In January 2026, U.S. equity markets continued to show positive momentum, with broad participation across market capitalizations and sectors. Small and mid-cap stocks outperformed large caps, reflecting a rotation towards value-oriented segments. Despite mixed economic data, S&P 500 companies are on track for their fifth consecutive quarter of double-digit EPS growth.

Value stocks outperformed growth stocks in January, driven by factors like domestic economic momentum and easing financial conditions. While growth stocks lagged, they maintained positive performance trends, especially within large caps. This rotation towards a more diversified style exposure signals a broadening of the opportunity set for investors.

Sector performance in January was led by economically sensitive areas like Energy, Materials, Industrials, and Communication Services. Defensive sectors saw more muted returns, reflecting a rotation towards growth-sensitive exposures. This orderly sector dispersion indicated healthy rotation within the market, rather than a flight away from any specific sector.

Small-cap sector performance in January highlighted a pro-cyclical tone, with Energy, Materials, and Industrials leading the way. Despite defensive and growth-oriented sectors lagging, most remained positive over broader time horizons. The technical breakout for the Russell 2000 index in January marked a significant milestone in small-cap performance.

In January, interest rates remained range-bound, supporting equity valuations, while commodities like oil and metals saw mixed but constructive performance. The US dollar declined, hitting a four-year low, while precious metals like gold and silver experienced sharp swings in prices due to macroeconomic news and crowded trades.

Economic data in January painted a mixed picture, with inflation signals, employment growth, and sector activity diverging. While headline inflation moderated slightly, producer prices exceeded expectations, indicating persistent cost pressures. Labor market data showed softer growth, but consumer demand remained resilient, with retail sales exceeding expectations.

Fourth-quarter earnings season began on a positive note, with S&P 500 companies reporting strong results. Earnings growth exceeded estimates, supported by sectors like Information Technology, Industrials, and Communication Services. Margin levels were at record highs, and revenue growth remained healthy, reinforcing the durability of the earnings cycle.

Nasdaq continued to lead the evolution of capital markets in January, with initiatives like extended trading hours and fractional share trading updates. These efforts aim to enhance accessibility and transparency for investors and listed companies. The ongoing transformation of capital markets reflects a commitment to efficiency and innovation.

Overall, while near-term conditions may require caution, the market’s intermediate and long-term trend remains constructive. Recent price action suggests consolidation rather than a sustained downturn. Investors should maintain a constructive outlook despite potential volatility in the weeks ahead.

Read more at Nasdaq Inc.: January 2026 Review and Outlook