How the market performed in January, Trump nominates Kevin for Fed Chair, Apple earnings

Key Concepts

• Market Indices Performance: S&P 500, NASDAQ, Dow Jones, Philly Chip Index, S&P 600, Russell 2000, Dow Transports, CRSP Micro Cap Index.
• MAG 7 & Tech Sector Divergence: Performance of the "Magnificent 7" stocks versus broader tech (semiconductors vs. software).
• Federal Reserve (Fed) Policy & Dollar Impact: Discussion of potential hawkish stance and its effect on markets.
• Silver Market Crash: Analysis of the unprecedented 30% intraday drop in silver prices.
• Layoffs & Labor Market: Examination of corporate layoffs across America and the state of the job market, including the impact of AI.
• Starbucks Turnaround Strategy: Overview of Starbucks’ initiatives to improve operational excellence, customer experience, and store remodeling.
• GLP-1 Medications & Consumer Trends: Discussion of the impact of GLP-1 drugs on consumer behavior and potential opportunities for Starbucks.

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Market Performance & Trends (January 2026)

The month of January 2026 saw mixed market performance, with gains overall despite a volatile week. The S&P 500 eked out a gain, snapping a two-week losing streak. Key index performances included:

• Philly Chip Index (SOX): +12.9% (Year-to-Date) – leading the gains.
• S&P 600 (Small Caps): +5.15% – benefiting from including only profitable companies with strong balance sheets.
• Russell 2000: Moderate gains.
• Dow Transports: Performance in between small and large caps.
• CRSP Micro Cap Index: +4.96%
• Dow Jones Industrial Average: +1.7%
• S&P 500: +1.4% – historically, a positive January often indicates a positive year (over 80% probability).
• NASDAQ 100: +1.2%
• NASDAQ Composite: <1%
• MAG 7 ETF: ~0.30% (break-even) – indicating underperformance compared to broader market gains.

A significant divergence within the tech sector was observed. Semiconductors performed exceptionally well (SanDisk +140%, Micron +45%), while software lagged significantly (-14.5% overall), with companies like HubSpot, Elastician, Intuit, and Nanix all down over 20%.

Sector Performance: Energy led with a +14% gain driven by a rally in crude oil (around $65/barrel). Materials (gold & silver) also performed well. Defensive sectors like Staples and Industrials showed moderate gains. Financials underperformed due to recent disappointing earnings. Tech finished barely in the red.

Federal Reserve & Dollar Dynamics

There is speculation about a potentially hawkish stance from Federal Reserve Governor Kevin Waller, despite his recent dissent in favor of a rate cut. The dollar climbed in response to this perceived hawkishness, potentially impacting cryptocurrency, commodities, and risk-sensitive assets. A key technical level to watch is a range the dollar has been trading in for the past year; a sustained break above this range could signal further dollar strength.

Silver Market Volatility

Silver experienced an unprecedented crash, its worst day in history (data going back to 1952), with a 30% intraday drop. While silver finished the month up 19.6%, the intraday decline was attributed to a stronger dollar, profit-taking after a significant rally, and exacerbated by high short interest leading to margin calls. The volatility highlighted the risks associated with leveraged positions in commodities.

Labor Market Analysis & Layoffs

Corporate America has seen a wave of layoffs from companies like Amazon, Home Depot, and UPS, driven by factors including inflation, Fed policy, and the increasing adoption of Artificial Intelligence (AI). While the unemployment rate remains low, finding a new job is becoming more difficult.

Laura Olrich, Director of Economic Research at Indeed, noted a "low hire, high fire" environment. 70% of all jobs added in 2025 were in healthcare, indicating a sector-specific strength. Governor Christopher Waller expressed concern about the labor market, citing weak payroll gains in 2025 and a rising unemployment rate.

Impact of AI: AI is impacting the labor market in three ways: 1) performing some work directly, 2) shifting investment away from labor towards capital investment in AI technology, and 3) correcting for overhiring during 2021-2022.

Wage growth has slowed as companies are less incentivized to offer large raises with workers less likely to leave their jobs. The next jobs report (February 2026) is expected to show continued stagnation, potentially around 60,000-65,000 jobs added.

Starbucks Turnaround & Future Strategy

Starbucks is demonstrating a turnaround, driven by a focus on operational excellence (the "Green Apron Service" program) and a renewed emphasis on customer experience. Key improvements include:

• Reduced Wait Times: Cafe wait times reduced from over 6 minutes to under 4 minutes during peak hours; drive-thru times also under 4 minutes.
• Store Remodeling ("Uplift"): A program to renovate stores overnight, improving the look and feel.
• Menu Innovation: Introduction of items like the protein latte and a return to the 1971 coffee blend.
• Rewards Program Enhancement: A tiered rewards program (Reserve, Gold, Green) leveraging AI for personalization.

CEO Brian Nickel emphasized the importance of creating a "third place" experience, reminiscent of Starbucks’ original concept. The company is also exploring protein-forward food options to cater to consumers using GLP-1 medications, recognizing a trend towards snacking and increased protein intake.

Notable Quotes

• Jared Blickery (Yahoo Finance): "The S&P 500 being up in January that portends a good year over 80% of the time. If you're up in January, you are up the entire year."
• Brian Nickel (Starbucks CEO): "We really focus on getting the operational excellence back into the stores and really what that's all about is our green apron service program which is all about becoming a great customer service company again."
• Brian Nickel (Starbucks CEO): "It is the soul of the brand. I think it is a halo to all those other occasions."

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Conclusion

January 2026 presented a mixed economic picture. While markets generally posted gains, significant divergences existed within sectors, particularly in tech. The labor market shows signs of stabilization but remains precarious, with layoffs and the impact of AI creating uncertainty. Starbucks is demonstrating a successful turnaround strategy focused on customer experience and operational improvements, while also adapting to evolving consumer trends like the use of GLP-1 medications. Monitoring the Fed’s policy direction, the dollar’s strength, and the continued evolution of the labor market will be crucial in the coming months.