Stocks End the Day Mixed Amid Sector Shifts

Market Recap: Indices End Mixed Amid Sector Shifts

On Thursday, the S&P 500 finished nearly unchanged, edging up by just 0.01%. The Dow Jones Industrial Average advanced 0.55%, while the Nasdaq 100 slipped 0.57%. Futures for March E-mini S&P saw a marginal gain of 0.01%, but March E-mini Nasdaq futures declined by 0.57%.

Sector Performance and Market Rotation

The trading session saw a divergence among major indices, largely due to declines in semiconductor, data storage, and software stocks. Investors shifted away from AI-focused and large-cap tech shares, favoring small-cap stocks, which contributed to the mixed market outcome.

Bond Yields and Economic Data

Rising bond yields weighed on equities, as the 10-year Treasury note yield climbed 3 basis points to 4.18%. This uptick followed a drop in announced layoffs to the lowest level in 17 months and weekly jobless claims that increased less than anticipated, both pointing to a robust labor market and potentially firmer Federal Reserve policy.

Defensive and Energy Stocks Provide Support

Losses in the broader market were limited as defense companies rallied after President Trump indicated plans to increase military spending to $1.5 trillion for the coming year. Energy stocks also gained ground, buoyed by a more than 3% rise in WTI crude oil prices.

Positive Economic Indicators

Thursday’s session was underpinned by encouraging economic reports: third-quarter nonfarm productivity improved, unit labor costs fell more than expected, and the October trade deficit narrowed to its lowest level in 16 years.

• December Challenger job cuts dropped 8.3% year-over-year to 35,553, marking a 17-month low and signaling labor market resilience.
• Initial jobless claims for the week rose by 8,000 to 208,000, still below the forecast of 212,000.
• Nonfarm productivity for Q3 increased by 4.9%, nearly matching the 5.0% estimate and representing the largest gain in two years. Unit labor costs declined by 1.9%, a steeper drop than the expected 0.1% decrease.
• The October trade deficit unexpectedly contracted to $29.4 billion, far better than the anticipated widening to $58.7 billion and the smallest gap in 16 years.

Upcoming Economic Events

This week, investors are closely watching several key U.S. economic releases. On Friday, December nonfarm payrolls are projected to rise by 70,000, with the unemployment rate expected to dip by 0.1 percentage point to 4.5%. Average hourly earnings for December are forecast to increase by 0.3% month-over-month and 3.6% year-over-year. October housing starts and building permits are also expected to show modest gains, while the University of Michigan’s January consumer sentiment index is anticipated to edge up to 53.5.

Interest Rate Expectations and Global Markets

Markets are currently pricing in a 12% probability of a 25 basis point rate cut at the next FOMC meeting scheduled for January 27-28.

Internationally, major stock indices ended lower on Thursday: the Euro Stoxx 50 slipped 0.32%, China’s Shanghai Composite edged down 0.07%, and Japan’s Nikkei 225 fell 1.63%.

Bond Market Developments

March 10-year Treasury note futures closed down by 10.5 ticks, with the yield rising to 4.183%. The decline was driven by strong labor market data and a surge in corporate bond issuance, which led dealers to hedge by shorting T-note futures. However, the drop in Q3 unit labor costs helped limit losses by signaling easing wage pressures.

• German 10-year bund yields increased by 5.1 basis points to 2.863%.
• UK 10-year gilt yields fell by 1.2 basis points to 4.404%.

European Economic Updates

• The Eurozone’s December economic confidence index unexpectedly declined to 96.7, missing forecasts for an increase.
• November unemployment in the Eurozone fell to 6.3%, better than the expected 6.4%.
• Producer prices in November dropped 1.7% year-over-year, the largest decrease in over a year.
• The ECB’s one-year inflation expectations for November held steady at 2.8%, above the 2.7% forecast, while three-year expectations remained at 2.5%.
• German factory orders for November jumped 5.6% month-over-month, far surpassing the anticipated 1% decline and marking the biggest increase in nearly a year.
• ECB Vice President Luis de Guindos stated that current interest rates are appropriate, with recent data aligning with projections and headline inflation at 2%.
• Swaps indicate just a 1% chance of a 25 basis point rate hike at the ECB’s next meeting on February 5.

Notable Stock Movers

• Semiconductor and Data Storage: Seagate Technology dropped over 7%, leading losses in both the S&P 500 and Nasdaq 100. Western Digital fell more than 6%, and Sandisk declined over 5%. Other notable declines included Micron Technology, Intel, Applied Materials, and Broadcom (down over 3%), as well as AMD, ARM Holdings, ASML, and KLA Corp (down more than 2%).
• Software: Datadog tumbled over 7%, Autodesk lost more than 5%, Salesforce fell over 2%, and both Oracle and Microsoft slipped over 1%.
• Defense: Defense contractors surged after President Trump’s announcement of a proposed military budget increase. AeroVironment soared over 8%, Huntington Ingalls Industries gained more than 6%, L3Harris Technologies rose over 5%, and Lockheed Martin advanced more than 4%. Northrop Grumman, General Dynamics, and RTX Corp also posted notable gains.
• Energy: Energy producers rallied as oil prices climbed. APA Corp jumped over 8%, Diamondback Energy rose more than 5%, and Halliburton, Occidental Petroleum, and ConocoPhillips each gained over 5%. Devon Energy, Phillips 66, and Valero Energy were up more than 4%, while Exxon Mobil advanced over 3%.
• Other Movers: Omnicell climbed over 6% following an upgrade from KeyBanc Capital Markets. Constellation Brands rose more than 5% after reporting stronger-than-expected quarterly sales. Generac Holdings gained over 5% after Citibank upgraded the stock. Globus Medical advanced more than 4% on a positive earnings outlook. Costco Wholesale increased over 3% after reporting robust December sales. Steve Madden rose more than 3% after an analyst upgrade. On the downside, AbbVie fell over 3% after a downgrade, Alcoa dropped more than 2% following a negative analyst report, and DoorDash declined over 2% after sales growth missed expectations.

Earnings Reports (January 9, 2026)

No major earnings announcements are scheduled for this date.