Wall Street Week Ahead: Jobs data could jolt stocks from holiday calm as 2026 kicks off

NEW YORK: The first full trading week of the new year could shake the US stock market out of its winter holiday slumber as the monthly jobs data headlines a busy start to 2026 for investors.

Stocks slid in the final session of 2025, with the benchmark S&P 500 falling into a monthly loss for December. But the index still climbed more than 16 percent in 2025, its third straight year of double-digit percentage gains, while the Cboe Volatility index was last just above its lows for the year.

Trading volumes were thin at the end of 2025, but the new year could get off to an eventful start. Aside from economic data, investors await a US Supreme Court decision on President Donald Trump’s tariffs along with his choice of a new Federal Reserve chair, and US corporate earnings season is around the corner.

While the S&P 500 is near record highs, it is also around the same level it was in late October, noted Matthew Maley, chief market strategist at Miller Tabak.

“The market is looking for direction,” Maley said. “We break out of these ranges and that’s going to give either people a lot of confidence or a lot of concern depending on which way it breaks.”

The employment data due on January 9 could provide a jolt either way. Concerns over weakness in the labor market prompted the Fed to lower interest rates at each of its last three meetings of 2025, as the US central bank juggles its goals of full employment and contained inflation.

Lower rates have supported equities, but the extent of further cuts in 2026 is unclear. Fed officials were divided over the path for monetary policy at the most recent meeting in December.

Inflation remains above the Fed’s 2 percent annual target. With the benchmark rate at 3.5 percent-3.75 percent, Fed funds futures suggest little chance of a cut at the next meeting in late January, but nearly a 50 percent chance of a quarter-point reduction in March.

“The fact that there has been softening in the labor market has really given the Fed good cover to change their outlook about reducing rates,” said Eric Kuby, chief investment officer at North Star Investment Management in Chicago. At the same time, investors are also wary that an overly weak report could signal more severe economic concern than markets currently anticipate.

Employment for December is expected to have climbed by 55,000 jobs, according to a Reuters poll. Payrolls rose by 64,000 in November, but the unemployment rate was 4.6 percent, a more than four-year high.

“If (employment) starts turning down in any kind of meaningful way, that’s going to signal that the recession is a lot closer than people think,” Maley said.

Other data next week includes manufacturing and services sector activity, along with job openings and other labor market data. Economic releases are returning to more normal schedules following the 43-day government shutdown that delayed or canceled many key reports.

A closely watched report on inflation trends, the monthly US consumer price index, is due out on January 13.

With stocks trading at historically lofty valuations, investors are banking on strong earnings growth. Overall S&P 500 company earnings are expected to have climbed 13 percent in 2025, with another 15.5 percent rise in 2026, according to LSEG IBES data.