Weekly Economic Update – 01/26/2026

The Week on Wall Street

Markets ended a short but eventful week slightly lower amid geopolitical tensions and fresh tariff threats. However, constructive economic news appeared to buoy spirits as the week progressed.

The Standard & Poor’s 500 Index fell 0.35 percent, while the Nasdaq Composite Index was flat (-0.06 percent). The Dow Jones Industrial Average declined 0.53 percent. By contrast, the MSCI EAFE Index, which tracks developed overseas stock markets, rose 0.91 percent.1,2

Tariff Talk

Stocks opened lower on Tuesday after the White House threatened fresh tariffs on EU nations following an international debate over Greenland.

The S&P 500 and Nasdaq slid more than 2 percent, while the Dow Industrials also came under pressure.3

Markets rebounded on Wednesday after assurances that the U.S. would adopt a more diplomatic approach toward Greenland. By the close of trading, the White House also walked back its tariff threats and said it had reached a framework for a Greenland deal.

On Thursday, markets accelerated higher, powered by a slight uptick in revised Q3 GDP and lower-than-expected weekly jobless claims.4,5

The S&P 500 went sideways on Friday as investors looked ahead to a big week of Q4 corporate reports and the first Fed meeting of 2026.6

Eye-Catching Small Caps

For the 14 consecutive trading sessions through Thursday, January 22, David beat Goliath—the Russell 2000 Index of small-cap stocks outperformed the S&P 500. The last time that happened was May 1996. Small caps broke that streak on Friday.7

Small caps have historically outperformed large caps when interest rates have trended lower, but the 10-year Treasury rate has been rising since late October.7

Weekly Riddle

The more of these you take, the more of these you will likely leave behind. What are they? 

Last Week’s Riddle: My three eyes blink, and I give you commands. Although I can’t see, the changing colors in me prompt you to obey me with your wheels, feet and hands. What am I?

Answer: A traffic light.

John Dombroski Jr. may be reached at (480) 991-1055 or [email protected]
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