U.S. stock markets opened the first full week of 2026 with gains in the weekends by major indices such as the S&P 500 and Dow Jones showing resilience after a holiday lull.

At Wall Street and in broader global markets, in early trading on Friday January 2, investors reacted to strong corporate earnings and optimism around tech spending.

Despite the positive tone, the Nasdaq Composite underperformed as some heavyweight tech stocks saw profit-taking early in the year.

The gains ended a four-day losing streak for key benchmarks, with value-oriented sectors such as industrials and energy providing broad support.

Traders noted that optimism was fuelled by record performances in 2025 and hopes for continued policy support from central banks. Early positioning ahead of U.S. jobs and inflation data due next week also shaped trading patterns.

Investors are interpreting this mixed start as a sign that markets may be set for increased volatility once normal trading volumes return after the holiday period.

With the Federal Reserve meeting minutes and January jobs report on the horizon, traders are adjusting exposure to equities, fixed income and commodities.

Bonds saw modest yield upticks as traders balanced growth expectations and inflation risks. In equities, defensive and cyclical sectors alternated in leadership, reflecting uncertain directional conviction.

Corporate earnings narratives — particularly from industrial and AI-linked companies — remain core drivers of sentiment.

European markets also showed strength as the pan-European STOXX 600 reached new record highs, continuing momentum from strong gains in 2025.

The rally was underpinned by banking and commodity stocks, with investors welcoming signs of stabilising activity across key economies.

London’s FTSE 100 notably crossed the 10,000 point threshold, marking a symbolic milestone for U.K. equities early in the year.

Such benchmarks have benefited from diversified sector weightings and resilient corporate earnings.

The performance reflects confidence that 2026 may sustain some of last year’s positive themes.

Despite these gains, caution persists as thin holiday trading can exaggerate price moves and liquidity remains subdued, making technical swings more pronounced.

Market watchers have emphasised that broader trends will depend on incoming macroeconomic data and central bank policy cues, particularly interest-rate guidance.

The interplay between growth expectations, inflation readings and global geopolitical developments could shape risk sentiment in coming sessions. Analysts stress that early 2026 markets will likely be reactive as fundamental signals crystallise.

Looking ahead, traders and portfolio managers are positioning for a number of key catalysts — notably the U.S. jobs report and inflation figures due this week — which could recalibrate rate expectations and either reinforce or temper the optimistic start to the year.

Equity flows, credit spreads and currency markets will be watched closely as volatility returns with deeper liquidity.

Source: Reuters.