U.S. stocks on the first trading day of the new year: defensive sectors such as energy led the gains, while technology stocks declined.

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On the first trading day of 2026, U.S. stocks continued the market rotation trend from the end of 2025, with investors shifting from last year’s leading tech stocks to defensive sectors such as energy and utilities. The Dow Jones outperformed the Nasdaq and S&P 500 indices.

On Friday, the S&P 500 rose 0.2%, the Dow Jones Industrial Average climbed 0.7%, and the Nasdaq Composite slipped 0.1%, marking its fifth consecutive day of declines. Tech stocks such as Palantir Technologies, AppLovin, and Microsoft dragged down the major indices, while shares of energy, materials, and utilities rose.

This market shift reflects continued investor concerns about valuations and profitability in the artificial intelligence sector. Traders are moving away from AI stars to more defensive or diversified industry choices.

Tech Stocks Remain Sluggish

Tech giants showed mixed performances in Friday trading.

Amazon and Meta stocks fell, and Tesla shares dropped 2.6% after reporting another year of declining deliveries. Tesla’s stock has fallen for seven consecutive trading days, a record and the longest downturn in over a year.

Chip makers Nvidia and Micron Technology saw their stocks rise. Data storage companies Western Digital and SanDisk also gained, becoming some of the few highlights in the tech sector.

The precious metals market experienced dramatic volatility this week. Silver prices rose 0.6% on Friday, while gold posted a 4.9% weekly drop, the largest single-week decline since 2021.

AI Fever Faces a Test

After three consecutive years of strong gains in the stock market, whether artificial intelligence can drive the main indices to new heights in 2026 has become a core concern for investors. In the last weeks of 2025, AI-related worries spread across Wall Street, with critics citing high valuations for tech stocks and concerns over the cyclicality of certain deals among major industry players.

David Bahnsen, Chief Investment Officer at Bahnsen Group, said: “The theme going into 2026 is a continuation of what we saw at the end of 2025—a very interesting and somewhat unexpected expansion in the market. There’s a lot of uncertainty around how AI will generate profits.”

Jed Ellerbroek, portfolio manager at Argent Capital Management, noted that investors saw similar panic early last year when China’s DeepSeek launched a low-cost AI model, but the market rebounded quickly after a sell-off and continued to climb throughout the year. “At the time, fear outweighed the facts,” Ellerbroek said.

Market Outlook: Cautiously Optimistic

Despite relatively light trading this week and the impact of the New Year holiday, investors’ rotational moves were evident. The Dow Jones has outperformed both the Nasdaq and S&P 500 indices for two consecutive months—November and December—as traders shifted toward more defensive or diversified industry allocations.

Many investors still expect the stock market to continue rising in 2026. According to Dow Jones market data, the “January Barometer” hypothesis has held true for the past four years—when the S&P 500 rises in January, there is a 79% chance the whole year ends up higher.

But Bahnsen believes the market needs more clarity on AI concerns and the economic outlook before a clear upward trend can emerge in the early weeks of 2026. “Most market participants don’t dare to be overly bullish or bearish,” he said, “and that often leads to sideways trading.”

Risk Warning and DisclaimerThe market is risky, and investments need to be made cautiously. This article does not constitute personal investment advice nor does it take the special investment objectives, financial situation, or needs of individual users into consideration. Users should consider whether any opinions, views, or conclusions in this article fit their specific circumstances. Investing accordingly is at your own risk. ```