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Stocks Down Slightly
The major U.S. indexes posted fractional declines as stocks failed to maintain the previous week’s upward momentum. The S&P 500 traded within a narrow range as earnings season opened, finishing the week 0.5% below a record high that it set on Monday.
A U.S. small-cap benchmark outpaced its large-cap peers by a wide margin for the second week in a row, marking a sharp rotation from small caps’ lagging 2025 performance. With its more than 2% weekly gain, the Russell 2000 Index was up nearly 8% on a year-to-date basis versus less than 2% for a comparable large-cap index.
The big U.S. banks that opened earnings season reported mixed results. As of Friday, analysts projected that financials sector earnings rose 6.6% in the fourth quarter – slightly below the 8.2% average gain that’s forecast across all 11 sectors in the S&P 500, according to FactSet. Information technology is expected to post the strongest earnings growth, with consumer discretionary generating the weakest result.
The latest Consumer Price Index report showed that inflation held steady at a 2.7% annual rate in December – unchanged from November and in line with most economists’ forecasts. Excluding volatile food and energy costs, core inflation remained at 2.6%, and a separate release on wholesale prices showed similar stability.
China reported that its exports in 2025 climbed 5.5% relative to 2024 while imports stayed flat, boosting its annual trade surplus to a record level of nearly $1.2 trillion. The gain was driven in part by growth in exports to non-U.S. markets as Chinese producers sought to build global scale amid trade tensions with the United States.
A Japanese stock market benchmark surged more than 4% for the week, surpassing a record high set the previous week. Since mid-December, the index has gained more than 10% amid investor optimism over economic stimulus measures backed by Prime Minister Sanae Takaichi.
U.S. retailers posted a slightly larger-than-expected increase in sales during November relative to the previous month, with a 0.6% gain versus economists’ consensus expectations of 0.4%. The retail report from the U.S. Census Bureau was released on a lagged basis, as the December data that would typically be available continued to be delayed due to the recent government shutdown.
Thursday’s scheduled release of the U.S. Federal Reserve’s preferred inflation gauge will provide the Fed with a key data set heading into its next policy meeting, scheduled to conclude on January 28. Thursday’s release of the Personal Consumption Expenditures Price Index follows a recent trend of moderating inflation that has nevertheless remained above the Fed’s 2% long-term target.
Source: John Hancock Investment Management
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