Wall Street Mixed at New Year's Start as Treasury Yields Rise

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Market Movements and Economic Outlook

On Friday, the first trading day of 2026, U.S. stocks experienced a mixed close, with the dollar strengthening and U.S. Treasury yields rising. The major stock indices showed varied performances, with the S&P 500 and Dow Jones Industrial Average posting gains, while the Nasdaq Composite ended slightly lower.

The S&P 500 and the Dow managed to break their four-day losing streak, showing positive momentum despite the overall uncertainty in the market. However, the Nasdaq Composite faced pressure from tech and tech-related megastocks, resulting in a nominal loss for the index. All three major U.S. stock indexes closed the week with losses, as the holiday-shortened week saw reduced trading activity.

According to Jed Ellerbroek, a portfolio manager at Argent Capital in St. Louis, the market was characterized by lighter volumes and less engagement due to the holiday season. He noted that value stocks outperformed growth stocks, and sectors like utilities, industrials, and energy—beneficiaries of AI advancements—were performing well.

The Federal Reserve's Year Ahead

As the new year begins, markets are closely watching the Federal Reserve's monetary policy decisions. Jerome Powell is nearing the end of his tenure as Federal Reserve chair, and economic data releases are returning to their regular schedule following the federal government shutdown. A series of delayed indicators will be critical in shaping the central bank's future actions.

Thomas Martin, a senior portfolio manager at Globalt in Atlanta, emphasized the importance of maintaining Fed independence. He pointed out that even though some recent appointees were appointed by former President Donald Trump and may be more dovish, they aim to preserve the appearance of independence. "Once you lose that, you're kind of like in trouble," he said.

However, Ellerbroek holds a different view, suggesting that President Trump has indicated his intention to appoint someone who would follow his direction. He added that the short-term appeal of lower interest rates is tangible, with the potential for significant rate cuts.

Artificial Intelligence and Geopolitical Volatility

The impact of massive investments in artificial intelligence (AI) technology on the market will be a key focus in the coming year. As AI continues to evolve, its influence on various sectors is expected to grow, potentially driving both opportunities and challenges for investors.

In addition to AI developments, the new year is anticipated to bring geopolitical volatility. With U.S. congressional midterm elections approaching and ongoing negotiations to end Russia's war in Ukraine, as well as persistent tensions in the Middle East, market participants will need to remain vigilant.

Global Market Performance

European shares started the year at record highs, bolstered by strong performances in technology and defense stocks. The STOXX 600 index approached the 600 milestone, while London's FTSE 100 index reached the symbolic 10,000-point mark for the first time.

Globally, MSCI's gauge of stocks rose 0.43% to 1,019.15. The pan-European STOXX 600 index increased by 0.67%, and Europe's broad FTSEurofirst 300 index gained 0.69%. Emerging market stocks also saw positive movement, rising 1.71% to 1,429.34. In Asia-Pacific, MSCI's index outside Japan closed higher by 1.75%, while Japan's Nikkei fell 0.37% to 50,339.48.

Precious Metals and Currency Trends

Gold and silver prices saw modest gains after a period of profit-taking. Gold's 2025 rise was its largest in 46 years, driven by factors such as Fed rate cuts, geopolitical tensions, and central-bank buying. Spot gold rose 0.36% to $4,329.57 an ounce, while spot silver increased 1.6% to $72.39 per ounce.

The U.S. dollar strengthened following its largest yearly drop in eight years. The dollar index rose 0.19% to 98.43, with the euro down 0.21% at $1.172. Against the Japanese yen, the dollar gained 0.11% to 156.84.

Cryptocurrencies and Bond Yields

In the cryptocurrency market, Bitcoin rose 1.69% to $89,789.87, while Ethereum gained 4.5% to $3,121.09. U.S. Treasury yields moved higher as investors looked ahead to next week's employment data, which could provide insights into the economy's health.

The yield on benchmark U.S. 10-year notes increased 3.8 basis points to 4.191%, while the 30-year bond yield rose 3.8 basis points to 4.8682%. The 2-year note yield climbed 0.6 basis points to 3.475%.

Oil Prices and Market Sentiment

Oil prices eased after recording their biggest annual loss since 2020, as investors weighed concerns about oversupply against geopolitical risks. U.S. crude dipped 0.17% to settle at $57.32 per barrel, while Brent crude settled at $60.75 per barrel, down 0.16% on the day.