On the first trading day of 2026, the US stock market closed with a mixed performance – the Dow Jones Industrial Average and the S&P 500 Index rose, ending a four-day losing streak, while the Nasdaq Composite Index edged slightly lower. Investors remained cautious as they closely monitored the continuous rise in government bond yields.
On Friday, January 2nd, the Dow Jones Industrial Average rose by 319.10 points, or 0.66%, to close at 48,382.39 points, while the S&P 500 Index increased by 12.97 points, or 0.19%, to 6,858.47 points. However, the tech-heavy Nasdaq Composite Index slipped by 6.36 points, or 0.03%, to 23,235.63 points.
The market’s gains were limited by weakness in large-cap tech stocks, but a strong rebound in chipmakers significantly boosted the overall sentiment.
Market data indicated a rotation of funds, with chip stocks showing significant strength as the Philadelphia Semiconductor Index rose by 4% and companies like Nvidia, Intel, and Micron all experienced upward movements.
The industrial and utilities sectors also saw gains, with Caterpillar and Boeing rising by 4.5% and 4.9% respectively, providing support for the Dow.
While the market remains optimistic about AI development, the decline in the stock prices of tech giants like Apple, Microsoft, and Amazon indicates traders are still cautious about high valuations.
Joe Mazzola, Head of Trading and Derivatives Strategy at Charles Schwab, told Reuters, “I really think investors might be a bit more cautious about the valuations they’re paying for certain AI concept stocks.”
However, he also noted that the market still follows the “buy the dip, sell the rally” trading mentality. “As long as there’s an opportunity to buy on pullbacks, they will continue to do so. I don’t think that cycle is going to end in the short term,” added Mazzola.
Tesla’s stock price fell by 2.6% as the company’s fourth-quarter electric vehicle deliveries came in at 418,227 vehicles, slightly below Wall Street’s expectations of 426,000 vehicles. Meanwhile, Chinese automaker BYD reported a 28% increase in sales to 2.26 million vehicles in 2025, surpassing Tesla’s annual deliveries of 1.64 million vehicles, establishing itself as the largest global electric vehicle seller that year.
Investors are still keeping a close eye on the rising US government bond yields, which are putting pressure on the stock market. The 10-year US Treasury yield has climbed to around 4.19%.
Adam Turnquist, Chief Technical Strategist at LPL Financial, warned, “As rates move to uncomfortable levels, stocks are taking the first step into difficult terrain.”
He told Bloomberg that if the 10-year bond yield breaks above 4.20%, it would create an upside target close to 4.50%.
At the same time, the market is highly focused on President Trump’s nomination for the next Federal Reserve chair. The market anticipates the new chair will lean towards a dovish policy.
Dennis Dick, Chief Market Strategist at Stock Trader Network, told Reuters, “The next Fed chair is likely to be more dovish than Jerome Powell. So, I imagine we’ll see significant rate cuts in the second half of this year.”
He added, “It’s a positive for all stocks, not just tech stocks.”
So far, the market has not seen the expected “Santa Claus Rally.” This refers to the seasonal phenomenon in the US stock market where prices tend to rise during the last five trading days of December and the first two trading days of January.
Regarding market sentiment, Steve Sosnick, Chief Strategist at Interactive Brokers, pointed out to Bloomberg that market participants “may not necessarily be cautious,” but “they might already be fully invested as they enter the new year,” which could dampen further buying pressure on indices.
Internationally, the FTSE 100 Index in London broke through the symbolic level of 10,000 points, marking a record high for European stock markets as they welcomed the new year.
On December 31, the Trump administration announced a postponement of tariff increases on products such as upholstered furniture and kitchen cabinets, leading to stock price increases for furniture retailers like Wayfair, Williams-Sonoma, and RH by 6%, 5%, and nearly 8% respectively.
According to Bloomberg analysts, with fourth-quarter earnings season commencing in mid-January, the short-term direction of the stock market may be largely influenced by business surveys and economic data.