WEEKLY MARKET RECAP – JANUARY 2, 2026

As 2025 came to an end, the S&P 500 and Dow pulled back from the record highs both indexes reached the prior week. Although they recovered some losses on Friday, the first trading day of 2026, each finished the week down roughly 1%.

Despite the late-year dip, the S&P 500 delivered a 17.9% total return for 2025, marking its third consecutive year of double-digit gains. The result, however, trailed the outsized returns of 25.0% in 2024 and 26.3% in 2023, which together represented the strongest back-to-back performance since 1997 and 1998.

Mega-cap technology stocks once again dominated market performance. The so-called “Magnificent Seven” accounted for 42% of the S&P 500’s total return in 2025 and 55% of returns over the past three years, according to S&P Dow Jones Indices. Their share of the index’s total market capitalization also increased, rising to 34.9% at year-end from 33.5% a year earlier.

In fixed income markets, a broad U.S. bond benchmark posted a gain of more than 7% for the year amid shifting expectations for inflation and monetary policy. The 10-year Treasury yield climbed as high as 4.80% in January, dipped briefly below 4.00% in October, and ended 2025 at 4.16%, down from 4.57% at the close of 2024.

Sector performance remained broadly positive. Communication services and information technology led the S&P 500 for the third straight year, generating returns of 33.6% and 24.0%, respectively. All 11 sectors finished the year higher, with real estate lagging but still posting a 3.2% gain.

Looking ahead, major U.S. banks are set to kick off earnings season in mid-January. Analysts surveyed by FactSet expect S&P 500 companies to report average fourth-quarter earnings growth of 8.3%, with information technology and materials projected to deliver the strongest gains.

January’s market performance will be closely watched, given its historical signaling power. Since 1929, the S&P 500 has moved in the same direction for the full year about 72% of the time following January’s return, according to S&P Dow Jones Indices. That pattern has also held in each of the past four years.

Finally, labor market data due Friday will shed light on whether recent weakness persisted into December. The previous, shutdown-delayed report showed unemployment rising to 4.6% in November, the highest level since 2021, as job growth slowed to 64,000 following a 105,000 decline in October. Employment gains have been negative in three of the past six months.