Broad Market Rally Pushes S&P 500 Higher Pre-Inauguration
The U.S. stock market extended its rally this week, with all S&P 500 sectors closing higher as a decline in bond yields eased concerns about recent sharp increases in interest rates.
The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite each posted weekly gains, lifting all three indexes into positive territory for January, according to FactSet data. The S&P 500 and Dow achieved their largest weekly rallies since the week of Donald Trump’s 2016 election victory.
“What’s encouraging is that the equal-weighted S&P is leading,” said Louis Navellier, Chief Investment Officer at Navellier, in a Friday email. This reflects a broadening market rally, bolstered by a significant drop in interest rates.
The Invesco S&P 500 Equal Weight ETF, which gives each stock in the index an equal allocation, outpaced the traditional market-cap-weighted S&P 500, signaling broader participation in the rally. After a rocky start to 2025 fueled by rising Treasury yields, the market appears to be gaining momentum ahead of Donald Trump’s upcoming inauguration.
Financials, energy, and materials were the top-performing sectors in the S&P 500 this week, each rising around 6%, according to FactSet. Financial stocks rallied on strong earnings reports from major banks, including Citigroup, Goldman Sachs, and Morgan Stanley, which each climbed about 12% for the week.
“The banking sector continues to trade at a substantial discount to the broader S&P 500, despite this week’s gains,” said Chris Davis, chairman of Davis Advisors, in an interview. Davis, who manages the Davis Select Financial ETF, noted optimism among investors about potential deregulation under the new administration, which could simplify regulatory requirements for banks.
Friday marked the final trading session of President Joe Biden’s term, with Trump’s inauguration set for Monday. Markets will be closed in observance of Martin Luther King Jr. Day.
The major indexes ended Friday with gains: the Dow rose 0.8%, the S&P 500 climbed 1%, and the Nasdaq Composite advanced 1.5%. Treasury yields retreated, with the 10-year yield posting its largest weekly decline since November, after cooler-than-expected inflation data for December.
For the week, it rose 2.9%, bringing its year-to-date gain to 2%, while the Invesco S&P 500 Equal Weight ETF surged 3.9% for a year-to-date increase of 2.7%. The Russell 2000 index of small-cap stocks jumped 4% for the week, now up more than 2% in 2025.
The drop in bond yields has provided relief to the market, particularly for highly leveraged small-cap companies, said Navellier. “The retreat in interest rates has removed significant pressure, supporting a broader recovery across the U.S. stock market,” he said.
