Yields Exert Pressure Amid New U.S. Spending Fears

Published as of: January 8, 2026, 9:13 a.m. ET 

(Thursday market open) With one day to go until key employment data, major indexes pulled back this morning amid weakness in Treasuries and cryptocurrencies. Defense industry stocks including Lockheed Martin (LMT) and Northrop Grumman (NOC) bucked the lower trend, posting 8% gains before the open after President Trump called for a 50% increase in the defense budget. That proposal might face challenges in a Congress concerned about rising deficits and also may help explain today's climbing Treasury yields.
 

Consensus for tomorrow morning's December nonfarm payrolls growth is 55,000, Briefing.com said, with unemployment expected to ease to 4.5% and wages edging up 0.3%. But the so-called "whisper number" is lower at around 45,000, and the three-month average is an anemic 22,000. Federal Reserve Chairman Jerome Powell thinks these reports over-estimate jobs growth by thousands a month, so downward revisions might occur later. And yesterday's ADP private sector jobs report was light. So were job openings.

Major indexes dropped yesterday except for the tech-heavy Nasdaq, and volatility keeps creeping up. The weak labor reports hurt Wall Street Wednesday, though loss of momentum in energy, memory chip makers, and defense firms probably hurt, too. Along with data, tomorrow could feature a tariff ruling from the Supreme Court. In data today, initial jobless claims fell to 208,000 while continuing claims rose. A report on labor costs showed easing pressure while layoffs in December fell to around 35,000, lower than expected, and productivity surged. Still, total 2025 job cuts rose 58% from 2024, according to Challenger, Gray and Christmas.

1. Data picks up beyond jobs: The long holiday slumber ends Friday with nonfarm payrolls and two other reports, one on housing and one on sentiment. Housing starts and building permits, due at the same time tomorrow as the jobs report, aren't seen moving much from previous reports and have trended lower since the post-pandemic surge. A few signs of life emerged in the moribund housing sector recently as the weekly 30-year mortgage rate dropped to 6.16%, near recent one-year lows and down from 7% last January, according to Bankrate. However, this didn't stir interest in home buying last week, as weekly mortgage applications tracked by MBA fell 9.7%. University of Michigan preliminary January consumer sentiment is due soon after tomorrow's open and expected to stay near recent historic lows of around 53.0, per Briefing.com consensus. That's down from 74.0 a year ago, dented by tariff and affordability concerns. Job worries also play a part, though inflation expectations have edged lower recently.
    
2. Washington events seen key to sentiment: Several expected developments from D.C. could have a negative Wall Street impact. Another shutdown looms at the end of January if Congress can't make progress on government funding bills. A second shutdown could throw the collection of jobs, inflation, and other economic data back into chaos. "The timing is very tight and a shutdown can't be ruled out, but negotiations on Capitol Hill to avoid it seem to be making progress, "said Michael Townsend, managing director of legislative and regulatory affairs, Schwab. Another D.C.-related question is the Supreme Court's pending decision on President Trump's attempt to fire Fed Governor Lisa Cook for alleged financial improprieties. The Court will hear oral arguments this month, with a ruling expected by mid-year. A victory for Trump could undermine confidence in the Fed's independence, another possible weight on Treasuries. Powell's term ends in May and the president has said that he wants to be consulted on interest rates by Powell's successor.
    
3. Magnificent Seven couldn't keep up: Though communication services and tech led all S&P 500 sectors last year, investors may look back at 2025 as the year when the "Magnificent Seven" trade stopped paying off so well. While all seven rose year-over-year, only Alphabet (GOOGL) and Nvidia (NVDA) beat the 16% return of the S&P 500 index. Alphabet, the best performer with a 66% advance last year, didn't make it onto the list of top 20 S&P 500 stocks. Nvidia was number 75 despite its solid 39% gain. So far this year, Nvidia performance has been tepid, and it's up less than 1% since late October despite yesterday's solid outing. This may reflect good news priced in amid widespread analyst positivity, or skepticism about Nvidia's ability to sell chips in China, though news outlets reported this morning that China plans to approve imports of Nvidia's H200 AI chip. It also reflects an intra-sector move away from AI chip makers and toward the memory sector, where stocks like Micron (MU) and Western Digital (WDC) have surged amid signs of powerful demand and possible light supply. The memory market is traditionally volatile and goes through supply-driven cycles, so the spotlight now could fade eventually.

