The S&P 500 extended its winning streak to three days on Monday, rising 0.64% to 6,878.49 as artificial intelligence stocks recovered and investors grew increasingly confident in the 2026 outlook. The index is now within striking distance of its all-time high.

The Dow Jones Industrial Average advanced 227 points (0.47%) to 48,362.68, while the Nasdaq Composite climbed 0.52% to 23,428.83. Nearly 400 S&P 500 components rose on the session.

AI Leads the Recovery

After last week's tech selloff sent shockwaves through the market, AI-linked stocks staged a comeback. Nvidia gained more than 1% after Reuters reported the company is preparing to ship H200 chips to China by February. Oracle advanced over 3%, while Micron Technology rose around 4%.

The recovery suggests the AI trade isn't dead—just taking a breather after an extraordinary run. Investors appear willing to buy the dip in quality names with clear revenue growth.

December Losses Erased

The three-day rally has erased the S&P 500's December losses, putting the index on track for an eighth consecutive monthly gain—the longest winning streak since 2018. For the year, the S&P 500 is up more than 15%, having closed above 6,900 for the first time earlier this month.

Holiday Trading Ahead

Markets face a holiday-shortened week, with early closes Wednesday and a full closure Thursday for Christmas. Trading volume typically thins dramatically, which can amplify moves in either direction.

The government's delayed Q3 GDP report arrived Tuesday morning, showing the economy grew at a surprisingly strong 4.3% pace. The Conference Board's December consumer confidence survey is also due.

Wall Street's 2026 Outlook

Strategists remain bullish heading into the new year. The consensus S&P 500 target for year-end 2026 sits around 7,629, implying roughly 11% upside from current levels. On a median basis, targets are even higher at 7,650—about 13% potential gain.

Key themes for 2026 include:

  • Continued AI investment and monetization
  • Federal Reserve rate cuts supporting valuations
  • Rotation into cyclical stocks as economic growth accelerates
  • Potential broadening of market gains beyond mega-cap tech

The Bottom Line

The S&P 500's year-end rally reinforces that the bull market remains intact despite periodic volatility. With the index approaching records, investors face the perennial question: chase the momentum or wait for a pullback? History suggests staying invested beats timing the market—but position sizing and diversification remain essential.