US midday market brief: S&P 500 rises 0.7% as jobs data lifts sentiment

The S&P 500 climbed 0.7% to a fresh intraday record high on Friday, following the release of December's employment report, which showed a mixed labor market picture that calmed recession fears.

The Nasdaq Composite gained 0.9%, while the Dow Jones Industrial Average added 213.52 points, or 0.43%, closing at 49,480.41 as of midday trading.

The gains cap the first full trading week of 2026 with solid weekly advances: the S&P 500 is up roughly 0.9% week-to-date, while the Dow and Nasdaq have each risen approximately 1.8% and 1.2%.​

The employment data reinforced a narrative Wall Street has embraced since late 2025: the Federal Reserve is likely to remain on hold in January.

This certainty reduced volatility and signalled the market's willingness to hold equities through the first quarter earnings season, a key psychological shift for the market.​

Market snapshot: Indexes, breadth and sector movers

Nonfarm payrolls increased by just 50,000 in December, falling sharply short of the 73,000 forecast by Dow Jones consensus economists and marking a sharp slowdown from November's revised figure of 56,000.

Critically, prior months saw downward revisions totalling 76,000 jobs: 68,000 in October, reduced from an initial 105,000 decline, and 8,000 in November, signalling a tighter labor market than headline estimates suggested.

The unemployment rate ticked down to 4.4%, slightly better than the anticipated 4.5%, while wage growth accelerated to an annual 3.8%, exceeding expectations of 3.6%.​

This mixed signal, weak job creation paired with falling unemployment and accelerating wages, left room for bulls to claim the labor market remains resilient.

Leisure and hospitality, the largest job gainer, added 47,000 positions, while healthcare rose 21,000.

By contrast, retail employment dropped 25,000, and government added only 2,000 jobs.

The breadth of gains tilted toward defensive sectors and cyclicals, with financials and industrials outperforming.

Small-cap equities also rallied, with the Russell 2000 participating in the week's gains.​

Treasury yields remained choppy but ultimately drifted higher after initially spiking lower on the weak payrolls number.

The 10-year yield climbed to 4.187%, while the 2-year rose 1 basis point to 3.505%, as markets repriced the probability of a Fed rate cut in late January to just 5%, down from 12% earlier Friday.

The dollar index reached a four-week peak of 99.091, reflecting renewed confidence in the U.S. economy's durability.​

Drivers and outlook​

Forward-looking catalysts include the Federal Reserve's January 28 policy decision, next week's retail sales and inflation data, and the start of earnings season.

The market has now priced in a 71% probability of 50 basis points in total rate cuts throughout 2026, though the timing remains uncertain.

Until the Fed signals a dovish pivot or economic data deteriorates sharply, risk appetite appears firmly in favour of equities.​

The gains reflect a market settling into 2026's first full trading week with renewed conviction: no imminent rate cuts, but no recession either.

The traders will likely keep a close eye on Fed speakers and regional economic data next week to test that thesis.