Quiet Trading Likely as Markets Kick off 2026

0:05Welcome to the Schwab Market Update Podcast, where we prepare you for each trading day with a recap of recent news and a look at what's ahead. I'm Keith Lansford, and here is Schwab's early look at the markets for Friday, January 2nd. The new year begins on a Friday wedged between a holiday and a weekend, meaning light-volume trading seen earlier this week might continue today. Trading hours are normal for anyone who decides to show up, though participants might want to take extra care as thin volume can exacerbate volatility. Stocks stumbled into the new year, down four sessions in a row through Wednesday, despite a lack of bearish news.

0:49Instead, late-year profit-taking and simple lack of buying interest seemed to weigh on Wall Street, puncturing what had been a promising start to the Santa Claus rally a week ago. Historically, data show that when the Santa Claus rally fails, January is often a soft month for stocks, but past isn't precedent. Volume was less than 60 % of normal Wednesday at the New York Stock Exchange, meaning there may not be much conviction behind the weakness. Still, fewer than 10 % of S &P 500 stocks were up for the day as of late Wednesday, which is eye-opening. Wednesday's weakness took yearly gains down to 16.4 % for the S &P 500 index and 20.2 % for the NASDAQ 100, down from 17 % and 21 % going into the session.

1:37The small-cap Russell 2000 index rose 11.3%. The session ended with a whimper Wednesday, with both the S &P 500 and NASDAQ 100 ending near session lows. Sometimes a weak close can mean a follow-up weak start the next trading day. And Wednesday's descent kept the S &P 500 from having a positive December. Instead, it fell fractionally for the month, the first monthly decline since April. Today's calendar is virtually empty, so participants must make do with data out Wednesday before yesterday's closure. Weekly initial jobless claims of 199 ,000 were well below the briefing.com consensus of 226 ,000, continuing the 2025 pattern of light claims reports.

2:24Generally, it would take weekly claims of 250 ,000 or more to get analysts worried about layoffs. Continuing jobless claims, which measure the difficulty of finding a new job once someone is out of work, remained elevated at$1.866 million, but also came in beneath expectations. Continuing claims have tracked near-four-year highs for quite a while, suggesting that while layoffs are sparse, people aren't getting hired quickly either. This emphasizes the low-fire, low-hire trend that's established itself over recent months.

3:01Next week features a cornucopia of jobs data as full participation in the markets returns after the long holiday period. Job openings, ADP employment and layoffs data all form a red carpet leading to next Friday's December non-farm payrolls report. Data is finally returning to normal after the government shutdown created chaos for recent reports, but there still may be some big revisions on the way. Forecasts for jobs growth in December should be on the way by early next week after November's anemic rise of 64 ,000. All this news on labor trends might give investors a better sense of how the Federal Reserve might act in coming months.

3:43The language in minutes from the Fed's last meeting, released Tuesday, was generally vague, but indicated some officials thought it would be appropriate to keep rates unchanged for some time. The bias is still toward more easing, but it could be difficult to build consensus, and we expect more dissents going forward, said Colin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research. We project one or two rate cuts next year based on our outlook of a cooling but not crumbling labor market and still sticky inflation, and the Fed may hold rates steady for a few meetings to start the year just like the approach in 2025.

4:24The futures market priced in less than 15 % odds of a January rate cut as of late Wednesday, according to the CME FedWatch tool. Other data out Wednesday included a read on China's manufacturing economy. The official NBS manufacturing PMI rose to just above 50, the level needed to connote expansion, but still relatively light. This followed months of contraction and mainly reflected demand in domestic channels, which Beijing has tried to ignite. New orders rose, possibly a positive sign. One corner of the market saw plenty of action earlier this week, despite the holidays. Metals prices remained volatile that midweek, with silver and gold back in the red.

5:09Silver futures slid more than 9 % Wednesday, but remained near all-time highs, and volatility could get exacerbated by CNBC's report that China might restrict silver exports. Silver and copper, also up sharply this year, are important industrial metals, so their strength could make life more difficult for major companies that depend on these materials. Tech and industrials both come to mind, with Tesla CEO Elon Musk calling out the trouble with high silver prices earlier this week. Higher metals prices also could ultimately be tough for the Fed if they begin factoring into producer or consumer inflation readings.

5:46The impact sometimes shows up first in producer prices, which the government will release in mid-January. Earnings season begins the week of January 12, when large banks start reporting along with some airlines. Analysts expect solid fourth-quarter S &P 500 earnings growth of around 8.3%, according to FactSet, down from 13.6 % in the third quarter. Though it's tempting to think stocks might stage a rally once the calendar turns and data and earnings resurface, investors should remember that January often features profit-taking as participants wait until the new year to sell winners, putting off capital gains taxes until the following year.

6:29Some seasonal profit-taking appears to have moved into December this year, however, keeping the so-called Santa Claus rally at bay, at least in recent sessions. Santa's rally traditionally includes the first two trading days of the new year, so those still waiting might not want to give up on a visit. So far, however, the last few days have put coal into investors' stockings. The year ended with market breadth in relatively good shape. As of late Wednesday, just under 56 % of S &P 500 stocks traded above their 50-day moving averages, and 58.8 % topped their 200-day moving averages. This pattern suggests the long rally that fueled 16 % gains for the S &P 500 index in 2025 isn't dependent on just a few mega-cap stocks that can move the entire market with their huge market capitalizations.

7:20The S &P 500 Equal Weight Index, which weighs all S &P 500 stocks the same, finished 2025 up just 9.3%. This reinforces how strength from heavyweights like NVIDIA, Alphabet, Broadcom, and Tesla helped the market cap-weighted S &P 500. A deeper look at Wednesday's action showed every single S &P 500 sector down for the day, with Infotech, Materials, and Industrials performing the worst. Communication services, with a 0.37 % drop, was the best sector. For the year, communication services led all sectors, with a 32.4 % gain, followed by infotech at 23.6%. Industrials at 18 % and financials at 13.7 % were third and fourth.

8:09Real estate dropped 0.17 % in 2025, the only sector in the red. This kept sectors from being all green for the year, something they last accomplished in 2021. Individual trading highlights on Wednesday included mining stocks Newmont and Hecla, both falling nearly 2 % as silver hit the skids. Nike added 4 % Wednesday on news that the company's CEO bought shares. Taiwan Semiconductor gained more than 1 % Wednesday on news that NVIDIA had approached the firm about increasing production of the H200 chip now allowed to be exported to China. Demand from China has jumped, sources told Reuters. NVIDIA, the largest stock by market capitalization, ended the year up 38.9%.

8:58Some of the biggest gainers of the year, including Newmont and Micron, fell in the last trading day of 2025. Stocks associated with cryptocurrencies also had a soft day, though Bitcoin barely moved. The Dow Jones Industrial Average fell 303.77 points Wednesday, or 0.63%, to 48 ,063.29. The S &P 500 Index dropped 50.74 points, or 0.74%, to 6 ,845.50. And the Nasdaq Composite lost 177.09 points, or 0.76%, to 23 ,241.99. The 10-year U.S. Treasury yield finished up four basis points Wednesday after the light reading on jobless claims, but fell about 40 basis points this year to 4.17%. It was up 15 basis points in December.

9:58This has been the Schwab Market Update podcast. To stay informed, visit www.schwab.com slash market update or follow us for free in your favorite podcasting app. And if you like what you've heard, please consider leaving us a rating or a review. It really helps new listeners find the show. I'll be back with another update Monday.

10:27For important disclosures, see the show notes and schwab.com slash market update podcast.