Lockheed Martin and Northrop Grumman both climbed 8% as the opening bell loomed, buttressed by Trump's proposal to increase annual defense spending to $1.5 trillion. The strength follows downturns for both stocks Wednesday after Trump said he "will not permit" defense companies to issue dividends or stock buybacks. Weakness in defense likely helped explain yesterday's soft industrials sector outing. Other defense stocks rising this morning include General Dynamics (GD) and RTX (RTX), up 6% and 5%, respectively.
 

Constellation Brands (STZ) climbed 1.6% early as quarterly results issued late yesterday topped estimates for the producer and marketer of beer, wine, and spirits.

Gap (GAP) climbed 4% early Thursday after UBS upgraded shares to buy from neutral. The analyst expects positive trends in sales and earnings driven by beauty, handbags, and the Athleta brand.

Alcoa (AA) dropped 3% early today on a downgrade from JPMorgan Chase to underweight. The analyst cited tariffs and valuation concerns for the aluminum company, CNBC reported.

Nike (NKE) gave back 1% this morning after selling its digital products subsidiary, RTFKT, in a retreat from the company's engagement in blockchain collectibles, Bloomberg reported.

Costco (COST) climbed 1% after Jefferies reiterated its buy rating and price target.

Globus Medical (GBUS) shares are up nearly 9% after the medical device company issued preliminary fourth-quarter sales numbers and a 2026 outlook that both beat analysts' expectations.

Alphabet added 1.5% after getting upgraded to overweight from neutral by Cantor Fitzgerald.

Eli Lilly (LLY) surged 4% Wednesday after The Wall Street Journal reported Lilly is in advanced talks to acquire clinical-stage biopharma company Ventyx Biosciences for more than $1 billion. Ventyx focuses on autoimmune, inflammatory, and neurodegenerative diseases. Lilly confirmed the report later, saying it has entered into a definitive agreement to buy the company.

Intel (INTC) powered to 6% gains Wednesday, hitting its highest level since April 2024. The rally came after Intel introduced chips built with a new manufacturing process at the CES 2026 conference. However, Western Digital (WDC), which had been on a tear, fell 8.9% and semiconductors in general fell 1% after a strong start to the week.
 

Apple (AAPL) eased 1% this morning and hit two-month lows. Its market capitalization fell below that of Alphabet's (GOOGL) yesterday for the first time since 2019. Investors seem focused again on Apple's slow start in AI versus Magnificent Seven competitors.
 

Other weak sectors yesterday included energy, hurt by falling oil prices, and materials, pushed down by dropping values for metals. Mining stocks remained lower this morning. Treasury yields rose today, possibly reflecting U.S. deficit concerns tied to Trump's defense spending proposal.
 

Volume was below average for the New York Stock Exchange and at the Nasdaq yesterday during the pullback, contrasting with heavier volume on the way up earlier this week. Though declining shares led advancers, new 52-week highs outpaced new lows by a large margin at both exchanges. And more than 60% of S&P 500 stocks remain above their 50-day moving averages, a healthy sign that the rally isn't limited only to mega-caps.
 

Crude oil (/CL) edged up early today but remains near one-year lows. The Trump administration hopes to control the Venezuelan oil industry for years, according to The Wall Street Journal.
 

Bitcoin (/BTC) dropped 1.2% early today and occasionally fell below $90,000 for the first time since January 2. Stocks related to crypto also lost ground.

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The U.S. dollar index ($DXY–candlesticks) has been on a bit of a roll recently, climbing nearly every day since late December and now trading just below the 50-day moving average (blue line) of 99.07. This level had served as support last fall before failing in early December, and the index hasn't been close since, until now. Tomorrow's jobs report and next week's inflation data could help determine where the dollar heads from here. Weak data signaling the chance of more aggressive rate cuts by the Fed would likely help send the dollar back down toward its December low below 98.

Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week. 

January 9: December nonfarm payrolls, December unemployment, September and October housing starts and building permits, and January preliminary University of Michigan consumer sentiment.

January 12: No major data or earnings expected.

January 13: December Consumer Price Index (CPI), September new home sales, and expected earnings from JPMorgan Chase (JPM), Bank of New York Mellon (BK), and Delta Air Lines (DAL).

January 14: December Producer Price Index (PPI), retail sales, Fed Beige Book, and earnings from Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C).

January 15: Expected earnings from Morgan Stanley (MS), Goldman Sachs (GS), BlackRock (BLK), and First Horizon (FHN).