inside market dynamics and a rising alternative set throughout kinds, sectors, and capitalizations.
January positive aspects had been led by small‑ and mid‑capitalization indices, with the Russell 2000 and S&P MidCap 400 outperforming giant‑cap benchmarks. Equal‑weight variations of the S&P 500 and Nasdaq‑100 additionally outpaced their cap‑weighted counterparts, reinforcing the theme of bettering breadth. Massive‑cap indices posted extra modest positive aspects however remained firmly optimistic on a multi‑month foundation, reflecting consolidation after robust advances in 2025 quite than any deterioration in development. The dispersion between equal‑weight and cap‑weighted indices suggests traders are more and more prepared to look past the biggest constituents, favoring broader earnings participation and valuation normalization.
Model efficiency in January continued the rotation that started late final 12 months. Worth outperformed development throughout each giant‑ and small‑capitalization universes, with significantly robust positive aspects in small‑cap worth. This management displays a mix of things, together with sensitivity to home financial momentum, easing monetary situations, and renewed curiosity in segments that lagged during times of extra concentrated development management. Progress shares, whereas lagging on a relative foundation, maintained optimistic longer‑time period efficiency tendencies, significantly inside giant caps. The January dynamic seems much less about abandoning development and extra about broadening the chance set, as traders rebalance towards a extra diversified type publicity coming into the brand new 12 months.
Sector Efficiency
On the sector degree, January efficiency was led by economically delicate areas, together with Power, Supplies, Industrials, and Communication Companies. Power throughout these teams mirrored bettering confidence in world demand, capital spending, and cyclical exercise, in addition to favorable pricing dynamics in choose commodity‑linked industries.
Defensive sectors delivered extra muted returns, in keeping with a threat‑supportive atmosphere and a rotation towards development‑delicate exposures. Importantly, sector dispersion remained orderly, with no broad indicators of stress or capitulation. As a substitute, efficiency mirrored wholesome rotation inside an total constructive market development, quite than a flight away from any single space of the market.
Small‑cap sector efficiency additional underscored January’s professional‑cyclical tone. Power, Supplies, and Industrials led the advance, supported by bettering home demand expectations and a stabilization in financing situations. Financials additionally posted strong positive aspects, benefiting from improved working leverage and a steeper yield atmosphere since late 2025.
Extra defensive and development‑oriented small‑cap sectors lagged on a relative foundation, although most remained optimistic over the broader three‑month and 12 months‑to‑date horizons. The general takeaway from small‑cap efficiency is one of re‑engagement, as traders selectively re‑entered areas of the market that had been extra delicate to macro uncertainty earlier within the cycle.
From a technical standpoint, though the preliminary breakout to new highs occurred in September, January marked the primary month through which the Russell 2000 exhibited significant comply with‑by way of past the prior cycle excessive on the 2,486 resistance degree.
Charges, Oil, Treasured Metals, and the Greenback
January’s cross‑asset backdrop remained supportive of threat belongings. Rates of interest had been largely vary‑sure, reinforcing monetary stability and serving to maintain fairness valuations. Commodity efficiency was blended however constructive, with energy in vitality‑ and supplies‑linked markets aligning with improved cyclical sentiment. After declining 5 consecutive months to shut out 2025, WTI crude rebounded 13.6% in January. And whereas crude has moved above its 50-d and 200-d easy transferring averages, the longer-term, multi-year development of decrease highs stays intact.
The buck (DXY) declined for the third consecutive month (-1.4%) whereas briefly breaking down under a seven-month help degree ($96.38) to a four-year low. A tactical reduction rally has since set-in, working off oversold momentum readings (day by day RSI 23); nonetheless, the longer development seems decrease.
Treasured metals continued to draw curiosity as portfolio diversifiers, reflecting ongoing demand for actual belongings alongside threat publicity. At their January excessive, gold and silver had been +29.5% and 69.8%, respectively. Nonetheless, throughout the final session of the month, gold and silver declined 12.8% and 36.1%, respectively, at their intra-session lows earlier than closing the day with declines of 9% and 26.4%, respectively. For silver it was the one worst one-day decline since a minimum of 1950. The earlier document decline since 1950 was -22% intraday, or -17% on a closing foundation, each of which happened on Oct. 10, 2008. Macro information and a reversal of crowded trades contributed to the steep declines. Regardless of the steep drawdown, gold and silver closed out the month +13.3% and +18.9%, respectively.
Financial Knowledge
January’s U.S. financial information painted a blended however market‑related image, with inflation alerts changing into much less uniform and development indicators diverging throughout sectors. Headline CPI for December was absolutely in keeping with expectations, whereas core CPI got here in barely cooler on a month‑over‑month foundation, reinforcing the view that shopper inflation pressures proceed to average on the margin. Nonetheless, that message was difficult by a big upside shock in producer costs. Core PPI and ultimate demand PPI each materially exceeded consensus on a month-to-month foundation, with 12 months‑over‑12 months measures additionally operating hotter than anticipated, underscoring persistent pipeline price pressures that stay inconsistent with a easy disinflation narrative.
Labor market information leaned softer total, although not decisively so. Nonfarm payroll development undershot expectations in December, with each headline and personal payrolls coming in under consensus, whereas prior months noticed modest downward revisions. Regardless of slower job positive aspects, the unemployment charge declined modestly, and wage development remained agency, with common hourly earnings operating above expectations on a 12 months‑over‑12 months foundation. Excessive‑frequency labor indicators, together with jobless claims, remained traditionally low and comparatively steady all through the month, suggesting labor market cooling stays gradual quite than abrupt.
