Russell 2000 Reaches Fresh Record as Supportive Econ Data Lift Cyclically Oriented Names: Jan. 8, 2026

Yields are climbing following better-than-expected economic data that signaled an improving labor market amidst strengthening productivity. Unemployment claims continued to stabilize while Challenger results depicted layoffs dropping to a 17-month low and rising hiring intentions, which together are suppressing slowdown worries and alleviating angst related to potential job losses. Moreover, robust efficiency gains are quelling wage inflation concerns, as more output per worker offsets price pressures. Adding to the optimism was the narrowest trade deficit in 17 years, which is supporting cyclical leadership in stocks which stand to benefit from onshoring ambitions, as tech once again passes the baton to the economically sensitive Dow Jones and Russell 2000 benchmarks, which are strongly positive while the S&P 500 and Nasdaq 100 decline. But participation is broad, with 10 out of 11 sectors advancing and being led by staples, energy and consumer discretionary. In fixed-income, the Treasury curve is ascending in bear-steepening fashion propelled by duration, as growth projections heighten, which is also sending the greenback north. Commodities ex crude oil and cryptocurrencies are lower as Bitcoin and Ethereum sink by more than 1%. Conversely, forecast contracts are catching bids.

New Data Points to Continued Strengthening of Labor Market

Unemployment claims remained in the safe zone during the past two weeks with both initial and continuing segments arriving near expectations. The former category climbed to 208k during the week ended Jan. 3, lower than the 210k anticipated but above the prior period’s 200k. Continuing filings increased to 1.914 million in the interval culminating on Dec. 27, greater than the 1.9 million projected and the 1.858 million from the previous print. Four-week moving averages dropped from 219k to 211.75k among first-time applicants but rose from 1.872 million to 1.893 million in the continuing segment. Also, this morning, data from Challenger, Gray & Christmas pointed to strengthening conditions, as the 35.5k job cuts announced last month were the smallest since July 2024, while intentions to expand rosters by 10.5k positions marked the strongest December going back to 2022. The positivity is likely a result of rising economic confidence amongst businesses, which is being bolstered by robust consumer spending, lessening inflationary pressures and expectations of a few rate reductions from the Fed around the corner.

Productivity Grows at One of Fastest Paces in a Decade

Productivity in the third quarter of 2025 expanded at one of the strongest paces in the past decade, as the 4.9% quarter-over-quarter (q/q) seasonally adjusted annualized rate (SAAR) flew ahead of the 3% projection and the preceding period’s 4.1%. The gains were driven by limited supply, as immigration restrictiveness hampers participation, compelling firms to do more with fewer workers. Additionally, AI adoption is increasing output per employee and boosting the nation’s economic yield as a result. Indeed, unit labor costs, or what employers pay employees to produce a single unit, dropped 1.9% q/q on a SAAR basis, beneath the 1% expectation but above the -2.9% from the prior print.

Tomorrow Features Pivotal Econ Releases

Investors will have a full day of economic data tomorrow with nonfarm payrolls dominating the schedule and followed by consumer sentiment and its associated inflation expectations. Housing statistics are also due; however, those are not as impactful, as construction starts and building permits are important for economists, but less influential in the short run to capital markets. For Jobs Friday, Wall Street will be looking for positive numbers that reflect a cycle that’s on solid footing while hoping that the figures aren’t robust enough to moderate the outlook for interest rate cuts, or weak enough to raise slowdown worries and create angst related to the buoyancy of corporate earnings estimates. Meanwhile, the most significant development will likely come from the Supreme Court’s views on whether President Trump had the authority to implement broad-based tariffs. A blockage of the levies would derail onshoring ambitions, worsen the fiscal picture and send rates higher, although near-term profitability would improve.

International Roundup

Canada’s Trade Balance Turns Negative

Canada’s trade of services and goods fell from a $607 million September surplus to a $59 million deficit in October. The merchandise balance fell from a $243 million surplus to a $583 million shortfall.

After slipping in September, imports jumped 4.3% in the subsequent month. Higher values of products entering the country occurred in 8 of 11 broad sectors, including the following:

• Electronics and electrical equipment, up 10.2%, driven by strong demand for products from Ireland
• Metal and non-metallic mineral products, up 9.5%, which reversed from a 27.9% October decline. Demand was led by unwrought gold, silver, and platinum group metals.
• Industrial machinery, equipment and parts, up 5.7% in October. The other general-purpose machinery group and the logging, construction, mining and oil and gas field machinery and equipment classification were the largest contributors to higher imports.

Conversely, purchases of basic and industrial chemicals, plastic and rubber products from foreign supplies sank 7.5%, led by a 23.5% decline of basic chemicals.

The growth of goods exported decelerated from 6.7% in September to 2.1% to start the fourth quarter. Shipments abroad of metal and non-metallic products, after expanding 25%, climbed 27.3%, driven primarily by demand for unwrought gold.  The value of exports was pulled down by energy shipments dropping 8.4% due to double header of headwinds. First, refinery closures in the US trimmed demand for oil. Second, a global oversupply of oil caused prices to descend. Also in October, exports and imports of services declined 0.4% and 1.2%, respectively.

Decline in Annualized Gate Prices Accelerates in Europe

Wholesale prices in the euro area sank 1.7% year over year (y/y) in November, according to the Producer Price Index from Eurostat. Economists anticipated that wholesale prices among countries that use the euro would fall 1.9% following September’s 0.5% descent. On a month-over-month (m/m) basis, however, prices were up 0.5%, exceeding the economist consensus estimate for a 0.4% ascent and October’s positive 0.1% change. The annual softness resulted from energy prices tumbling 7.4%. Other categories had modest increases. Durable consumer goods, capital goods and non-durable consumer goods, for example, were 2%, 1.8% and 1.1% higher. For the monthly print, energy led the increase with a 1.8% gain. It was followed by durable consumer goods and intermediate goods with both categories up 0.3%. Non-durable items and capital goods, furthermore, were 0.2% and 0.1% more costly. 

Europe Unemployment Falls Marginally

The euro area unemployment rate fell from 6.4% in October to 6.3% in November. A consensus of economists predicted that the rate would be unchanged. Despite the decline, the rate is still slightly higher than the year-ago period result of 6.2%.

Euro Area Sentiment and Hiring Expectations Fall

Business sentiment and plans for hiring workers both weakened slightly in the euro area last month but were more stable in the broad European Union (EU). For the euro area, the Economic Sentiment Indicator (ESI) and the Employment Expectations Indicator (EEI) fell from November’s 97.1 and 97.7 to 96.7 and 96.8, according to the European Commission. For both gauges, long-term averages are indicated by scores of 100. The ESI was more stable for the EU. It fell 0.1 points to 96.8 while the EEI sank 0.9 points to 97.9.

Within the EU, industry confidence advanced 0.5 points with production expectations and current level or order books improving. The development was offset slightly by inventories of finished products. Services confidence was unchanged. In this sector, managers reported improved demand expectations but were more negative regarding past conditions. The EEI print was hurt by companies in the services, retail trade, and construction sectors revising hiring plans downward.