S&P 500 Briefly Touches 7,000, Ends January Up 1.2%
Benchmark index hits milestone before pulling back on Fed chair news and earnings reactions. Dow gains 1.6% for the month.
The S&P 500 touched 7,000 for the first time this week before retreating to end January with a modest gain.
The benchmark index hit an intraday high of 7,002.28 on Tuesday, a milestone that seemed ambitious just weeks ago. But the celebration was brief. The index pulled back sharply after the Fed held rates steady and ended Friday at 6,953, down 0.4% on the day.
For the month, the S&P 500 gained 1.2%. The Dow added 1.6% to close at 48,895. The Nasdaq rose 1.1% despite a rough final week.
The Path to 7,000
The January rally built on momentum from late 2025. Tech stocks led the charge as earnings season delivered strong results from most of the Magnificent Seven. Apple posted record iPhone revenue. Meta beat on every metric with aggressive AI spending plans.
The S&P 500's path above 7,000 on Tuesday coincided with the Fed's January meeting, where policymakers held rates steady at 3.5% to 3.75%. Markets initially took the decision in stride—it matched expectations.
Then the week turned. Microsoft dropped 7% Wednesday night after Azure growth disappointed. President Trump nominated Kevin Warsh as Fed chair Thursday, sparking concerns about tighter monetary policy ahead. Stocks sold off into the weekend.
Sector Performance
January's gains weren't evenly distributed. Communication services and financials led the S&P 500 higher, while healthcare and utilities lagged.
Verizon stood out with a massive single-day gain Friday after Q4 earnings beat estimates and management announced a $25 billion buyback program. The 11.8% surge made Verizon one of the month's best performers in the Dow.
Tech was mixed. Apple and Meta both rallied on earnings. Microsoft gave back its post-earnings gains and then some. NVIDIA held steady despite ongoing concerns about AI capex sustainability.
What January Tells Us
January is often viewed as a bellwether for the full year. The "January Barometer" theory suggests that as January goes, so goes the year. The data is mixed—it works until it doesn't.
What matters more is the setup heading into February:
- Earnings season continues with Disney reporting Monday morning, followed by more S&P 500 components throughout the week
- Fed policy remains on hold with no cuts expected until June at the earliest
- The Warsh nomination adds uncertainty about monetary policy direction in the back half of 2026
- Valuations remain stretched with the forward P/E ratio at 22.2x, above both the 5-year and 10-year averages
The S&P 500 has now posted three consecutive years of double-digit gains. Wall Street forecasts generally call for single-digit returns in 2026, though targets range widely.
Looking Ahead
February brings fresh challenges. The jobs report lands Friday, providing the first major economic data point of the month. Inflation readings follow in mid-February.
The earnings calendar remains packed. About 33% of S&P 500 companies have reported Q4 results so far, with 75% beating estimates. That's solid but not exceptional. The blended earnings growth rate of 11.9% would mark the fifth consecutive quarter of double-digit profit expansion.
For traders, the 7,000 level becomes a psychological magnet. The index may test it again if earnings continue to impress and the Fed chair nomination doesn't create lasting damage. Whether it holds depends on factors no one can fully predict.
The market closed January with gains intact. That's not a bad foundation for what comes next.