Investing.com--The S&P 500 eked out a gain Friday on the first day of the trading year, as chip stocks jumped, but broader gains were kept in check by a stumble in major tech stocks including Microsoft and Meta amid light trading volumes.
At 4:00 p.m. ET (21:00 GMT), the S&P 500 was up about 0.2% while Nasdaq 100 closed roughly flat, but Dow Jones Industrial Average added 0.7%, or 319 points.
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Chip stocks shine, but big tech stumbles; Tesla loses EV crown to BYD
NVIDIA Corporation (NASDAQ:NVDA) and Micron Technology Inc (NASDAQ:MU) led the move higher in the chip stocks, rising more than 1% and 10%, respectively, but gains in the broader tech sector were kept in check by slump in Microsoft Corporation (NASDAQ:MSFT) and Meta Platforms Inc (NASDAQ:META).
Tesla Inc (NASDAQ:TSLA) was also under pressure after EV maker reported that sales fell 16% in Q4 from a year earlier, weighed down by weaker demand in Europe and China. Adding to Tesla’s woes, Chinese EV maker BYD overtook Tesla to become the world’s largest seller of electric vehicles in 2025 after reporting 28% jump in sales of its battery-powered cars for 2025.
"The rebound this morning is being led by large-cap technology," Katie Stockton, founder of Fairlead Strategies, wrote in the morning note.
However, Stockton warns that "a short-term overbought downturn remains active to suggest there is heightened risk in the days ahead."
Trading conditions remain thin
Trading conditions are expected to remain thin, with many investors yet to return from the holiday break and fuller participation unlikely until early next week. Still, strategists at Deutsche Bank cautioned against reading too much into the early move.
“We shouldn’t extrapolate too far, as the first trading day has been an incredibly poor guide in recent times to how the rest of the year plays out,” strategists including Jim Reid wrote.
Still, the forces that dominated last year, particularly enthusiasm for artificial intelligence-linked stocks that helped drive all three major U.S. indexes to record highs in 2025, are likely to feature again this year.
"Long-term relative trends still favor technology for 2026, although the intermediate-term relative trend for tech has weakened for Q1," Stockton added.
Strong momentum faded into year-end, however, with the S&P 500, Nasdaq and Dow all posting declines over the final four sessions of 2025. The pullback ran counter to expectations for a so-called Santa Claus rally, which typically sees stocks rise over the last five trading days of December and the first two sessions of January.
Barclays warned that equity markets could turn choppy as they enter 2026 at elevated levels that are “over reliant on AI success.”
The bank’s strategists nonetheless expect further gains over the year, citing resilient corporate earnings and a favorable balance between economic growth and monetary policy.
Looking ahead, investors see U.S. monetary policy as a key driver. Expectations of a more dovish Federal Reserve, reinforced by recent economic data and speculation around future leadership, have led markets to price in additional rate cuts, setting the tone for global assets in 2026.
