Market Insights Summary - Edward Jones

Daily Market Snapshot (January 9, 2026)

A strong start to 2026 has been observed, with equity markets showing significant gains. The S&P 500 closed 0.7% higher, marking a 1.8% increase year-to-date, while the small-cap Russell 2000 surged 5.8% in the same period.

Shorter-dated government bonds experienced a sell-off as the December payrolls report indicated stability in the labor market, prompting investors to reconsider expectations for Federal Reserve easing. Conversely, longer-duration bonds rallied due to President Trump's directive for Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds.

The U.S. dollar has appreciated by 0.8% against a trade-weighted basket of currencies, and WTI oil prices rose by 2% amid geopolitical tensions in Iran. Gold prices have also increased, surpassing $4,500 per ounce.

Labor Market Insights

The December labor report revealed a disappointing increase of only 50,000 nonfarm payrolls, with previous months' gains revised down by 76,000. This sluggish hiring trend continues from 2025, where total payrolls rose by just 584,000, significantly lower than the 2 million increase in 2024. Notably, federal government job cuts accounted for 277,000 of this decline.

Despite the slow hiring, the unemployment rate fell to 4.4% in December, suggesting some stabilization in the labor market, which is a positive sign amidst the hiring slowdown.

Federal Reserve Outlook

The Federal Reserve has cut interest rates in its last three meetings but may pause further cuts in January, given the recent labor data and a strong third-quarter GDP report. While a pause is expected, further cuts are anticipated later in the year, with projections of one to two 25 basis point reductions, bringing rates to a range of 3%-3.5%.