US equity markets stepped back from fresh records overnight as early-year momentum cooled and investors locked in gains. The S&P 500 fell 0.34% to close at 6,920.93, while the Dow Jones Industrial Average dropped 466 points, or 0.94%, to 48,996.08. Both indices had touched new all-time highs earlier in the session before fading. The Nasdaq Composite bucked the trend, edging 0.16% higher to finish at 23,584.27, supported by selective strength in large technology names.
Financials and energy lose momentum
Two of the strongest sectors to start 2026 — financials and energy — were among the biggest drags, with both down more than 1%. Major US banks slid, while heavyweight energy producers also moved lower as crude prices weakened. Oil came under pressure after comments from Donald Trump that interim authorities in Venezuela would transfer up to 50 million barrels of oil to the US, raising concerns about additional global supply and the risk of oversupply in the months ahead.
Market participants noted that crude’s relatively muted reaction suggested supply-demand conditions remain loose, even as geopolitical tensions in South America persist. Despite last weekend’s US action in Venezuela, investors largely judged that the situation had not materially altered the outlook for US economic growth or corporate earnings.
Policy signals weigh on specific sectors
Further pressure came from policy-related headlines. Defence stocks fell after Trump said he would not permit defence contractors to issue dividends or buy back shares until concerns about the industry were addressed. Separately, private-equity names eased after the president flagged a ban on large institutional investors purchasing additional single-family homes in the US.
One bright spot within energy was refining. Shares in Valero Energy and Marathon Petroleum rose after reports suggested Venezuelan oil sales would continue and that sanctions could be eased, improving feedstock availability for refiners.
Australian market outlook and commodities
Australian shares are set to open lower, tracking the softer lead from Wall Street and declines in both oil and gold. Oil briefly traded below US$60 a barrel, while precious metals slipped, with some strategists warning of higher volatility ahead. In contrast, iron ore rallied in Singapore on expectations of further easing by China’s central bank and pre-holiday restocking by Chinese steel mills ahead of the Spring Festival.
Looking ahead, some economists argue that recent sharp moves in commodities reflect supply-side shocks rather than demand, and expect commodity prices and equity markets to diverge through 2026 — with stocks rising even as some commodity prices ease.
