Odds for a "January Effect" in 2026?

• Pre-market futures show Nasdaq leading with +235 points (+0.93%), followed by S&P 500 +35 (+0.51%), Russell 2000 +13 (+0.53%), and Dow +139 (+0.29%)
• 2025 recovery from April tariff lows was substantial: Nasdaq +39%, Russell 2000 +33%, S&P 500 +32%, and Dow +24%
• Key economic data ahead includes Jobs Week starting Monday with ADP payrolls, JOLTS data, and unemployment figures following weak November hiring

Market Summary: January 2, 2026

Pre-Market Activity: Futures opened 2026 positively with Dow +139 points (+0.29%), S&P 500 +35 (+0.51%), Nasdaq +235 (+0.93%), and Russell 2000 +13 (+0.53%).

2025 Performance Review: Despite December weakness and a failed Santa Claus Rally, 2025 delivered strong gains. From April tariff lows: Nasdaq +39%, Russell 2000 +33%, S&P 500 +32%, and Dow +24%. The Nasdaq achieved its third consecutive year of +20% growth.

January Effect Potential: Market observers are watching for the traditional "January Effect" driven by tax-loss harvesting, year-end bonus reinvestment, and portfolio rebalancing. Trading volume remains light due to holidays, with normal activity expected to resume Monday.

Key Headwinds

• Ongoing tariff concerns (though some tariffs on furniture, cabinets, and Italian pasta rolled back until 2027)
• Employment uncertainty
• Rising healthcare costs
• Potential federal government shutdown as Congress reconvenes

Upcoming Economic Data

• Today: S&P U.S. Manufacturing report expected at 51.7 (down from 51.8)
• Next week's "Jobs Week" includes:
• Wednesday: ADP private payrolls (December), JOLTS report (November)
• Thursday: Weekly Jobless Claims
• Friday: BLS Employment Situation report

Market Context: The unemployment rate stands at its highest level since September 2021, following weak November hiring data. Manufacturing data shows four months of decline in the past five months, though remaining above the 50-level growth threshold.

Sector Focus: The report highlights quantum computing stocks as a potential growth opportunity converging with AI technology.