2026 Starts Off with a Bumpy Ride: Jan. 2, 2026

The bumpy ride occurring in the first day of 2026’s trading is poised to be emblematic of what the rest of the new year has in store for Wall Street. Stocks opened sharply higher 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. At the moment, all major benchmarks are posting marginal gains, while the greenback, Treasuries and volatility protection instruments are near their respective flatlines. Commodities are mixed, with silver, gold and copper rising while crude oil, natural gas and lumber drop. Crypto and prediction markets are seeing interest, as Bitcoin, Ethereum and forecast contracts catch bids.

Pivotal Earnings Season to Determine Direction

Earnings reports in the middle of the month are geared to determine the direction for 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 investments 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 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%.

International Roundup

Canada Manufacturing Contracts for 11th Straight Month

Canada’s 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. The gauge’s contraction-expansion threshold is 50. In addition to falling deeper into contraction, the result missed the economist consensus estimate of 48.6.

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’t replace departing workers. Meanwhile, backlogs of orders shrank and confidence regarding the future dropped to a three-month low.

Hong Kong Retailing Growth Slows Slightly

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:

• Electrical goods and other consumer durable goods not elsewhere classified 38.6%
• Medicines and cosmetics, 9.2%
• Optical shops, 7.3%
• Other consumer goods not elsewhere classified, 5.5%
• Commodities in department stores, 3.8%
• Jewelry, watches and clocks, and valuable gifts, 3.6%
• Wearing apparel, 3%
• Food, alcoholic drinks and tobacco, 2%

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:

• Footwear, allied products and other clothing accessories, 4.3%
• Furniture and fixtures, 6.1%
• Books, newspapers, stationery and gifts, 10.6%
• Chinese drugs and herbs, 1.8%

Singapore’s Growth Slows Relative to Third Quarter

Singapore’s 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%.