Exercise information confirmed notable bifurcation. Manufacturing indicators remained contractionary, with ISM Manufacturing slipping additional under 50, whereas companies exercise stunned sharply to the upside, as ISM Companies posted one of many strongest beats of the month. Laborious information was extra constructive, with industrial manufacturing and capability utilization exceeding expectations, supporting the view that underlying financial momentum stays resilient regardless of softer survey‑primarily based manufacturing alerts. Third‑quarter GDP was revised barely greater, confirming sturdy development momentum exiting final 12 months, whereas value elements inside GDP remained elevated however steady.
Client demand information held up moderately properly. Retail gross sales exceeded expectations throughout headline and ex‑auto measures, pointing to continued spending resilience, at the same time as shopper confidence surveys had been blended. The Convention Board confidence index disenchanted relative to expectations, whereas the College of Michigan sentiment readings improved modestly, reflecting ongoing rigidity between family stability‑sheet energy and inflation sensitivity.
Taken collectively, January’s information difficult the close to‑time period macro narrative for markets. Whereas headline inflation and employment development confirmed indicators of moderation, agency wage development, robust companies exercise, and upside surprises in producer costs recommend that underlying inflation pressures haven’t absolutely dissipated. For capital markets, this mixture strengthened charge sensitivity to incremental information and supported continued volatility in entrance‑finish coverage expectations quite than a transparent shift towards an imminent easing cycle.
Company Earnings
Fourth‑quarter earnings season has gotten off to a strong begin, with early reporters reinforcing a broadly constructive revenue backdrop for U.S. equities. With roughly one‑third of S&P 500 firms having reported, 75% delivered EPS beats and 65% have exceeded income expectations, leading to mixture earnings coming in 9.1% above estimates, properly above historic averages. Importantly, the magnitude of earnings surprises has greater than offset the marginally under‑common beat charge, lifting the blended S&P 500 earnings development charge to 11.9% 12 months‑over‑12 months, which—if sustained—would mark a fifth consecutive quarter of double‑digit earnings development. Outcomes have been pushed primarily by Data Know-how, Industrials, and Communication Companies, the place outsized upside surprises from a number of mega‑cap and cyclical leaders have meaningfully boosted index‑degree development.
Margins have additionally been a notable optimistic. The S&P 500 is on tempo to report a web revenue margin of 13.2%, In accordance to FactSet, that is the best degree on document underscoring robust working leverage regardless of ongoing price and wage pressures. Whereas income beats have been extra modest in magnitude, prime‑line development stays wholesome at 8.2% 12 months‑over‑12 months, representing the second‑strongest income development charge since mid‑2022 and increasing the index’s streak of income growth to 21 consecutive quarters. Wanting forward, early steerage tendencies are encouraging, with optimistic EPS steerage for Q1 2026 outpacing destructive steerage, and analysts proceed to forecast double‑digit earnings development by way of 2026, supporting the sturdiness of the earnings cycle at the same time as valuation multiples stay elevated.
Nasdaq and the Ongoing Evolution of Capital Markets
Past market efficiency, January supplied continued proof of structural transformation inside U.S. capital markets, with Nasdaq enjoying a central position in a number of forward-looking initiatives. The alternate stays actively engaged in market advocacy and innovation efforts designed to boost accessibility, liquidity, and resilience for listed firms and traders alike.
Key areas of focus embody the exploration of prolonged and doubtlessly 23-hour buying and selling fashions, which intention to raised align U.S. markets with world participation and evolving investor conduct. In parallel, Nasdaq continues to interact in discussions round digital asset infrastructure, tokenization, and the modernization of market plumbing to help future issuance and buying and selling fashions.
In January, Nasdaq alerted market members to an upcoming market construction replace associated to fractional share buying and selling, which will go into impact on Feb. 23. Whereas fractional buying and selling itself isn’t new, the change formalizes how such trades are reported and mirrored in consolidated market information. Traditionally, trades involving fractional share portions had been required to be reported as entire shares, limiting transparency round true commerce measurement and quantity. Below the up to date framework, trades in NMS shares with fractional elements will now be reported with better precision, bettering the accuracy of final‑sale information and consolidated quantity statistics. From a market perspective, the replace is largely technical in nature and isn’t anticipated to change buying and selling conduct, but it surely represents an vital modernization of fairness market infrastructure as fractional and small‑greenback buying and selling continues to develop.
Nasdaq’s efforts in these areas replicate a broader dedication to supporting listed firms by way of coverage engagement, regulatory dialogue, and infrastructure funding. As capital markets evolve, these initiatives are supposed to offer issuers with better flexibility, traders with improved entry, and the ecosystem as an entire with enhanced effectivity and transparency. Over time, developments reminiscent of fractionalization, expanded buying and selling hours, and digital settlement frameworks might additional reshape how capital is raised, allotted, and traded.
Abstract
Whereas close to‑time period situations warrant a level of warning, significantly provided that February has traditionally been a seasonally weaker interval for the S&P 500, the broader “message of the market” doesn’t recommend a significant deterioration within the intermediate or lengthy‑time period development. Current value motion and momentum alerts level extra towards consolidation than the beginning of a sustained downturn. In consequence, durations of volatility or pullbacks within the weeks forward must be seen throughout the context of an ongoing, constructive backdrop. Whereas endurance could also be required within the close to time period, the load of the proof continues to favor sustaining a constructive market outlook over an extended‑time period horizon.
The knowledge contained herein is supplied for informational and academic functions solely, and nothing contained herein must be construed as funding recommendation, both on behalf of a specific safety or an total funding technique. All info contained herein is obtained by Nasdaq from sources believed by Nasdaq to be correct and dependable. Nonetheless, all info is supplied “as is” with out guarantee of any form. ADVICE FROM SECURITIES PROFESSIONAL IS STRONGLY ADVISED.
