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Anna's Markets Recap

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Saturday, 5:13 AM

January 3, 2026

Good morning news friend! Here is a quick recap of what happened in the markets this week. 📰🌟

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What Moved Markets Last Week

The transition from 2025 into 2026 marked a definitive regime change in US equity markets, characterized less by macroeconomic data and more by a violent collision of structural forces. The traditional "Santa Claus Rally" failed to materialize in its expected form as the S&P 500 and Nasdaq Composite faced resistance at all-time highs. Instead, investors witnessed a sharp bifurcation: year-end tax harvesting collided with the deployment of 2026 capital allocation strategies, resulting in a distinct sector rotation on the first trading day of the new year.

Volatility was exacerbated by a severe liquidity vacuum. Trading volumes plummeted roughly 45% below the 20-day average, creating a fragile market structure where algorithmic flows dominated the tape. This thin environment amplified the impact of a critical structural event: the Chicago Mercantile Exchange (CME) raised margin requirements on precious metals. This triggered a forced liquidation event in Gold and Silver on December 29, decoupling asset prices from their intrinsic value and driving a 4.4% decline in Gold solely due to leverage mechanics rather than a shift in the fundamental thesis.

Macroeconomically, the narrative was shaped by the release of the December FOMC minutes on December 30. The text revealed a divided committee—while a consensus supported the December cut to 3.50%-3.75%, a vocal faction argued for a pause to assess cumulative impacts. The market interpreted this as a signal that the Federal Reserve retains optionality for a "soft landing," stabilizing 10-year Treasury yields around 4.11%–4.15%. This yield stabilization provided a floor for the broad market but failed to rescue high-multiple software stocks, which faced a reckoning as capital rotated toward earnings visibility and hardware infrastructure.

Commodities Gold (XAU/USD) experienced the most dramatic volatility of the week. Prices fell sharply by 4.4% on December 29 to ~$4,350 following the CME margin hike. However, the asset recovered to $4,345 by January 2. This rapid V-shaped recovery signals immense structural strength; the dip was purely mechanical, caused by forced deleveraging, and was aggressively bought by central banks and inflation hedgers.

Tech and Growth

The Technology sector exhibited extreme bifurcation, effectively splitting into two distinct asset classes: "AI Infrastructure/Hardware" (Winners) and "Software/EVs" (Losers). This divergence signals a demand for immediate returns on investment (ROI); the market is no longer paying for high AI capital expenditures (Capex) without immediate revenue recognition.

Semiconductors and Hardware Nvidia (NVDA) and Broadcom (AVGO) acted as the primary alpha generators, rallying on January 2 as funds front-ran 2026 allocations. NVDA surged 2% to close at $188.85, breaking resistance at $185. Bullish options activity, specifically a high volume of calls at the $190 strike, created a gamma squeeze that pulled the stock higher. The narrative remains the "AI Infrastructure Supercycle," with investors treating these names as essential utilities. Similarly, AVGO outperformed peers, closing at $347.93, driven by reports of a $73 billion backlog for AI custom chips.

Software and Mega-Cap Divergence Conversely, Salesforce (CRM) suffered the week's most significant drawdown, plummeting 4.2% on January 2 to $253.62. The catalyst was a shock to the margin expansion thesis: the company guided for fiscal 2026 expenses to rise by over $9 billion to roughly $105 billion. Investors interpreted this surge in spending as a sign of weak pricing power and the high cost of competing in the AI agent space.

Microsoft (MSFT) also trended bearishly, closing down 2.21% at $472.94. The market has soured on "Capex intensity," worrying that revenue recognition from Copilot is lagging behind the billions spent on infrastructure. Alphabet (GOOGL), however, bucked the trend, rising 0.48% to $315.32. Investors are increasingly viewing Google as a "value" play within Big Tech, rotating capital out of expensive software and into reasonably valued search dominance.

