U.S. Equities Rally Early in 2026, Reviving Santa Rally Optimism

U.S. stocks opened higher on Friday, with the S&P 500 gaining ground as investors rotated back into technology shares ahead of next week’s closely watched CES conference. Sentiment also improved after signs emerged that President Donald Trump may be taking a softer stance on certain tariff policies, easing some near-term trade concerns.

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By 9:53 a.m. in New York, the S&P 500 was up about 0.6%, with six of the index’s 11 sectors trading in positive territory. Technology and communication services led the advance, reflecting renewed appetite for growth-oriented stocks. On the downside, health care and real estate were the weakest performers in early trading.

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The Nasdaq 100, which has a heavier weighting toward large tech names, climbed 1.2%. Semiconductor stocks stood out, with the Philadelphia Semiconductor Index jumping as much as 4.5%, marking its strongest intraday gain since late November.

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Despite Friday’s rebound, the broader market has recently lost momentum. The S&P 500 finished 2025 roughly 1% below its Dec. 24 record high, ending the year with four consecutive sessions of declines. Even so, some investors are holding out hope for a late “Santa Claus rally,” a seasonal pattern that typically spans the final five trading days of the year and the first two of January. With two sessions still remaining in that window, optimism hasn’t completely faded.

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Trading activity, however, remains subdued. Volumes are expected to stay light through year-end, reflecting the holiday period and reduced participation from institutional investors. On Wednesday, trading volume was about 45% below the 20-day average, underscoring the thin conditions that can amplify market moves in either direction.

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Against this backdrop, some strategists are urging caution as equities hover near record levels. “When markets are highly concentrated and trading close to all-time highs, the more important question becomes, ‘what could go wrong?’” wrote Michael Cembalest of JPMorgan Chase & Co. in his outlook for 2026. He highlighted four key areas of risk: the reliability of U.S. power generation, China’s ability to scale and protect its technological advantages, Beijing’s posture toward Taiwan, and whether the massive $1.3 trillion invested by hyperscalers in capital spending and research since 2022 will ultimately generate sufficient profits.

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Still, enthusiasm around technology was evident as investors looked ahead to CES in Las Vegas, one of the year’s largest showcases for new consumer and enterprise tech. Magnificent Seven Index, which tracks the biggest U.S. tech giants, rose more than 1% ahead of the event. Advanced Micro Devices Inc. surged 5.9%, boosted by expectations surrounding a keynote address from CEO Lisa Su scheduled for Monday evening.

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Nvidia Corp. also advanced, gaining about 3.0%. CEO Jensen Huang is expected to make several appearances during the conference, with a likely focus on data centers, physical AI, and robotics, according to Wedbush Securities analyst Dan Ives. Investors see CES as a potential catalyst for renewed excitement around artificial intelligence, chips, and next-generation computing, themes that have dominated market leadership over the past two years.

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Tesla Inc., by contrast, was little changed despite reporting weaker-than-expected fourth-quarter vehicle deliveries. The electric-vehicle maker said deliveries fell 16% from a year earlier, compared with expectations for a decline closer to 11%. Earlier in the week, Tesla took the unusual step of publishing its own average of analyst estimates, which had already pointed to a steeper drop of around 15%, softening the shock but reinforcing concerns about slowing demand.

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Elsewhere in the market, Wayfair Inc. and RH both moved higher following the latest adjustments to U.S. tariff policy. President Trump’s measures included delaying planned tariff increases on items such as upholstered furniture and lowering anti-dumping duties on certain Italian pasta products. Investors interpreted the changes as a modest positive for import-reliant retailers and home furnishings companies, which have been sensitive to trade-related cost pressures.

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Looking ahead, investors will turn their attention to several key events in the coming week. Early earnings from Jefferies Financial Group Inc. will offer a first glimpse into how banks are closing out the year. On Friday, the closely watched U.S. jobs report is expected to provide fresh insight into labor market strength and could influence expectations for monetary policy in early 2026.

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As the year draws to a close, markets remain supported by optimism around technology and easing trade fears, but caution is still warranted. With valuations elevated and risks lingering beneath the surface, the durability of any year-end rally may depend on whether upcoming data and corporate updates can justify the market’s bullish tone heading into the new year.

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