After posting a strong rally the previous week, equities ended this week mixed, with small-cap stocks extending their gains while large-cap indexes paused amid increased volatility.
Trading was choppy, driven by renewed tensions between the White House and the Federal Reserve, a proposal to cap credit card interest rates, and an upbeat outlook from Taiwan Semiconductor Manufacturing Co. (TSMC).
The Dow Jones Industrial Average slipped by 0.29 percent for the week, to 49,359, after reaching a record high on Jan. 12. The S&P 500 fell by 0.38 percent to 6,940, also retreating after setting a record earlier in the week. The tech-heavy Nasdaq Composite declined by 0.66 percent, while the Russell 2000 once again outperformed, rising by 2.04 percent.
Market volatility increased, with the Chicago Board Options Exchange Volatility Index hovering around 15.80.
Stocks opened sharply lower on Jan. 12 as tensions between the White House and the Federal Reserve resurfaced and investors locked in profits following the prior week’s rally.
Additional pressure came from President Donald Trump’s proposal to cap credit card interest rates at 10 percent for one year, which weighed heavily on financial shares.
Selling pressure eased as the session progressed, and bargain hunters returned, helping major indexes recover by midday and finish higher.
Small-cap stocks remained resilient, with the Russell 2000 advancing for a sixth consecutive session, as traders focused on the possibility of additional interest rate cuts following weaker labor market data released the previous week.
Despite the rebound, market participation remained narrow. Financial stocks ended the day with sizable losses, reflecting concerns that a cap on credit card rates would compress profit margins. Capital One Financial and American Express, both heavily exposed to credit card lending, fell by 6.42 percent and 4.27 percent, respectively.
“Tuesday’s CPI was in line with expectations, which will likely keep the Federal Reserve on pause when it comes to interest rates for the foreseeable future,” Skyler Weinand, chief investment officer at Texas-based Regan Capital, told The Epoch Times.
“After cutting rates three times in the fall of 2025, the Fed is likely to take its time and absorb more data, especially given the noise created by the recent government shutdown.”
Weinand added that recent positive employment data, sticky price levels, and political uncertainty are likely to keep the Federal Reserve sidelined through at least the spring. He also noted that inflation data remain clouded by the absence of the October CPI reading.
“Inflation is still relatively high but trending lower,” he said. “Consumers are still dealing with high price levels and lingering sticker shock from post-COVID increases in housing, health care, education, and everyday purchases.”
That uncertainty was reflected in market performance throughout the session, with the Dow and the S&P 500 trending lower, while the Nasdaq and the Russell 2000 hovered between gains and losses before joining the broader market decline by the close.
“Wednesday’s delayed PPI report for November came in stronger than expected, but it likely doesn’t change the outlook for the Federal Reserve,” Clark Bellin, president and chief investment officer at Nebraska-based Bellwether Wealth, told The Epoch Times. He noted that the Federal Reserve cut rates in December despite not having access to that data at the time.
Bellin expects the central bank to remain on hold for the next six months, followed by one or two rate cuts in the second half of 2026.
Equity investors hoping for more favorable inflation readings sold last year’s top performers and rotated into lagging sectors. As a result, the Dow, the S&P 500, and the Nasdaq—each dominated by large-cap stocks—finished the session lower, while the Russell 2000 closed higher.
Investors interpreted TSMC’s outlook as confirmation of continued robust spending on artificial intelligence (AI) infrastructure. Big technology stocks advanced, and the rally broadened, lifting all major equity indexes into positive territory by the close.
Optimism toward technology shares carried into Jan. 16 but faded late in the session, as investors were reluctant to place large directional bets ahead of the long holiday weekend. The Dow, S&P 500, and Nasdaq ended with modest losses, while the Russell 2000 posted slight gains.
Bellin said he remains encouraged by the performance of equities so far in 2026, while closely monitoring the ongoing earnings season.
“We believe the upcoming tech earnings reports at the end of January and early February will be among the most important in recent memory,” Bellin said.
“Technology was the best-performing sector in 2025, and the guidance companies provide in the coming weeks will be critical in determining whether tech can deliver another strong year in 2026.”
“Regardless of how tech stocks perform,” he added, “we expect the broadening of the market to play an even larger role this year as the bull market continues to grind higher.”