The first trading day of 2026 delivered what investors hadn't seen in years: gains. The S&P 500 rose 0.4% on Friday, snapping a three-year streak of losses on the opening session that had become an unwelcome tradition. The Nasdaq Composite did even better, surging 1.1% as technology stocks picked up right where they left off in 2025.

Breaking the Pattern

The S&P 500 had fallen on its first trading day in each of the previous three years—2023, 2024, and 2025. Market historians noted the streak, and some investors wondered whether 2026 would extend it to four consecutive years of New Year disappointment.

Instead, buyers emerged from the holiday break ready to deploy capital. Fresh excitement over artificial intelligence prospects drove much of the action, with AI-related stocks leading the advance. The broader positive sentiment suggested that the bullishness that defined much of 2025 hasn't evaporated with the calendar change.

"The first day isn't predictive of the full year, but it does tell you something about positioning and sentiment coming out of the holidays. Today's action suggests institutional investors remain constructive."

— Liz Ann Sonders, Chief Investment Strategist at Charles Schwab

Tech Leads the Charge

Nvidia shares jumped more than 2%, extending gains that made the chipmaker one of 2025's standout performers with a roughly 39% annual return. The stock's continued momentum reflects ongoing confidence in AI infrastructure spending, despite periodic concerns about valuation and sustainability.

The broader technology sector followed Nvidia's lead. The Nasdaq 100 rose approximately 1% as investors processed a wave of positive AI news from Asia and looked ahead to next week's CES technology conference, where Nvidia CEO Jensen Huang is scheduled to deliver a keynote address.

Not everything rose, however. The Dow Jones Industrial Average traded 128 points lower, or 0.3%, after opening higher. The divergence between the tech-heavy Nasdaq and the blue-chip Dow highlighted that market leadership remains concentrated in growth stocks.

Winners and Laggards

Several notable moves shaped the day's trading:

Baidu U.S.-listed shares surged 10.5% after the Chinese technology giant announced plans to spin off its semiconductor unit, Kunlunxin, and pursue a Hong Kong listing. The move crystallizes value that was previously embedded within Baidu's broader business.

Tesla maintained gains of more than 1% despite reporting fourth-quarter deliveries that missed analyst estimates. The market's willingness to look past disappointing fundamentals reflects continued faith in the company's longer-term vision—or perhaps simply that expectations had already been sufficiently reset.

Home goods retailers rallied after President Trump delayed a 30% tariff hike on upholstered furniture. Wayfair gained 3.6%, RH rose 5.5%, and Williams-Sonoma climbed 2% as the threat of higher import costs receded, at least temporarily.

Building on 2025's Foundation

Friday's gains added to what was already an impressive run. The S&P 500 rose more than 16% in 2025, marking its third consecutive annual advance. The Nasdaq Composite jumped over 20%, while the Dow climbed approximately 13%. All three benchmarks hit record highs during the year.

The standout performers of 2025 included Palantir Technologies (up 136%), AppLovin (up 97%), Alphabet (up 65%), and Nvidia (up 35%). The dominance of technology and AI-related names underscored the theme that drove markets for much of the year.

What Wall Street Expects for 2026

Every Wall Street forecaster tracked by Bloomberg predicts stocks will rally for a fourth consecutive year in 2026. The CNBC Market Strategist Survey shows an average S&P 500 year-end target of 7,629, implying upside of approximately 11.4% from current levels.

Individual forecasts span a wide range. Bank of America expects the benchmark to hit 7,100 by year-end, suggesting more modest gains of roughly 3.7%. Deutsche Bank is more bullish, targeting 8,000 points—a potential gain of nearly 17%.

The consensus optimism might give some investors pause. Wall Street's unanimous bullishness at the start of a year has historically been a contrarian signal. Yet the conditions supporting the rally—strong corporate earnings, resilient consumer spending, and easing monetary policy—remain largely intact.

The Fed Factor

Among the top items on Wall Street's 2026 watchlist is the Federal Reserve. President Trump has promised to announce a new Fed chair nominee this month, with current Chair Jerome Powell's term expiring in May. The uncertainty around Fed leadership adds a layer of complexity to market forecasts.

For the January 28 Federal Open Market Committee meeting, traders largely expect the Fed to hold rates steady. Bets are more divided for the March meeting, with futures markets showing uncertain odds of a quarter-point cut. The Fed's December projection suggested just one rate reduction for 2026—fewer than many investors had hoped.

International Tailwinds

Positive news from overseas contributed to Friday's optimism. European markets hit all-time highs to start 2026, with defense and banking stocks leading the rally. The FTSE 100 in London achieved a historic milestone, breaking through 10,000 for the first time.

Asian markets also showed strength, with the regional benchmark posting its best start to a year since 2012. The global synchronization of gains suggests risk appetite extends beyond U.S. borders—a supportive backdrop for American multinationals with international exposure.

What to Watch Next Week

The shortened trading week ahead holds several potential market-moving events:

  • ISM Manufacturing PMI (Monday) will provide the first major economic reading of 2026
  • ISM Services PMI (Tuesday) offers insight into the larger services sector
  • FOMC Minutes (Wednesday) from the December meeting may reveal Fed thinking on rate policy
  • Jobs Report (Friday, January 9) for December will shape expectations for the Fed's January decision

The Bottom Line

One day doesn't make a year, and seasoned investors know better than to extrapolate too much from a single session. But the market's ability to break its first-day losing streak while maintaining last year's winning themes provides a constructive starting point.

The ingredients for continued gains appear present: earnings growth projections remain strong, the Fed is in easing mode, and corporate America continues to invest heavily in AI and other growth initiatives. Whether those ingredients combine to produce a fourth consecutive year of double-digit returns—or whether valuation concerns finally catch up with enthusiasm—will be the story that unfolds over the coming months.

For now, 2026 is off to a winning start.