Focus: US

Market Close: Fri, 16 January 2026

At market close on Friday, January 16, 2026, US markets concluded a week marked by selective rotation amid mixed economic signals. Investors shifted focus toward defensive sectors as broader indices hovered near flat, reflecting caution despite resilient small-cap performance. 

The market saw pressure on mega-cap tech names last week due to concerns over AI capital expenditures not yet translating into clear profitability gains, while small caps outperformed. Key indices posted their first back-to-back weekly declines of the year, but losses were capped by strength in areas like Taiwan Semiconductor's results boosting AI sentiment late in the week.

Broader market dynamics included:

• Rotation trends: Mega-cap "Magnificent 7" stocks fell about 1.6% aggregate, with five of seven names in the red. Investors shifted toward cyclicals and small caps, which gained for the week and marked 11 straight sessions outperforming the S&P 500 by Friday.
• Sector highlights: Tech faced skepticism on AI spending (e.g., Microsoft, Meta, Amazon), while banks showed mixed results. Bank of America beat estimates but broader sentiment was cautious.
• Economic context: Data was relatively uneventful, with Fed speak mixed and no major surprises. 

President Trump announced on Sunday that the US would impose 10% tariffs on imports from eight European NATO allies (Denmark, Norway, Sweden, France, Germany, UK, Netherlands, Finland) starting February 1, escalating to 25% on June 1 unless they agree to sell Greenland to the US. He cited their opposition to US control of the Arctic territory, recent troop deployments there, and broader NATO/Russia-China tensions as justification. 

European leaders condemned the move as damaging to alliances, with the EU holding emergency talks and considering retaliatory tariffs on up to €93 billion of US goods. Global markets sold off sharply on January 19: European indices fell with autos and luxury stocks hit hardest; Asian markets were milder; gold and silver reached record highs while the dollar weakened. 

US cash markets were closed for MLK Day, but futures dropped significantly (S&P 500 down 1.0–1.2%, Dow  down 0.7–0.8%, Nasdaq down  1.4%), pointing to a lower open on Tuesday amid trade-war and geopolitical uncertainty.

US Sector Note

Positive Reversals Spotlight:

• Banks (5 Dec, Positive Reversal): 94% positive acceleration vs 82% positive trend; regime up; no priority Negative Reversal / Take Profits / Exit. Driver: Regional banks +19.2% YTD outperformance.
• Materials (26 Dec, Positive Reversal): 92% positive acceleration vs 72% positive trend; 20 positives/0 negatives. No Negative Reversal / Take Profits / Exit >7; catalyst: +39.6% YTD gains.
• Consumer Services  (No recent signal, Mixed): 84% positive acceleration vs 42% positive trend (Bullish Surge). Trigger: Resilient spending dynamics

Negative Reversals Spotlight:

• Energy (26 Dec, Negative Reversal): 65% deceleration vs 69% positive trend (Bear Plunge); 2 positives/20 negatives. Context: +5.1% YTD amid supply pressures.
• Pharma Biotech & Life (19 Dec, Mixed Reversals): 55% positive acceleration vs 57% positive trend; 15 positives/10 negatives. Regime down; context: XBI +35%.
• Utilities 21 Nov, Negative Reversal): 86% deceleration vs 43% positive trend; 1 positive/3 negatives. Context: Eroded defensive role
• Tech Hardware & Equip: (10 Oct, Declining): 62% deceleration vs 38% positive trend; 4 positives/0 negatives. Context: 25% YTD growth with volatility

Portfolio Positioning (ETFs):

Bullish Surge

• Materials Select (XLB)
• Capital Markets (KCE)
• Metals & Mining (XME)

Most Positive / Max Overweight

• Banks (KBE) 
• Regional Banking (KRE)
• Financial Select (XLF) 
• Transportation (XTN)
• Homebuilders (XHB)
• Oil & Gas Equipment & Services (XES) 

• Industrial Select (XLI)
• Consumer Staples Select (XLP)
• Consumer Discretionary Select (XLY)
• Retail (XRT)
• Health Care Equipment (XHE)
• Software & Services (XSW)
• Pharmaceuticals (XPH)

Negative / Underweight:

• Energy Select (XLE)
• Oil & Gas Exploration & Production (XOP)

Bear Plunge:

• Utilities Select (XLU)
• Real Estate Select (XLRE)