Stock Market Weekly commentary / stock picks- Week ending Jan 16, 2026

Market Summary: Rotation Beneath Record-Level Indexes

U.S. equities remained near record highs last week, supported by small-cap strength and improved market breadth, even as major indexes posted modest weekly declines (Nasdaq -0.7%, S&P 500 -0.4%, Dow lower) while the Russell 2000 reached a new closing high. Markets responded to the start of earnings season, softer-than-expected CPI, mixed PPI, policy uncertainty tied to potential credit card rate cuts, improving consumer sentiment, contracting manufacturing activity, and elevated oil volatility driven by Iran-related geopolitical risk. Sector leadership reflected clear rotation, with defensive and cyclically resilient areas outperforming—Materials, Real Estate, Industrials, Staples, and Energy led—while Financials, Health Care, and Communication Services lagged. Importantly, Technology (36% of S&P 500 market cap) continues to show internal divergence, as semiconductors and memory benefit from strong AI infrastructure demand while parts of software face scrutiny over monetization and revenue durability. Looking ahead, markets will focus on Core PCE and GDP next week, with ongoing geopolitical developments, and while small-cap leadership remains constructive, defensive outperformance and higher dispersion warrant a more cautious, selective approach to new positioning.