U.S. stocks traded unevenly on Friday, with the S&P 500 moving between gains and losses as strength in semiconductor stocks was offset by weakness across major technology names amid concerns over elevated valuations.
By 3:02 p.m. ET (20:02 GMT) in New York, the S&P 500 was up around 0.2%. The Nasdaq 100 slipped 0.1%, while the Dow Jones Industrial Average rose 0.7%, gaining 323 points.
Chip stocks outperform as big tech weakens
Semiconductor shares led market gains. NVIDIA climbed more than 1%, while Micron surged over 8%.
However, broader technology gains were capped by declines in Microsoft and Meta Platforms, as investors reassessed valuations in large-cap tech stocks.
Tesla under pressure as BYD takes EV lead
Tesla shares also came under pressure after the company reported a 16% drop in fourth-quarter sales compared with a year earlier. The decline was driven by softer demand in Europe and China.
Adding to the negative sentiment, Chinese electric vehicle maker BYD overtook Tesla as the world’s largest EV seller in 2025, after reporting a 28% increase in annual battery-electric vehicle sales.
Katie Stockton, founder of Fairlead Strategies, said in a morning note that the rebound was being driven by large-cap technology stocks. However, she cautioned that short-term overbought signals remain in place, suggesting elevated risk in the days ahead.
Thin trading conditions persist
Market participation remained light, with many investors still away following the holiday period. Fuller trading activity is not expected to return until early next week.
Strategists at Deutsche Bank warned against drawing strong conclusions from early-year price movements. Jim Reid and his team noted that the first trading day of the year has recently been a poor indicator of how the rest of the year will unfold.
Still, themes that dominated last year are expected to remain influential. Enthusiasm for artificial intelligence-related stocks helped push all three major U.S. indexes to record highs in 2025 and is likely to continue shaping market trends in 2026.
Stockton added that while long-term trends continue to favor technology, the sector’s intermediate-term outlook has weakened for the first quarter.
Momentum faded toward the end of 2025, with the S&P 500, Nasdaq, and Dow all posting losses over the final four trading sessions of the year. The pullback ran counter to expectations for a traditional Santa Claus rally.
Outlook for 2026
Analysts at Barclays cautioned that equity markets could remain volatile as they enter 2026 at elevated levels that are heavily dependent on continued AI-driven growth.
Despite this, the bank expects stocks to move higher over the course of the year, supported by resilient corporate earnings and a favorable balance between economic growth and monetary policy.
Looking ahead, investors are closely watching U.S. monetary policy. Expectations for a more dovish Federal Reserve, reinforced by recent economic data and leadership speculation, have led markets to price in additional interest rate cuts, shaping the outlook for global assets in 2026.
