MARKET COMMENTARY

Last week, U.S. markets whipsawed through the shortened week as tariff threats and business surveys shifted expectations for growth and Federal Reserve policy. Stocks tumbled on Europe and Greenland tariff fears before recovering quickly, while fresh data confirmed consumer strength and easing prices, supporting a gradual slowdown without recession and keeping the Fed on hold.

Below is the rundown and outlook.

Stock Index Performance 

• The S&P 500 fell 0.35%.
• The Nasdaq 100 rose 0.30%.
• The Dow Jones Industrial Average dropped 0.53%.

What the Latest Data Shows

• Consumer spending remained strong through year-end 2025. Personal spending rose 0.5% in both October and November, with broad gains across services like health care and financial services and goods like recreational items and clothing. Real spending climbed 0.3% in November, even as income growth remained modest and the savings rate slipped to 3.5%, indicating consumers are still willing to spend but have less cushion than before.
• Inflation continues its slow grind lower but isn't at target yet. The Personal Consumption Expenditures (PCE) index rose 0.2% in November, putting the annual rate at 2.8%, just above October's 2.7%. While still elevated compared to the Fed's 2% goal, the trajectory supports continued disinflation without alarming policymakers or forcing their hand on rate cuts.
• Business activity is expanding but losing steam. January's flash Purchasing Managers• Index (PMI) survey showed the private sector still growing, but momentum is clearly slowing from the stronger second half of 2025. Manufacturing picked up slightly while services held steady, yet new orders remained weak across both sectors and companies reported near-stagnant hiring amid cautious sentiment and elevated costs.
• The Fed expected to pause with room to cut later. Solid growth paired with inflation above 2% gives the central bank no reason to rush into rate cuts at this month's meeting. But with business surveys pointing to softer demand, a weaker labor market, and gradual disinflation, the door remains open for cuts later in 2026 if the slowdown continues.

The Week Ahead 

• Wednesday's Federal Reserve decision will dominate the week, with markets expecting rates to hold at 3.5•3.75% while trying to parse Fed Chair Jerome Powell's hints on future cuts. Importantly, December•s Producer Price Index (PPI) (Jan. 30) will be one of the first •clean• looks at wholesale inflation since the data blackout, while investors will scrutinize it to see if businesses are absorbing higher input costs or passing them to customers.
• Major tech names, including Meta, Microsoft, Tesla, and Apple, will report earnings alongside blue-chip heavyweights like UnitedHealth and Exxon Mobil. With Q4 earnings expected to be up 8•9% overall and 2026 growth projected at nearly 15%, investors need to see profit strength broaden beyond tech.

As we look ahead, the economy's path remains steady but moderating. A major test lies in whether more companies can deliver solid profits to justify current valuations and fuel further gains.