US equities paused after a strong run as weaker-than-expected December retail sales reinforced expectations for Federal Reserve rate cuts later this year.
US equities paused after a strong run as weaker-than-expected December retail sales reinforced expectations for Federal Reserve rate cuts later this year. Treasury yields fell to their lowest levels in about a month, but equity gains were uneven, with tech weighing on the broader market even as the Dow and equal-weighted S&P 500 notched fresh highs. Markets are now firmly focused on the upcoming jobs report as the next catalyst.
Key Headlines & Market Movers:
Consumer data softens the growth outlook: December retail sales unexpectedly stalled, suggesting the US consumer lost momentum heading into year-end. Core measures tied to GDP also slipped, prompting economists to trim near-term growth estimates. While not recessionary on its own, the data adds to evidence that consumption growth may slow meaningfully in early 2026, especially with weather disruptions weighing on January activity.
Rates rally as Fed cut expectations firm: Treasuries rallied sharply, with 10-year yields falling to around 4.14% as investors modestly increased the odds of three rate cuts this year. Markets continue to fully price two cuts, with the first expected around midyear. Fed officials struck a cautious tone, emphasizing the need for clearer labor market weakness before easing further, reinforcing the importance of upcoming payroll and inflation data.
Equity leadership rotates: The S&P 500 slipped modestly, constrained by weakness in large-cap tech and semiconductors, even as roughly 300 constituents advanced. In contrast, the Dow and the equal-weighted S&P 500 reached new highs, highlighting ongoing rotation toward cyclicals, financials, and smaller-cap exposure as market breadth improves.
AI volatility continues, but long-term conviction holds: Recent pullbacks in software and AI-related stocks drew mixed reactions. Some strategists see last week’s selloff as overdone, arguing fundamentals and long-term AI demand remain intact despite near-term valuation and capex concerns. Others emphasize discipline, noting that leadership broadening beyond last year’s AI winners is a healthier backdrop for a durable bull market.
S&P 500 Sector Performance
Looking Ahead
Attention now turns squarely to the January jobs report and upcoming inflation data. Markets are searching for confirmation that growth is cooling just enough to justify Fed easing without tipping into a sharper slowdown. A weaker payroll print could tilt sentiment risk-off, while a solid but moderating labor market would likely reinforce the current “soft-landing” narrative. For portfolios, the environment continues to favor balance, maintaining exposure to technology and AI themes while leaning into cyclicals and areas benefiting from improving breadth.
The Investment Management Group at Duncan Williams Asset Management is led by a team with extensive experience in investment management, financial planning, and client service. President David Scully, CFA®, CFP®, has more than 20 years of experience and is active in Memphis civic organizations. Chief Investment Officer Kyle Gowen, CFA®, CFP®, oversees investment strategy and is engaged with the local community. Investment Analyst Jack Eason, CFA®, provides research and supports charitable initiatives. The IMG team is committed to professional standards, client service, and community involvement. No statement is intended as an offer of investment advice or a guarantee of future results.
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