Tesla (TSLA) Tesla slid 3% on January 2 to close at $438.07, breaking its Q4 uptrend line. While the company reported 422,850 deliveries, this figure missed the "whisper numbers" of 430k+ that had been priced in by year-end incentives. The failure to beat the whisper number crushed sentiment, shifting the narrative from "Hyper-growth" to "Mature Cyclical" and evaporating the stock's growth premium.

Banks and Financials

The financial sector faced a turbulent week defined by a historic leadership transition and renewed concerns over operating efficiency.

Berkshire Hathaway (BRK.B) On January 1, 2026, Warren Buffett officially stepped down as CEO, handing control to Greg Abel. The market immediately applied a "succession discount," sending shares down 1.15% to $496.85. Despite robust fundamentals and a massive cash pile of ~$382 billion, the removal of the "Buffett Premium" has investors questioning future capital allocation strategies, specifically whether Abel will pivot toward dividends.

JPMorgan Chase (JPM) JPM faced significant pressure, dropping to $325.48. Similar to Salesforce, the bank was punished for expense guidance. Management guided for $105 billion in 2026 expenses—a $9 billion increase that exceeded analyst expectations of ~$100 billion. The deterioration of the efficiency ratio sparked a fundamental repricing of future earnings, with heavy put buying at the $320 strike indicating traders are hedging against further downside.

Payments and Yields Visa (V) and Mastercard (MA) remained resilient, with MA rising 1.36% to $563.13 following the announcement of a $14 billion share buyback program. High-end consumer spending remains intact, providing a defensive buffer. Meanwhile, Bank of America (BAC) outperformed JPM, rising 1.73% to $55.00, as the steepening yield curve favored its deposit franchise.

Consumer Goods and Healthcare

This sector acted as a defensive bastion, though cracks emerged in retail based on valuation concerns.

Healthcare Eli Lilly (LLY) remains a "must-own" growth asset, closing near all-time highs at $1,080.36. The duopoly in weight loss drugs continues to dominate sentiment, with rapid revenue growth from Zepbound justifying high premiums. UnitedHealth (UNH) rose 1.91% to $336.40 as investors hunted for value after its 2025 lag, front-running the 2026 guidance release expected later in January. AbbVie (ABBV) and Johnson & Johnson (JNJ) remained stable, serving as bond proxies for income-focused portfolios.

Consumer Staples and Retail A clear divergence emerged between volume growth and valuation. Walmart (WMT) rose 1.21% to $112.76, benefiting from "trade-down" behavior as consumers seek value. In contrast, Costco (COST) underperformed, closing down ~0.38% near $862.42. The negative sentiment was driven by insider selling—specifically Executive Vice President Javier Polit selling ~$2.26 million in stock—which highlighted concerns over its 46x P/E valuation. Procter & Gamble (PG) also struggled, falling to $141.79, as the market signaled fatigue regarding its pricing power; consumers are pushing back on price hikes, shifting the focus to volume risks.

Energy and Industrials

Energy and Industrials Exxon Mobil (XOM) demonstrated remarkable strength, hitting a 52-week high of $120.82 on December 29 and closing the week at $122.65. XOM has effectively decoupled from the price of oil, with investors buying into its volume growth story from Guyana and the Permian Basin. It is viewed as a "cash machine" that remains profitable even at lower crude prices.

Conversely, Home Depot (HD) ended the week weak at $345.82 (-0.65%). The company lowered its fiscal 2026 sales growth guidance to just 2.5%–4.5%, confirming that housing turnover remains at 40-year lows. The "higher for longer" rate narrative continues to act as a stiff headwind for housing-linked discretionary spending.

Oil (WTI) traded softly around $57–$58/barrel, weighed down by oversupply fears and a forecast of a 2026 surplus. The divergence between rising energy stocks (XOM) and falling crude prices underscores a "flight to quality" within the sector—investors want the majors, not the commodity itself.

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Baked with love,

Anna Eisenberg ❤️