Goldilocks Jobs Report Spooks the Fed But it's No Recession Signal
The U.S. Department of Labor's December jobs report seemed to take rate cuts off the table and the show goes on.
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The U.S. Department of Labor delivered a "Goldilocks" December jobs report on Friday. It was not hot enough to scare the Federal Reserve but not cold enough to signal a recession. Non-farm payrolls came in at +50,000. This landed just below the expected range of +60,000 to +70,000 but it still sits within a healthy cooling range.
There are underlying signs of weakness, specifically the revisions to October and November that took another 76,000 jobs off the books. However, it is not enough to cause major growth concerns yet. The immediate fallout is that a January rate cut is now off the table. Futures show only a 4% chance of a 25 basis point cut. Investors remain sanguine and are essentially pricing in two cuts for later in the year as the unemployment rate dipped slightly to 4.4%.
Small Caps and New All-Time Highs
Market breadth was only slightly positive on Friday, but the Russell 2000 (IWM) stole the show. It extended its breakout into new all-time territory and closed near $260.23. Small caps have been the absolute winner of early 2026 with a gain of about 5% year to date.
We have seen recent rotation out of technology and semiconductors as well as the Magnificent Seven (MAGS) but the dip buyers did not stay away for long. They showed up on Friday to push the Nasdaq 100 (QQQ) up about 1%. While it is not at a fresh all time high it is holding near its highest levels since October. The QQQ chart looks attractive here as it probes overhead resistance and consolidates for a run into the Q4 earnings season.
Tariff Drama Delayed, Not Deleted
The U.S. Supreme Court did not issue a ruling on the Trump administration global tariff case on Friday. That drama is now delayed for at least another two weeks. This will cause major volatility when it finally hits but for now investors are optimistic that a mishmash outcome or alternative legal tools from the White House will prevent a major economic shock.
Looking Ahead as a Stock Picker
Next week brings a heavy slate of economic data, including PPI and CPI, plus retail sales and home sales. This will cause some churn, but the market currently feels comfortable with the economic trajectory.
The most important takeaway right now is that we have entered a stock picker's market. Speculative action is picking up nicely especially in small caps. Big-cap tech is seeing some choppy action that you can trade but it is no longer the safe haven it once was.
I am staying focused on high-conviction names and will continue hunting for new ideas. I will be ramping up my positions in Solaris Energy (SEI) and Harrow (HROW) because they are showing relative strength. I will have a report on a new name on Monday.
Have a great weekend. I will see you on Monday.
At the time of publication, DePorre was long SEI and HROW.
