Tech Leads as S&P 500, Nasdaq Rise on First Trading Day of 2026
The S&P 500 gained 0.7% and the Nasdaq jumped 1.3% on Friday as AI enthusiasm carried into the new year. Nvidia rose 3%.
Wall Street started 2026 the way it ended 2025: buying tech.
The S&P 500 gained 0.7% on Friday, the first trading session of the new year. The Nasdaq Composite jumped 1.3%, led by the same AI names that powered last year's rally. The Dow added 50 points, or 0.1%, lagging as usual due to its light tech weighting.
Friday's gain marks a break from recent history. The S&P 500 finished lower on the first trading day for each of the last three years. This time, buyers showed up.
Tech Leads Again
Nvidia climbed more than 3%, extending its run as the market's most-watched stock. The chipmaker rose 39% in 2025 and shows no signs of cooling off. TD Cowen reiterated a buy rating Friday, citing the company's recent $20 billion licensing deal with Groq as evidence of continued AI infrastructure dominance.
Apple and Alphabet each gained 2%. Tesla rose despite reporting Q4 deliveries that missed analyst estimates—a sign that investors remain focused on the autonomous driving thesis rather than near-term vehicle sales.
The Magnificent Seven are picking up where they left off. Microsoft, Meta, and Amazon all added at least 0.5%.
Asia Sparked the Rally
The session's momentum came from overseas.
Asian markets posted their best open to a year since 2012, driven by a flurry of AI announcements out of the region. Baidu's AI chip unit filed for a Hong Kong IPO, adding to excitement about China's tech ambitions. Regional semiconductor names rallied across the board.
That enthusiasm carried into U.S. premarket trading and held through the session. The Nasdaq 100 was up roughly 1% at the open and never looked back.
Santa Rally Disappointment
Despite Friday's gains, the traditional "Santa Claus rally" has been a bust.
The seven-session period covering the last five trading days of December and first two of January is supposed to deliver gains. So far, it hasn't. The S&P 500 remains down nearly 1% during this window, marking a third consecutive year without a Santa bounce.
Historically, a failed Santa rally has preceded weaker full-year returns. But the sample size is small, and market superstition isn't investment strategy.
2025 in the Books
The first session of 2026 capped a strong stretch for equities.
The S&P 500 finished 2025 up 16.6%, extending its streak of double-digit annual gains to three years. The Nasdaq rose 20.4%. Both indices outperformed despite an April tariff scare that briefly brought the S&P 500 within a whisker of bear market territory.
The Dow gained 13.2%, constrained by its lack of exposure to the megacap tech names driving returns. It's the same story as 2024: AI wins, everything else lags.
What Wall Street Expects
Strategists are projecting more gains ahead.
The CNBC Market Strategist Survey shows an average S&P 500 target of 7,629 for year-end 2026—implying 11% upside from current levels. Every forecaster tracked by Bloomberg expects stocks to rise for a fourth consecutive year.
The bull case rests on continued AI spending, potential Fed rate cuts, and earnings growth. The bear case cites stretched valuations and uncertainty around tariff policy.
For now, the optimists have momentum. Friday's rally suggests the AI trade isn't over, and there's no obvious catalyst to derail it.
Looking Ahead
Next week brings more clarity on the Fed's thinking.
The December FOMC minutes, due Wednesday, could reveal how divided officials remain on the path of rates. Markets expect the Fed to hold steady at its January 28-29 meeting, with any further cuts pushed to the second half of the year.
Friday was a clean win for the bulls. Tech led, breadth was positive, and the new year started on solid footing. Whether it lasts depends on what comes next from earnings season and the Fed.