US equity markets kicked off 2026 on a cautious footing, with the S&P 500 and Nasdaq trading largely flat as strength in semiconductor stocks offset weakness across other technology segments. The Dow Jones Industrial Average recovered from an early slide during the overnight session and stabilized near its opening levels on Friday, reflecting a tentative but orderly start to the new trading year.
Despite the subdued opening, broader sentiment remains constructive. Wall Street strategists continue to favor US equities over the medium term, with the latest CNBC strategist survey pointing to an average S&P 500 target of 7,629 for 2026, implying double-digit upside. Expectations are building that market leadership could gradually broaden beyond mega-cap technology, with increased rotation into regional banks and select non-tech sectors, while some richly valued technology names may underperform.
Semiconductors anchor markets after a strong 2025
Semiconductor stocks provided early support, with gains in Nvidia (NVDA) and Micron (MU) extending momentum from a powerful 2025 driven by sustained artificial intelligence investment. In contrast, software names such as Salesforce (CRM) and CrowdStrike (CRWD) moved lower, highlighting early signs of sector differentiation within technology.
Tesla (TSLA) added to the cautious tone after reporting fourth-quarter vehicle deliveries that fell well short of expectations. Even so, the muted start to 2026 follows a robust finish to last year, when US benchmarks posted strong gains. In 2025, the S&P 500 advanced more than 16%, the Nasdaq surged over 20%, and the Dow climbed roughly 13%, with all three indices reaching record highs during the year.
Tariff delay fuels rebound in furniture and home goods stocks
Outside the technology space, furniture and home goods stocks outperformed after US President Donald Trump announced a one-year delay to planned tariff increases on upholstered furniture, kitchen cabinets, and vanities. Shares of Wayfair (W), RH, and Williams-Sonoma (WSM) rallied as investors reassessed the potential impact of trade policy on costs and margins.
The tariff pause comes after a sharply divided performance within the sector in 2025, when value-focused retailers outperformed while higher-end brands struggled amid sourcing challenges and uneven demand. The policy shift provided near-term relief and prompted a reassessment of earnings risks tied to tariffs.
Economic data points to steady but uneven growth
On the macro front, US manufacturing activity cooled modestly in December as new orders slowed, according to the latest S&P Global Manufacturing Purchasing Managers Index (PMI). The index remained in expansion territory, while employment growth accelerated to its fastest pace since August and input price pressures eased. Overall, the data painted a picture of a slowing but still resilient manufacturing sector as the economy enters 2026.
Fed and leadership changes loom as key 2026 themes
Federal Reserve leadership is emerging as a major source of uncertainty for markets this year. Fed Chair Jerome Powell has declined to clarify whether he intends to remain on the Fed’s board after his term as chair expires in May.
A full departure would allow President Trump to quickly reshape the balance of power within the Federal Open Market Committee (FOMC), potentially altering the future direction of US monetary policy. While many Fed watchers expect Powell to step aside, citing institutional precedent and concerns over politicization, the issue remains unresolved and closely monitored by investors.
In corporate news, Warren Buffett formally passed the CEO role at Berkshire Hathaway (BRK) to Greg Abel, closing a six-decade chapter that turned the company into a trillion-dollar conglomerate. Buffett voiced strong confidence in Abel’s leadership and capital allocation approach, even as Berkshire shares have lagged since the succession announcement amid questions about the post-Buffett era.
Emphasizing the firm’s long-term strength, Buffett highlighted Berkshire’s substantial cash reserves and diversified business portfolio as it enters a new phase of leadership.
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