The U.S. stock market expanded its rally this week, with all S&P 500 sectors posting gains, as declining bond yields provided relief from their recent sharp rise.
The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all recorded weekly gains, pushing each index into positive territory for January, according to FactSet. The S&P 500 and Dow logged their strongest weekly performances since the week of Donald Trump’s 2016 presidential victory.
“What’s encouraging is that the equal-weighted S&P is leading,” noted Louis Navellier, Chief Investment Officer of Navellier, in a Friday email. This signals a broadening of the stock market’s advance, further supported by a significant pullback in interest rates.
An exchange-traded fund tracking the equally weighted S&P 500 outperformed the traditional index, which is heavily influenced by Big Tech megacaps. After a volatile start to 2025, marked by spiking Treasury yields, the market’s rally is showing broader participation ahead of Donald Trump’s inauguration.
Financials, energy, and materials led the S&P 500 sectors this week, each gaining about 6%, FactSet data show. Financials, in particular, surged as major banks reported strong Q4 earnings, with Citigroup, Goldman Sachs, and Morgan Stanley each rallying around 12%.
“The banking sector continues to trade at a significant discount to the broader S&P 500 despite recent gains,” said Chris Davis, chairman of Davis Advisors, in a phone interview. Davis, who manages the Davis Select Financial ETF, noted that investors are optimistic about potential deregulation under the incoming administration, which could reduce “regulatory complexity” for banks.
Friday marked the final trading session under President Joe Biden, with Trump’s inauguration scheduled for Monday. Markets will close in observance of Martin Luther King Jr. Day.
U.S. stock indexes ended higher Friday, with the Dow up 0.8%, the S&P 500 rising 1%, and the Nasdaq advancing 1.5%. Treasury yields retreated, with the 10-year yield seeing its largest weekly drop since late November after cooler-than-expected December inflation data.
The S&P 500 rose 2.9% for the week, up 2% in January, while the Invesco S&P 500 Equal Weight ETF climbed 3.9%, bringing its year-to-date gain to 2.7%. Meanwhile, the Russell 2000 small-cap index jumped 4% this week, now up over 2% for the year.
Falling bond yields eased pressure on highly leveraged small-cap firms and supported elevated price-to-earnings multiples, said Navellier. “This reduction in interest rates is providing critical relief to the market’s broader recovery,” he added.
