Weekly Market Performance — January 2, 2026

Markets Blog

David Matzko, LPL Research

LPL Research provides its Weekly Market Performance for the week of December 29, 2025. Amid light trading volumes, stocks traded lower over the course of the New Year’s holiday-shortened week, capping another year of double-digit returns with a moderately risk-off tone. Major U.S. averages pared their year-to-date advance to round out 2025 as investors await the next big market catalyst, while international stocks ended mostly higher after sealing an unexpectedly strong year. Treasuries edged lower over the last four days but remained well into positive territory to end the year, while precious metals faced a fresh wave of volatility to close out the month of December.

Stock Index Performance

U.S. and International Equities

U.S. Equities: Major U.S. averages ended the holiday-shortened week in the red as thin trading volumes led stocks to close out a third year of healthy gains on a moderately risk-off note. Following last week’s Christmas holiday, markets continued to lack major directional drivers to close out 2025, and while market impacts were limited, headlines did include Meta’s (META) planned acquisition of Singapore-based artificial intelligence (AI) firm Manus, as well as President Trump’s remarks that he has identified a preferred Federal Reserve (Fed) Chair candidate. Plus, on the macro front, the December Federal Open Market Committee (FOMC) meeting minutes suggested that most officials see further cuts if inflation continues to moderate — although caution and division between policymakers remain. Stocks kicked off the New Year on a cautious note, paring an opening advance led by big tech names.

Despite capping 2025 on a bit of a down note, stocks posted another strong year with the S&P 500, Nasdaq, and Russell 2000 Indexes printing their third straight double-digit advance and the seventh in the last nine years. Major averages shook off slides early in the year following the release of DeepSeek’s cost-efficient artificial intelligence (AI) model, the so-called early April “tariff tantrum,” and AI scrutiny to be driven higher by a continuation of outstanding AI driven earnings growth and investment, the resumption of the Fed’s easing cycle, and a resilient macroeconomic backdrop. The S&P 500 added 17.9% (including dividends) in 2025, outpaced by the tech-heavy Nasdaq adding 21.2%, while the Russell 2000 small cap index gained 12.8%.

International Equities: European stocks traded higher over a four-day week. Headlines remained quiet across the Eurozone as 2025 wound down with multiple markets open for just three or three and a half sessions as the pan-European STOXX 600 Index capped its best year since 2021. Equities gained ground for the third consecutive year on resilient economic growth and the prospect of bolstered fiscal spending, with the German DAX Index adding 22.3% (in dollar terms, including dividends) on defense spending plans, while London’s FTSE 100 rallied 25.7% to log its best year since 2009. In contrast to the U.S., value names outperformed their growth counterparts, with banks enjoying their best showing since 1997.

Major Asian markets ended mixed in abbreviated trading weeks of their own. Tech leaning markets led gainers, supported by early week gains within the space and fresh AI optimism to start 2026. South Korea led gains, adding 4.4% over a three-day week after authorities lifted the investment warning for chipmaker SK Hynix on Monday and bullish remarks from AI firms on Friday. The Kospi Index ended at record levels, alongside Taiwan’s Taiex, which ended 2025 on high notes and started 2026 with more of the same. Japanese benchmarks declined in just a two-day week, and mainland China slipped over three sessions while Hong Kong reversed weekly losses Friday on upbeat tech IPOs and headlines. Broadly, the Asia-Pacific region sealed the best year for the region since 2017, posting rare outperformance over their U.S. and European peers.

Fixed Income, Currency, and Commodity Markets

Fixed Income: Core bonds, measured by the Bloomberg Aggregate Index traded lower over the last four days as the 10-year yield added six basis points (0.06%) while the monetary policy sensitive two-year yield was little changed. Alongside stocks, Treasuries ended 2025 on a down note, dropping in afternoon trading of the final session of the year. Nonetheless, the Treasury market posted its best year since 2020, garnering support from tariff fueled economic uncertainty and, later in the year, the resumption of Fed easing in response to a weakening labor market after a year-long pause. At the same time, Treasury yields remained rangebound with the 10-year yield trading in its narrowest range since 2021, while shorter dated securities faced the largest drop in yields last year amid expectations of continued Fed easing into 2026 while the 30-year yield edged higher. The Bloomberg U.S. Aggregate Bond Index added 7.3%, outperformed by a 7.8% rise in corporate debt securities and an 8.6% gain for high yield bonds. Municipal bonds added a healthy 4.2% while U.S. Treasuries were higher by 6.3% in 2025.

