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Energy, Defence and AI Drive Markets to Fresh Highs

US equities pushed higher this week, with the S&P 500 closing at a new record high on Friday as investors balanced geopolitical risk, shifting sector leadership, and mixed labour market signals.

Week:

S&P500: +1.1% FTSE100: +1.7%  Gold: +2.4% Bitcoin: -3.4%

YTD:

S&P500: +1.3%  FTSE100: +2.0%  Gold: +3.0% Bitcoin: +3.6%

Energy, Defence and AI Drive Markets to Fresh Highs

Source: Connect Weekly | Week ending 10 January 2026

US equities pushed higher this week, with the S&P 500 closing at a new record high on Friday as investors balanced geopolitical risk, shifting sector leadership, and mixed labour market signals. Energy and defence led early gains amid rising geopolitical tensions, before AI enthusiasm reasserted itself and helped power markets higher into the end of the week. Small caps outperformed at several points, reflecting optimism around easing financial conditions later in the year.

What drove markets this week

Markets opened strongly on Monday as investors shrugged off geopolitical risk linked to Venezuela. Energy stocks led the rally as oil prices climbed, while defence and nuclear-related names also caught a bid. Bitcoin rebounded, lifting crypto-adjacent equities, and AI-linked stocks benefited from renewed enthusiasm around infrastructure and mobility applications.

Tuesday saw momentum accelerate, with the S&P 500 setting a new record high. Semiconductor stocks surged as developments from the CES conference in Las Vegas reinforced confidence in the durability of AI demand. Storage, memory, and neocloud names rallied strongly, while enthusiasm also spilled into space and EV-adjacent plays. Energy lagged after Monday’s strength, reflecting a rotation rather than a reversal.

Midweek consolidation and policy noise

On Wednesday, the S&P 500 slipped after briefly touching another intraday high as investors digested mixed labour data. Private payrolls rose, but job openings declined, keeping uncertainty around the Fed’s 2026 easing path intact. Defence, rare earths, and strategic materials moved sharply on renewed geopolitical headlines, while housing and defence stocks sold off after policy-related comments from President Trump unsettled those sectors.

Thursday delivered a more defensive tone. The S&P 500 finished flat as tech weighed on the Nasdaq 100, while the Russell 2000 jumped more than 1% as small caps benefited from rotation. Defence stocks rebounded sharply on proposals for a significantly higher US military budget, while selective AI, energy infrastructure, and retail names posted strong gains.

Friday: Jobs data clears the path for new highs

Markets rallied on Friday after a mixed December jobs report showed fewer jobs added but a sharper-than-expected drop in unemployment. The data eased near-term growth concerns without closing the door to rate cuts later in 2026, pushing the S&P 500 to a fresh record close. AI utilities, nuclear-adjacent names, airlines, housing-related stocks, and select chipmakers all participated in the move higher.

Looking ahead

With the first full week of the year complete, attention turns to how durable this leadership mix proves to be. Energy, defence, and AI infrastructure are setting the tone, while small caps remain sensitive to any shift in rate expectations. As earnings season approaches and policy rhetoric intensifies, markets appear constructive, but increasingly selective, as 2026 gets underway.

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