Markets Hold Firm amid Heavy News Flow

For the week ending 9 January 2026

As of midday Friday, global equities held near all-time highs amid an ongoing rotation from megacap tech toward smaller and value-oriented stocks. The yield on the US 10-year Treasury note rose to 4.20% from 4.16% before the Christmas break, while the price of a barrel of West Texas Intermediate crude oil remained little changed at $58.75. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), edged down to 16.45 from 16.85 on Christmas Eve.

MACRO NEWS

US payrolls rose less than expected, but jobless rate dropped

The US economy added 50,000 jobs in December, below the consensus forecast, which predicted a gain of 70,000. However, the unemployment rate declined to 4.4% from November’s downwardly-revised 4.5%. Revisions subtracted 76,000 positions from the prior two months’ payrolls. These data, which suggest a tepid (but not weakening) labor market, are likely to keep the US Federal Reserve sidelined when it meets late this month. Markets expect the Fed’s next move to be a cut in mid-2026.

US seeks to stabilize Venezuela after capturing Maduro

In the days since the capture of former Venezuelan President Nicolás Maduro by US forces in Caracas, the interim leadership of the country shows early signs of cooperation with the United States. Secretary of State Marco Rubio told reporters on Wednesday that the US is undertaking a three-part process to stabilize the country, help it recover, and then aid a democratic transition.

The state oil company, Petróleos de Venezuela, is working to facilitate the transfer of between 30 and 50 million barrels of Venezuelan oil to the US, which will be sold at market prices, with the proceeds to benefit both countries. Rubio stated that the oil agreement demonstrates that the US is already making progress in its relations with the Venezuelan regime. The Venezuelans reportedly cooperated with the US in the seizure of an oil tanker in the Caribbean Sea that is part of the country’s shadow fleet that ferried sanctioned oil onto the crude black market. The US announced that it is lifting certain sanctions to enable the transport and sale of Venezuelan crude and other oil products and allow the import of select oil field equipment, parts and services. With Venezuela’s oil industry in a state of disrepair after decades of corruption and mismanagement, it could take years before the sector is able to approach the output levels it once achieved.

Trump said Friday morning that he has canceled plans for a second attack on Venezuela, hailing cooperation with the country’s interim government. He also welcomed the news that Venezuela is releasing a large number of political prisoners.

Trump issues a flurry of policy proposals

President Trump was busy making policy pronouncements via social media posts on Wednesday.  His first salvo was aimed at institutional investors, whom Trump said he would ban from purchasing single-family homes and converting them to rentals. He added that he would outline his plan for improving affordability and making housing more abundant when he speaks at Davos in coming weeks. Trump also said that Congress would need to codify such a ban. On Thursday, US Treasury Secretary Scott Bessent said investors would not be forced to sell houses but would be barred from making additional purchases. That same day, Trump said the government-backed mortgage-finance companies Fannie Mae and Freddie Mac would buy $200 billion in mortgage bonds, part of his efforts to address a sharp rise in the costs of owning a home. Additionally, the president reportedly may call on Congress to allow penalty-free withdrawals from 401(k) and 529 plans for mortgage down payments.

Separately, the president called for a $1.5 trillion defense budget for fiscal year 2026 and castigated defense contractors for undertaking share buybacks and issuing dividends instead of investing in plants and equipment. He also highlighted bloated executive pay while pointing to elongated delivery times for military hardware, saying that no defense executive should “be allowed to make in excess of $5 million dollars.” About $900 billion has been appropriated for defense this fiscal year, and analysts doubt Congress has the appetite to add $600 billion more. Though the president commands the bully pulpit, analysts see no clear-cut authority for the administration to limit defense contractors from returning capital or to cap executive pay.

QUICK HITS

US purchasing managers’ indices were mixed in December. The manufacturing PMI fell to its lowest level in 14 months, while the services measure reached a 14-month high.

Nearly 20 oil executives are scheduled to meet with President Trump at the White House on Friday to discuss rebuilding the Venezuelan oil industry.