Commodities and Currencies: The broader commodities complex traded lower on the week, measured by a decline in the Bloomberg Commodity Index, after the complex secured a 15.8% return on the year. West Texas Intermediate (WTI) crude prices shed just over 15% in 2025, but were broadly outweighed by a 64.6% gain in gold and a 148% rally — and best year on record — for silver. Over the holiday-shortened week, WTI crude oil ended modestly higher after paring a week-to-date advance in the first trading session of the year as oversupply concerns overshadowed lingering geopolitical risks. Silver prices traded sharply lower on the week as profit taking and supply shortage jitters sparked a wave of volatility across precious metals, leading the CME Group to hike margin requirements on precious metals futures again. In currencies, the dollar strengthened this week after logging a 9.4% loss in 2025 as the euro and pound sterling strengthened over the course of the year.

Economic Weekly Roundup

Fed Uncertain, Is it Cyclical or Structural? One of the most confusing things about the business cycle right now is whether we are experiencing cyclical or structural changes (we support the structural thesis).

In recent times, weaker demand has limited the ability of some firms to raise prices, but business productivity gains might enable some firms to manage current cost pressures. Risks to inflation remained tilted to the upside, although we believe these upside risks have decreased. We should have core inflation approaching 2.5% in 2026. However, risks to the labor market remained tilted to the downside. The rise in the unemployment rate for groups historically more sensitive to cyclical changes, the possibility that layoffs could push the unemployment rate sharply higher in a low-hiring environment, and the concentration of job gains in a few less cyclically sensitive sectors are signaling greater fragility in the labor market. The housing sector showed some signs of stabilizing and recent declines in mortgage rates supported the sector. Economic activity has also been supported by robust business fixed investment, especially in the technology sector. Structural factors such as technological progress and higher productivity growth, possibly reflecting increasing use of AI, could boost economic growth without generating price pressures and could also dampen job creation.

We should have robust economic growth particularly in Q2 despite having low job creation. We expect Q2 growth higher than 2% amid a low-hiring environment which means productivity gains will likely provide the necessary lift, not to mention boosted tax returns. Investors must be patient, but inflation will eventually get closer to the Fed’s target rate. We expect the Fed to cut rates a couple times this year as signs of a weaker job market become more evident.

The Week Ahead

The following economic data is slated for the week ahead, but some U.S. government data releases are slated for intermittent release before month-end due to the recent shutdown.  

• Monday: ISM Manufacturing report (Dec), Wards Total Vehicle Sales (Dec)

• Tuesday: S&P Global U.S. Services and Composite PMIs (Dec final)

• Wednesday: MBA Mortgage Applications (Jan 2), ADP Employment Change (Dec), ISM Services Index (Dec), JOLTS Jobs Report (Nov), Factory Orders (Oct), Durable Goods Orders (Oct final), Capital Goods Orders and Shipments (Oct final)

• Thursday: Challenger Job Cuts (Dec), Nonfarm Productivity (3Q preliminary), Unit Labor Costs (3Q preliminary), Initial Jobless Claims (Jan 3), Continuing Claims (Dec 27), Trade Balance (Oct), Wholesale Inventories (Oct final), Wholesale Trade Sales (Oct), New York Fed One-Year Inflation Expectations (Dec), Consumer Credit (Nov)

• Friday: Change in Nonfarm, Private, and Manufacturing Payrolls (Dec), Average Hourly Earnings (Dec), Average Weekly Hours All Employees (Dec), Unemployment Rate (Dec), Labor Force Participation Rate (Dec), Underemployment Rate (Dec), Housing Starts (Sep and Oct), Building Permits (Oct preliminary), University of Michigan Consumer Sentiment Report (Jan preliminary), Household Change in Net Worth (3Q)

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Asset Class Disclosures –

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

Bonds are subject to market and interest rate risk if sold prior to maturity.

Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.

Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

Precious metal investing involves greater fluctuation and potential for losses.

The fast price swings of commodities will result in significant volatility in an investor's holdings.

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