The first full trading week of 2026 brings markets back to fundamentals, with the December jobs report set to reset expectations after months of disrupted data and a volatile 2025.
US stocks ended the holiday-shortened week mixed, marking the second-to-last session of the Santa Claus rally period, as investors began to position for the year ahead. The Dow Jones Industrial Average led gains for the week, while the S&P 500 edged higher and the Nasdaq Composite finished nearly flat amid uneven moves across big tech and semiconductors.
With markets now turning the page on the holidays, economic data returns to center stage, starting with a closely watched slate of labor market releases.
December Jobs Report: What Markets Expect
Friday’s December nonfarm payrolls report is expected to show a continued cooling in hiring as 2025 came to a close. Economists forecast:
- Nonfarm payrolls: +55,000 jobs
- Unemployment rate: 4.5%, down from 4.6% in November
- Average hourly earnings: steady but slightly firmer month over month
If confirmed, the data would reinforce the narrative of a slowing but resilient labor market, rather than a sharp downturn.
The jobs report follows months of data disruption caused by last year’s 43-day government shutdown, which left policymakers and investors relying on partial signals. This week marks the first time in months that the full set of labor indicators returns on schedule.
Why the Fed Is Watching Closely
All eyes are on how this data feeds into expectations for the Federal Reserve. Markets currently see an 85% chance the Fed keeps rates unchanged at its January meeting, according to futures pricing.
A weaker jobs report could revive speculation around rate cuts later in the year, while stronger wage growth may keep policymakers cautious as inflation remains above target.
Investors are also watching Washington closely. Donald Trump has said he plans to announce his nominee to replace Fed Chair Jay Powell soon, with Powell’s term ending in May. Any signal on the future leadership of the central bank could move markets quickly.
More Labor Data This Week
The December jobs report is just the headline event. The week also includes:
- ADP private payrolls
- Challenger job cuts
- Weekly jobless claims
- JOLTS job openings
Together, these releases will help clarify whether the labor slowdown seen late last year is stabilizing or deepening.
Earnings Stay Quiet, for Now
The earnings calendar remains light ahead of bank earnings later this month. Notable reporters this week include:
- Constellation Brands
- Albertsons
- Jefferies Financial
- Applied Digital
Big banks are expected to officially kick off earnings season in about two weeks.
How 2025 Sets the Stage for 2026
Despite sharp swings last year, 2025 delivered strong gains. The S&P 500 rose more than 16%, while the Nasdaq climbed over 20%, driven largely by AI-linked growth and select mega-cap leaders.
Nvidia gained more than 30% in 2025, while Alphabet stood out among big tech with gains above 60%. Still, strategists note the rally was highly concentrated, with broader market participation lagging.
Analysts at Goldman Sachs argue that technology’s dominance is rooted in real profit growth, not pure speculation, and does not yet resemble past bubbles.
Looking ahead, Wall Street forecasts call for around 10% upside for the S&P 500 in 2026, though leadership may continue to rotate away from the so-called Magnificent Seven.
The Big Question for 2026
As markets reopen fully, investors are asking whether AI-led momentum can broaden, or whether stretched valuations and real-world constraints slow the trade.
For now, the December jobs report will be the first major test of the year. A steady labor market could keep risk appetite intact, while any surprise may quickly reshape expectations for rates, growth, and market leadership in 2026.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
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