WEEKLY MARKET RECAP – JANUARY 16, 2026

Major U.S. indexes edged modestly lower as stocks failed to extend the prior week’s rally. The S&P 500 moved in a tight range as earnings season began and ended the week about 0.5% below the record high it set on Monday.

Small caps continued to lead for a second straight week, signaling a sharp shift after their underperformance in 2025. The Russell 2000 rose more than 2% on the week and was up nearly 8% year to date, far ahead of a comparable large-cap benchmark that has gained less than 2%.

Early earnings results from the largest U.S. banks were mixed. As of Friday, FactSet data showed analysts expecting the financials sector to deliver fourth-quarter earnings growth of 6.6%, slightly below the 8.2% average increase forecast across all S&P 500 sectors. Information technology is projected to post the strongest earnings gains, while consumer discretionary is expected to lag.

Inflation data remained steady. The latest Consumer Price Index showed prices rising at a 2.7% annual rate in December, unchanged from November and broadly in line with expectations. Core CPI, which excludes food and energy, held at 2.6%, and wholesale inflation data suggested similarly stable pricing trends.

In global trade, China reported that exports rose 5.5% in 2025 compared with 2024 while imports were flat, pushing its annual trade surplus to a record near $1.2 trillion. Growth was partly driven by increased shipments to markets outside the U.S. as Chinese producers sought scale amid ongoing trade tensions.

Japan’s equity market also rallied. A key stock index jumped more than 4% for the week and set a new record, extending gains to more than 10% since mid-December as investors reacted positively to economic stimulus measures supported by Prime Minister Sanae Takaichi.

In the U.S., retail spending came in slightly stronger than expected. November retail sales rose 0.6% from the prior month, topping the 0.4% consensus forecast. The Census Bureau report was released on a delayed schedule, as the December release remains postponed due to the recent government shutdown.

Looking ahead, Thursday’s release of the Personal Consumption Expenditures (PCE) Price Index—the Fed’s preferred inflation measure—will be closely watched ahead of the next policy meeting, which is scheduled to conclude on January 28. The report follows a recent pattern of easing inflation that has nonetheless remained above the Fed’s long-term 2% target.