President Trump told the New York Times that he has made up his mind on his pick for Fed chair but has not shared it with anyone yet. 

Kevin Hassett, director of the National Economic Council, said that the Trump administration has a backup plan ready to go if the Supreme Court were to rule against the administration’s IEEPA tariffs. Hassett also repeated that he would accept the job of Fed chair, if offered. The Supreme Court did not rule on the matter Friday, despite expectations. 

In the wake of the operation to remove Maduro from Venezuela, President Trump reiterated several times his desire to annex Greenland. Reuters reported Thursday that the White House is considering offering payments of between $10,000 and $100,000 to Greenlanders to win their support.

Amid continuing economic turmoil, widescale protests spread across Iran this week.

Industrial metal prices continued to surge this week as energy storage and demand linked to the AI infrastructure buildout helped fuel a continued rally. Copper broke above $13,000/ton on the London Metal Exchange this week. 

On Tuesday, China imposed export controls on goods shipped to Japan for any military use due to remarks Japanese Prime Minister Sanae Takaichi made on Taiwan. Japan has condemned the ban as “absolutely unacceptable.” Chinese state media also reported this week that Beijing is considering tightening rare earth exports to Japan. 

Large US-based, multinational corporations were formally exempted this week from the 15% global minimum tax that was agreed upon by 150 nations. 

The UK and France signed an agreement to deploy thousands of troops to Ukraine as part of a multinational force if a credible ceasefire with Russia comes into force. The US has pledged to lead a monitoring framework, though specific troop commitments remain under discussion.

Consumer prices in China rose for a third consecutive month in December, advancing 0.8% from a year ago. Producer prices continued to decline, having fallen every month since October 2022. 

Republican Representative Doug LaMalfa, who represented a district in Northern California for 13 years, died this week, narrowing the GOP’s slim House majority to 218-213.

A preliminary reading of nonfarm productivity rose to 4.9% in Q3 from a dramatically upwardly revised 4.1% in Q2 (up from an earlier 3.3% estimate). The rise in productivity pushed unit labor costs (ULC) -1.9% for the quarter. Large revisions to Q2 data saw ULC fall 2.9% that quarter. Falling ULC is good news for the Fed’s fight against inflation. 

The US trade deficit narrowed to $29.4 billion in October, the smallest monthly deficit since 2009, while the September deficit was revised lower to $48.1 billion from $52.8 billion. Most of this narrower deficit has been chalked up to gold bullion reversing and flowing back out of the US after flowing into the country in early 2025 in anticipation of tariffs on the metal and on the normalization of pharma imports after tariff frontrunning last year. Whatever the cause, the decline in the trade deficit will flatter Q4 economic growth. 

The US Bureau of Economic Analysis said on Wednesday it would average September and November consumer price index data to produce October estimates for the Personal Consumption Expenditures Price Index, the Fed’s preferred measure of inflation.

On Thursday, German manufacturing orders for November were announced and were surprisingly sharply to the upside, with the year-over-year figure rising +10.5% versus expectations of +2.9%. According to analysts at Deutsche Bank, outside of the post-Covid rebound, this marks the strongest increase in almost 15 years.

Treasury Secretary Bessent said Thursday that he believes the US budget deficit will decline by between $300 billion and $500 billion in calendar year 2025, and he expects Trump will decide on his choice to replace Jerome Powell as Fed chair either right before or right after the World Economic Forum in Davos, which runs from January 19-23. 

Eurozone CPI rose 2% year-over-year in December, matching the European Central Bank’s target.

Major equity indices around the world closed at record highs during the week, including the S&P 500, the Dow Jones Industrial Average, the FTSE 100, the Nikkei 225, and South Korea’s KOSPI. 

THE WEEK AHEAD

Monday: US housing starts

Tuesday: US CPI, new home sales

Wednesday: US retail sales, PPI, existing home sales

Thursday: UK GDP, industrial production; eurozone industrial production

Friday: US industrial production

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.