The bumpy ride occurring in the first day of 2026\u2019s trading is poised to be emblematic of what the rest of the new year has in store for Wall Street. US stocks opened sharply higher on Friday, Jan. 2, before retreating to modest losses and are now advancing again as investors contemplate whether the tech sector has the fuel to deliver another annum of terrific returns or if the enthusiasm surrounding AI is overdone. Meanwhile, traders will be flying through foggy conditions in the next few weeks, as participants await mid-month earnings reports while incoming economic data will continue to be questioned due to government shutdown-related quality issues. As of late Friday, all major US benchmarks were posting marginal gains, while the greenback, Treasuries and volatility protection instruments were nearly flat. Commodities were mixed, with silver, gold and copper rising while crude oil, natural gas and lumber dropped. Crypto and prediction markets saw interest, as Bitcoin, Ethereum and forecast contracts caught bids.<\/p>\n\n\n\n
Pivotal Earnings Season to Determine Direction<\/strong><\/p>\n\n\n\n Earnings reports in the middle of the month are geared to determine the direction for US stocks in light of buoyant Wall Street expectations that have catapulted valuations to historic levels. The major theme looking ahead is if the technology sector is ready for a breather after a spectacular three-year run propelled by significant AI capital investment whose return profile is still being examined. A separate key factor will be whether an economic reacceleration alongside monetary policy accommodation could generate a broadening in equities, with consumer discretionary, real estate, financials, industrials, materials and small caps set to benefit the most under that case. Meanwhile, economic data will be less relevant in the upcoming days, but nonfarm US payrolls next Friday could make a significant impact in the Treasury complex and lead to a flatter curve led by the long end. High-frequency inflation indicators have been cooperating, and headline price pressures are likely to recede to the mid to low 2s soon, which bodes well for duration in consideration of a 10-year that is far too elevated in my opinion at 4.18%. Finally, fixed-income bulls are poised to have another strong year driven by improving fiscal conditions and softening cost forces offsetting robust cyclical momentum, leading the 10-year back below 4%.<\/p>\n\n\n\n International Roundup<\/strong><\/p>\n\n\n\n Canada Manufacturing Contracts for 11th Straight Month<\/strong><\/p>\n\n\n\n Canada\u2019s industrial sector contracted for the 11th consecutive month in December with the S&P Global Canada Manufacturing PMI sinking from 48.6 in November to 48.4.<\/p>\n\n\n\n The gauge\u2019s contraction-expansion threshold is 50. In addition to falling deeper into contraction, the result missed the economist consensus estimate of 48.6.<\/p>\n\n\n\n New orders and output both sank last month with survey respondents citing uncertainty regarding tariffs hurting sales. Tariffs have also weakened supply chains with input delivery times increasing, in part due to manufacturers seeking non-US providers. With higher input costs, declines in new orders and low output, manufacturers reduced their purchasing, causing inventories to slip for the 12th consecutive month. Businesses, when possible, passed higher input costs onto customers by raising their prices with output inflation hitting a six-month high. Regarding labor, staffing levels fell, primarily because companies didn\u2019t replace departing workers. Meanwhile, backlogs of orders shrank and confidence regarding the future dropped to a three-month low.<\/p>\n\n\n\n Hong Kong Retailing Growth Slows Slightly<\/strong><\/p>\n\n\n\n November retail sales in Hong Kong were up 6.5% year over year (y\/y), a slightly slower gain than the 6.9% growth in October, according to the Census and Statistics Department. Categories experiencing increased demand and the extent of the growth were as follows:<\/p>\n\n\n\n Conversely, commodities in supermarkets sank 2.1%, motor vehicles and parts dropped 3.1% and fuels slipped 11.1%. Other categories that declined and the extent of the changes included the following:<\/p>\n\n\n\n Singapore\u2019s Growth Slows Relative to Third Quarter<\/strong><\/p>\n\n\n\n Singapore\u2019s gross domestic product (GDP) grew 1.9% quarter over quarter during the final three months of 2025, according to preliminary estimates from Statistics Singapore. The expansion eased from the 2.4% q\/q rate in the three-month period ended in September. Relative to the last three months of 2024, fourth quarter GDP was up 5.7%, an acceleration from the 4.3% y\/y pace in the preceding period. Manufacturing was the key driver of q\/q growth, jumping 9.2% while the services sector ascended only 0.8%. Construction slipped 0.4% while the services subcategory of accommodation & food services, real estate, administrative & support services and other services dipped 0.5%. <\/p>\n","protected":false},"excerpt":{"rendered":" The bumpy ride occurring in the first day of 2026\u2019s trading is poised to be emblematic of what the rest of the new year has in store for Wall Street. US stocks opened sharply higher on Friday, Jan. 2, before retreating to modest losses and are now advancing again as investors contemplate whether the tech sector has the fuel to deliver another annum of terrific returns or if the enthusiasm surrounding AI is overdone. <\/p>\n","protected":false},"author":903,"featured_media":210459,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[151,58,146,147,148,7],"tags":[362,291,314],"contributors-categories":[370],"class_list":{"0":"post-210458","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-asia","8":"category-ibkr-economic-landscape","9":"category-macro","10":"category-north-america","11":"category-text-articles","12":"category-traders-insight","13":"tag-economic-outlook","14":"tag-macro","15":"tag-market-outlook","16":"contributors-categories-ibkr-macroeconomics"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\n\n
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