Stocks started the year where they left off during the fourth quarter of 2025, that is with the technology sector treading water while MidCaps surged. In fact, the Dow Jones Industrial Average, S&P 500, U.S. Total Market Index, Russell 2000 and Dow Jones Transportation Average all finished the week at record highs. As we have noted over the past quarter or two, we would not be surprised if this rotation continues as technology had surged more than sixty percent off the early April 2025 tariff-induced lows. However, after a much-needed breather, we do believe this sector will come back into favor. What’s an investor do do, maintain a well-diversified portfolio, but look to add to secular growers on weakness.
· 2026 has ushered in a broader resumption of economic data that was put on hold during the recent government shutdown along with the beginning of Q4-2025 earnings season. Regarding the latter, many of the major money center banks are on tap to report quarterly earnings, including JP Morgan Chase (JPM), Bank of America (BAC) and Citigroup (C). In addition, expect earnings from investment bankers Goldman Sachs (GS) and Morgan Stanley (MS). On the economic front, inflation data at the retail as well as wholesale level will be released this Tuesday and Wednesday. In addition to the payroll data released last week (see below), the combination of upcoming earnings along with the economic data should continue to fill out the picture of we believe is a resilient economy.
· Fixated on Greenland, during an interview at the White House, President Trump that that he “would like to make a deal, you know, the easy way. But if we don’t do it the easy way, we’re going to do it the hard way.” Although Greenland is somewhat self-governing it is also a territory within the Kingdom of Denmark, a member of NATO.
· Mortgage rates dropped to their lowest level in nearly three years on Friday, a day after President Trump posted on social media that he is “instructing Representatives to BUY $200 BILLION IN MORTGAGE BONDS.” Trump cited the cash held at government mortgage entities Fannie Mae and Freddie Mac for the decision. The incremental increase in demand for the mortgage bonds pushes up prices and drives down yields and theoretically therefore mortgage rates.
· Regarding Venezuela, posting on his social media platform, Truth Social, President Trump stated that “I am pleased to announce that the Interim Authorities in Venezuela will be turning over between 30 and 50 million Barrels of High Quality, Sanctioned Oil, to the United States of America. The Oil will be sold at its Market Price, and that money will be controlled by me, as President of the United States of America, to ensure it is used to benefit the people of Venezuela and the United States!”
It’s The Economy…”
· Non-Farm Payrolls rose by 50,000 during December after rising only 56,000 in November. The December figure was below the consensus estimate of 73,000. Over the past three months, the U.S. economy shed 67,000 jobs and for all of 2025, created just 584,000 new jobs. Economists continue to wrestle with the impact of a lack of immigration on the labor market as well as advances in technology. Private Sector companies added 58,000 jobs while the Public Sector lost 8,000. Despite adding 2,000 jobs in December, federal government employment is down 277,000 (-9.2% y/y) since January. Payroll data was positively influenced by restaurants and bars (27,000), health care (21,000) and social assistance (21,000). On the flip side, jobs in the retail trade shrank by 24,000. The Unemployment Rate ticked down to 4.4% during December from 4.5% in November. The Unemployment Rate had gotten as low as 3.4% in April 2023. Average Hourly Earnings rose 0.33% or $0.12 to $37.02 during December from $36.90 one month prior and by $1.34 or 3.76% from $35.68 y/y. Average Weekly Earnings rose 0.03% or $0.41 to $1,266.08 during December from $1,265.68 during November. Average Weekly Earnings over the past year have risen by $45.82 or 3.75% from $1,220.26. The manufacturing week fell to 41.2 hours from 41.3 hours December/November and as compared to 40.9 y/y. The Average Duration of Unemployment (Table A-12) rose to 24.4 weeks in December from 23.1 weeks in November, above the 23.3 weeks (SAAR) recorded one year ago. The Median Duration of Unemployment jumped to 11.4 weeks during December from 9.8 weeks in November, above 9.8 weeks (SAAR) one year ago. The number of Long-Term Unemployed (27 weeks or longer) rose 38,000 or 1.99% to 1,948,000 in December from 1,910,000 in November, above the level of 1,463,000 (SAAR) one year ago. Those unemployed less than 15 weeks totaled 58.1% of the unemployed while those unemployed 15 weeks and longer totaled 41.9% as compared to 60.5% and 39.5% one month ago. (Source, U.S. Department of Labor)
· Housing Starts fell 4.6% or by 60,000 to a seasonally adjusted annualized rate (SAAR) of 1,246,000 during October as compared to 1,306,000 in September (-8.5% y/y). A study completed by Freddie Mac in 2018 estimates that there must be 1.6 million units build annually to account for household growth and to replace existing stock. During October, Single-family housing starts rose 5.4% or 45,000 to 874,000 from 829,000 (-7.8% y/y). Meanwhile Multifamily housing starts plummeted 22.0% to 372,000 in October (-7.9% y/y) from 477,000 during September. Building Permits, a key barometer for future starts, fell 3,000 to 1,412,000 in October as compared to September (-1.1% y/y). (Source, U.S. Census Bureau)
· Nonfarm Productivity rose by 4.9% (3.3% y/y) (SAAR) during the third quarter, up from 4.1% during the second. Hourly Compensation rose by 2.9% during Q3 (3.2% y/y), up from 1.1% during Q2. Adjusted for inflation, the Real Hourly Compensation fell by 0.2% (0.5% y/y) compared to 1.2% during the prior quarter. As a result, Unit Labor Costs (defined as output per hour of work and can be determined by dividing total labor costs by output) fell by 1.9% (1.2% y/y) during Q3 which follows a drop of 2.9% during Q2. (Source, U.S. Bureau of Labor Statistics)
· The Institute for Supply Management’s composite index of non-manufacturing (service) sector activity rose to 54.4% during December from 52.6% in November. Of note were New Orders (57.9% v 52.9%), Employment (52.0% v 48.9%), Backlog of Orders (42.6% v 49.1%) and Business Activity (56.0% v. 54.5%). The Prices Paid Component fell to 64.3% during December from 65.4% during November. (Source, Institute for Supply Management)
· The Institute for Supply Management’s composite index of manufacturing sector activity slipped to 47.9 during December compared to 48.2 in October. Generally, a reading above 50% indicates that the manufacturing economy is expanding, below indicates one in contraction. Of note were the changes in New Orders (47.7% v. 47.4%), Production (51.0% v. 51.4%), Supplier Deliveries (inverse, higher number indicates slower delivery times) (50.8% v. 49.3%), Inventories (45.2% v. 48.9%) and Employment (44.9% v. 44.0%). The Prices Paid Component remained at 58.5% during December when compared to November.
Economic Reports scheduled to be released this week, include the following – on Tuesday, December Retail Inflation as measured by the Consumer Price Index (CPI) and October New Home Sales; on Wednesday, December Wholesale Inflation as measured by the Producer Price Index (PPI) and October Business Inventories; on Thursday, Initial Claims for Unemployment Benefits; and, on Friday, December Industrial Production and December Capacity Utilization.
Several potentially market moving companies are scheduled to report earnings, to include JP Morgan Chase (JPM), Delta Air Lines (DAL), Bank of NY Mellon (BK), Bank of America (BAC), Wells Fargo (WFC), Citigroup (C), BlackRock (BLK), Morgan Stanley (MS), Goldman Sachs (GS), JB Hunt Transport (JBHT), Taiwan Semiconductor (TSM), Commerce Bancshares (CBSH), State Street (STT), Regions Financial (RF), PNC Financial (PNC) and M&T Bank (MTB).