US STOCKS-S&P, Nasdaq start 2026 on firm footing as tech rebounds after recent losses

By Purvi Agarwal and Nikhil Sharma

Jan 2 (Reuters) - The S&P 500 and Nasdaq made a strong start to the first trading day of 2026, with technology stocks leading the rally, as risk sentiment improved after multiple dour sessions in the final days of a roller-coaster 2025.

On Friday, tech stocks staged a comeback, with heavyweight Nvidia NVDA.O up 2.4% and Broadcom AVGO.O rising 3.1%. The S&P 500's tech index .SPLRCT outperformed its peers, rising 1.2%.

The final sessions of 2025 bucked expectations for a "Santa Claus rally", a seasonal pattern in which markets tend to get a late boost over the last five trading days of December and the first two of January, according to the Stock Trader's Almanac.

Still, the S&P 500 .SPX, Dow .DJI and Nasdaq .IXIC ended the year with double-digit gains - their third consecutive year in the green, a run last seen during 2019-2021. The Dow posted its eighth monthly gain on the trot, the longest such streak since 2017-2018.

An insatiable appetite for artificial intelligence stocks bolstered the rally, pushing all three indexes to record highs last year.

At 10:13 a.m. ET, the Dow Jones Industrial Average .DJI fell 4.81 points, or 0.01%, to 48,058.48, the S&P 500 .SPX gained 25.98 points, or 0.38%, to 6,871.48 and the Nasdaq Composite .IXIC gained 170.96 points, or 0.75%, to 23,416.44.

Wall Street had made a stellar comeback in 2025 from April's lows when Trump's 'Liberation Day' tariffs sparked a meltdown in global markets, sent investors away from U.S. stocks and threatened growth by clouding the interest rate outlook.

Investors were keeping track to see if market-moving narratives from 2025 carry into the new year, especially the ever-evolving threat of tariff surprises from President Donald Trump.

On Wednesday, President Trump signed a proclamation to delay increases in tariffs for upholstered furniture, kitchen cabinets and vanities for another year, the White House said.

Shares of several furniture retailers, including Wayfair W.N, Williams-Sonoma WSM.N and RH RH.N, which rose 4.6%, 2.7% and 5.4%, respectively.

The Federal Reserve's monetary policy trajectory will set the tone for global markets in 2026, after recent economic data and expectations of a new dovish Fed chair prompted investors to price in further reductions.

"The next Fed Chair is probably going to be much more dovish than Jerome Powell. So I would imagine that we actually see in the second half of this year that interest rates go down substantially," said Dennis Dick, chief market strategist at Stock Trader Network.

"And that's going to be good for all stocks, not just tech stocks. You're going to see small caps start to outperform in the second half."

A key highlight for January will be next week's labor market data, especially after Powell, at the central bank's December meeting, cautioned against further interest rate cuts until there was more clarity on jobs.

Advancing issues outnumbered decliners by a 1.5-to-1 ratio on the NYSE, and by a 1.5-to-1 ratio on the Nasdaq.

The S&P 500 posted 5 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 30 new highs and 49 new lows.