US equities opened 2026 on a cautious note, with the S&P 500 and Nasdaq essentially flat as strength in semiconductors offset weakness elsewhere in technology. The Dow Jones found some footing on Friday after an early plunge through the overnight session, holding steady near where the first trading day of 2026 started.
Looking ahead, Wall Street strategists remain broadly bullish on US equities through 2026. The latest CNBC strategist survey points to an average S&P 500 target of 7,629, implying double-digit upside for the year. Some strategists expect market leadership to broaden beyond mega-cap technology, with rotation into regional banks and other non-tech sectors, while select richly valued tech names could lag.
Semiconductors steady markets after 2025 tech splurge
Chipmakers such as Nvidia (NVDA) and Micron (MU) advanced, extending momentum from a powerful 2025 driven by artificial intelligence spending, while software names including Salesforce (CRM) and CrowdStrike (CRWD) declined. Tesla (TSLA) also weighed on sentiment after reporting fourth-quarter deliveries well below expectations. Despite the subdued start to the year, 2025 closed with strong gains across major benchmarks, as the S&P 500 rose more than 16%, the Nasdaq climbed over 20%, and the Dow added roughly 13%, all reaching record highs through the year.
Tariff pause sparks relief rally in furniture stocks
Outside of technology, furniture and home goods stocks stood out after US President Donald Trump delayed planned tariff increases on upholstered furniture, kitchen cabinets, and vanities for one year. Wayfair (W), RH, and Williams-Sonoma (WSM) all rallied as investors reassessed cost pressures tied to trade policy. The tariff pause follows a sharp divergence within the sector in 2025, when value-oriented retailers surged while higher-end brands struggled amid sourcing concerns and volatile demand.
On the economic front, US manufacturing activity cooled modestly in December as new orders slowed, according to the S&P Global Purchasing Managers Index (PMI) survey results. December’s Manufacturing PMI remained in expansion territory, while job creation accelerated to its fastest pace since August and price pressures eased, suggesting a mixed but otherwise stable backdrop for growth.
Fed and corporate leadership transitions loom large over 2026
Federal Reserve (Fed) leadership is emerging as a key uncertainty for markets this year. Fed Chair Jerome Powell has declined to say whether he will remain on the Fed’s board when his term as chair ends in May, fueling debate about the future balance of power within the central bank. If Powell steps down entirely, President Trump would gain immediate influence over a majority of the Federal Open Market Committee (FOMC), potentially reshaping monetary policy direction. Most Fed observers expect Powell to leave, citing institutional precedent and concerns about politicizing the central bank, though the decision remains unresolved and closely watched.
In corporate leadership news, Warren Buffett formally handed the CEO role at Berkshire Hathaway (BRK) to Greg Abel, ending a six-decade tenure that transformed the company into a trillion-dollar conglomerate. Buffett expressed strong confidence in Abel’s leadership and capital allocation skills, even as Berkshire shares have lagged since the succession announcement amid investor questions about the post-Buffett era. Buffett emphasized the company’s long-term durability, underscoring Berkshire’s deep cash reserves and diversified business mix as it enters a new chapter.
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AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.
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