The benchmark S&P 500 briefly touched an intraday record before easing slightly, while the Dow Jones Industrial Average remained within half a percent of its December 12 peak. The Nasdaq Composite, heavily weighted toward technology stocks, also edged higher as interest in AI-driven companies resurfaced.
Markets have rebounded from last week’s pullback, when technology and AI stocks came under pressure amid concerns over stretched valuations and heavy capital spending weighing on near-term profits. Since then, stronger-than-expected economic data, optimism around potential policy easing under a new Federal Reserve chair next year, and renewed confidence in AI’s long-term growth prospects have helped restore investor confidence.
“2026 is likely going to be a ‘prove-it’ year for markets,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Companies must deliver tangible productivity and margin gains from AI and other investments.”
Earnings expectations remain supportive. Analysts forecast profits for S&P 500 companies to grow by 15.5% in 2026, up from an estimated 13.2% increase in 2025, according to data compiled by LSEG. The S&P 500 is already up more than 17% in 2025, driven largely by megacap technology stocks, though the rally has recently broadened to include cyclical sectors such as financials and materials.
Investors are also watching closely to see whether the market will deliver a so-called “Santa Claus rally,” a seasonal pattern in which stocks typically rise during the final five trading days of the year and the first two sessions of January. That window began on Wednesday and runs through January 5.
By late morning in New York, the Dow was down 65 points, or 0.13%, while the S&P 500 was nearly flat. The Nasdaq Composite edged up 0.05%, reflecting selective buying in growth-oriented names.
Among notable movers, Nvidia rose 1.4% after the AI chipmaker agreed to license technology from startup Groq and hire its chief executive. Target shares gained 1.7% following reports that hedge fund Toms Capital Investment Management has taken a significant stake in the retailer. Precious metal miners also advanced, tracking record highs in gold and silver prices.
Market breadth was mixed, with declining stocks outnumbering advancers on both the New York Stock Exchange and the Nasdaq. Still, the S&P 500 registered several new 52-week highs and no new lows, suggesting underlying strength despite subdued holiday trading volumes.
As the year draws to a close, investors appear cautiously optimistic, balancing lofty valuations against expectations that economic resilience and AI-driven growth can continue to support equities into the new year.