By Panos Mourdoukoutas
Equities resumed their rally this week as investors gained a clearer view of the labor market following the release of several key economic reports.
Positive sentiment was further supported by geopolitical developments in Venezuela that lifted oil stocks and by the Consumer Electronics Show (CES), which boosted technology shares.
For the week, the Dow Jones Industrial Average rose by 2.32 percent to a record 48,504. The S&P 500 gained 1.57 percent to reach 6,966, also a record high. The tech-heavy Nasdaq Composite added 1.88 percent, also near its weekly high, while the Russell 2000 surged by 4.62 percent.
Market volatility eased, with the Chicago Board Options Exchange Volatility Index hovering around 14.49.
Equity bulls got off to a strong start on Jan. 5, encouraged by the previous Friday’s rebound, and maintained control throughout the session.
Investor optimism early in the week was aided by the capture of Venezuela’s leader over the weekend and the prospect of regime change that could revive the country’s vast oil industry.
That development supported shares of U.S. oil companies with significant exposure to Venezuela, including Chevron, as well as oil services and infrastructure firms such as Halliburton and SLB. Those stocks rallied sharply, helping lift both the Dow and the S&P 500.
Technology stocks also benefited from the start of CES 2026 in Las Vegas, which added to bullish momentum in the sector.
A third supportive factor was the influx of new capital at the start of the year, which helped turn the Jan. 5 session into an “everything rally,” with gains extending across stocks, bonds, commodities, and bitcoin.
“We’re only a few days into the new year, and geopolitical issues are already coming to life,” Bret Kenwell, U.S. investment analyst at eToro, told The Epoch Times. “While the reaction in commodities is surprisingly muted, energy stocks are enjoying a strong start to the year thanks to Monday’s rally. Two days into 2026, and it’s the top-performing sector.”
Bullish sentiment gained further momentum on Jan. 6 after Nvidia CEO Jensen Huang delivered upbeat comments about the semiconductor industry at the CES trade show.
Stable bond yields reinforced investor confidence, broadening the rally across most major sectors and helping both the Dow and the S&P 500 notch new records for the year.
Markets turned more cautious on Jan. 7 following a series of weaker labor market headlines that drew mixed reactions from investors.
The latest ADP employment change report showed private sector hiring rebounded in December 2025, with employers adding 41,000 jobs after a revised loss of 29,000 in November 2025. Gains were led by education, health services, and leisure and hospitality.
However, the increase fell short of market expectations for a 47,000 gain, underscoring continued softness in private sector hiring.
At the same time, the Job Openings and Labor Turnover Survey (JOLTS) reported that job openings declined by 303,000 to 7.146 million in November 2025. The drop was driven by declines in accommodation and food services, transportation, warehousing and utilities, and wholesale trade.
The latest JOLTS reading marked the lowest level in 14 months and came in well below expectations of 7.60 million openings.
A weakening labor market presents a mixed outlook for equities. Slower hiring typically weighs on income growth and consumer spending, which can pressure corporate revenues.
In contrast, labor market weakness could prompt the Federal Reserve to cut interest rates sooner, potentially supporting stock prices.
Bond traders appeared to lean toward the latter view on Jan. 7, with the yield on the 10-year U.S. Treasury note falling to 4.13 percent from 4.17 percent the previous day.
That mixed outlook was reflected in market performance, as the Dow, the S&P 500, and the Russell 2000—indexes weighted toward economically sensitive sectors—closed lower, while the Nasdaq edged slightly higher.
Labor market data continued to drive trading on Jan. 8 in both equity and bond markets.
Initial jobless claims rose by 8,000 to 208,000 for the week ending Jan. 3, matching market expectations.
Continuing claims increased by 56,000 to 1.914 million, exceeding expectations of 1.90 million and reinforcing signs of labor market softening.
Meanwhile, the Challenger job cuts report showed U.S. employers announced 35,553 job cuts in December 2025.
That figure marked the lowest level since July 2024, down from 71,321 in November 2025 and 8 percent below the December 2024 total, suggesting resilience rather than deterioration in labor conditions.
Bond markets reacted negatively to that interpretation, pushing the 10-year Treasury yield back up to 4.18 percent and reversing the prior day’s decline. The Dow, S&P 500, and Russell 2000 closed higher, while the Nasdaq finished lower.
Further contributing to the divergence among indexes was renewed portfolio rotation out of recent technology leaders, such as SanDisk, Western Digital, and Micron Technology, and into health care, including UnitedHealth Group and Cigna.
Labor market data remained in focus on Jan. 9 with the release of the monthly nonfarm payrolls report, which showed the economy added 50,000 jobs in December 2025. Gains were led by food services and drinking places, health care, and social assistance.
The figure came in below market expectations, reinforcing views that the labor market is cooling enough to allow the Federal Reserve to continue cutting interest rates in 2026, a potential tailwind for most asset classes except cash.
While questions remain about the accuracy of recent data due to government shutdown disruptions, labor conditions faced multiple headwinds throughout the year, according to Dennis Follmer, chief investment officer at Massachusetts-based Montis Financial.
“Throughout 2025, the labor market faced many challenges, including uncertainties from tariffs to artificial intelligence,” Follmer told The Epoch Times.
Follmer expects just one interest rate cut in 2026.
“Higher for longer on interest rates has been the name of the game for an economy continuing to surprise to the upside,” he said. “As long as that strength persists, expectations for aggressive rate cuts are likely to prove overly optimistic.”
He added that elevated optimism around rate cuts makes him cautious.
“With a growing economy and the Fed still easing, the AI boom likely has some runway in 2026, but there are signs it’s getting late in what has been a great party, and some guests may be getting carried away.”
