Weekly Market Commentary January 5, 2026

WEEK IN REVIEW

Economic indicators over the recent period provide a nuanced view of U.S. conditions as the year closed. Crude oil inventories showed mixed results at the end of the year, with a small increase followed by a decline. However, product stockpiles — like gasoline and distillates — rose sharply, reinforcing the view that supply remains ample. This ongoing oversupply continues to weigh on prices, and markets are likely to stay sensitive to shifts in demand and any decisions from OPEC+.

The Federal Reserve’s December meeting minutes, released on December 30, revealed a cautiously accommodative stance. While most officials anticipate further rate cuts, the minutes highlighted growing internal divisions over the pace and magnitude of easing. This signals a “wait and see” approach heading into early 2026, tempering expectations for aggressive policy moves.

Labor market data remained resilient despite holiday volatility. Initial jobless claims fell to 215,000 for the week ending December 20 and dropped further to 199,000 during Christmas week, one of the lowest readings of the year. These figures underscore limited layoffs even as hiring momentum shows signs of moderation.

Manufacturing activity softened to finish the year. The S&P Global U.S. Manufacturing Purchasing Managers’ Index (PMI) finalized at 51.8 for December, down from 52.2 in November, indicating slower expansion and easing price pressures. Softer new orders and reduced selling-price inflation point to a disinflationary tilt in goods, aligning with cautious capital spending trends.

Overall, the data paints a picture of steady growth tempered by sector-specific headwinds. Energy oversupply and cooling factory activity contrast with a labor market that remains historically strong. Combined with a Federal Reserve leaning toward gradualism, these signals suggest a measured start to 2026, with markets likely to remain data-dependent in shaping expectations.

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