Weekly Market Recap: Markets Rotate as 2026 Leadership Broadens Beyond Big Tech

Market Overview

Markets delivered a tale of rotation last week as leadership shifted sharply beneath the surface. While the S&P 500 slipped -0.1%, strength in cyclicals and value-driven areas powered the Dow Jones (+2.5%) and Russell 2000 (+2.2%) higher, reinforcing the theme of broadening participation early in 2026.

Sector performance highlighted this divergence. Consumer Staples (+6.0%), Industrials (+4.7%), Energy (+4.4%), and Materials (+3.5%) led the market, while Technology (-4.6%), Communication Services (-4.4%), and Consumer Discretionary (-1.4%) lagged. Growth-heavy indexes reflected the pressure, with NASDAQ (-1.8%) and Russell 1000 Growth (-2.0%) underperforming, while Russell 1000 Value gained +2.2%.

International equities were mixed. Developed markets edged higher with MSCI EAFE (+0.5%), supported by value and cyclical exposure, while Emerging Markets (-1.4%) pulled back after a strong start to the year.

In fixed income, bonds posted modest gains as yields stabilized. The Bloomberg U.S. Aggregate rose +0.3%, investment-grade corporates added +0.3%, and municipals advanced +0.4%, reinforcing the appeal of income-oriented allocations as equity volatility picked up.

Federal Reserve Insights and Economic Roundup

Economic data continued to send mixed but important signals. Job openings declined meaningfully, with JOLTS falling to 6.5 million from 6.9 million, pointing to softer labor demand. At the same time, manufacturing momentum improved, as ISM Manufacturing PMI jumped to 52.6 from 47.9, moving back into expansion territory.

The dominant macro theme remains labor supply. Updated Census Bureau projections show slowing population growth and declining working-age labor supply, driven largely by reduced immigration. Under these assumptions, the labor force may only grow modestly in 2026—meaning the economy needs far fewer jobs per month to keep unemployment stable.

That dynamic matters for the Fed. Even if hiring demand cools, constrained labor supply may keep the unemployment rate anchored near current levels, limiting the urgency for aggressive rate cuts. Current expectations point toward two or fewer cuts in 2026, barring a sharp deterioration in employment.

Rates reflected that balance. The 2-year Treasury ended at 3.50%, the 10-year at 4.22%, and mortgage rates hovered near 6.3%, suggesting financial conditions remain restrictive—but stable.

The Week Ahead

Markets may see delayed or staggered releases following the latest government shutdown, but several key data points remain on deck.

Monday: No major economic releases scheduled

Tuesday: CPI (Jan), Retail Sales (Jan)

Wednesday: January Jobs Report (Payrolls, Unemployment Rate), Wholesale Inventories

Thursday: Producer Price Index (PPI), Initial Jobless Claims

Friday: Consumer Sentiment (Preliminary)