Weekly Market Commentary January 26, 2026

Week in Review

Economic data released this week continued to show a U.S. economy growing at a steady, though gradually moderating, pace. Real gross domestic product (GDP) for the most recent quarter was revised higher to an annualized 4.4%, reflecting strong consumer spending and resilient business investment. Personal consumption remained the primary contributor to growth, while government spending also provided support. Despite the strong backward-looking print, forward indicators suggest growth is likely to cool as restrictive monetary policy continues to work through the economy.

Labor market conditions remained firm. Initial jobless claims for the week came in at 200,000, up slightly from the prior week but still near historically low levels. The four-week moving average held close to 205,000, reinforcing the view that layoffs remain limited and that employers continue to retain workers amid a tight labor market. These figures remain consistent with stable income growth and ongoing labor market resilience.

Inflation data was broadly in line with expectations. Headline Personal Consumption Expenditures (PCE) inflation rose 0.2% month-over-month and 2.8% year-over-year, while core PCE also increased 0.2% on the month and 2.8% year-over-year. Services inflation remained sticky, offsetting continued easing in goods prices. The data suggest inflation progress has slowed, supporting expectations that the Federal Reserve will remain cautious on the timing of policy easing.

Business sentiment softened modestly. Manufacturing Purchasing Managers’ Index (PMI) registered 51.9, while Services PMI came in at 52.5, both remaining in expansion territory but down from prior highs. The readings point to continued growth in private-sector activity, though at a more moderate pace entering the new year.

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