The Dow Jones Industrial Average kicked off 2026 on a positive note, closing higher on Friday and breaking a four-day losing streak. However, the broader market showed mixed signals, with the S&P 500 edging up slightly and the Nasdaq Composite dipping marginally, as strength in semiconductor shares was offset by weakness in consumer discretionary stocks.
Chipmakers and Industrials Lead the Charge
The rally was spearheaded by a sharp recovery in chip stocks, with giants like Nvidia and Intel providing significant support. The Philadelphia SE Semiconductor index recorded strong gains. Industrial heavyweights Caterpillar and Boeing also rose sharply, contributing to the Dow's advance of 311.99 points, or 0.67%, to close at 48,383.22. Utilities was another sector that posted gains for the day.
According to preliminary data, the S&P 500 gained 12.52 points, or 0.18%, to end at 6,858.02 points. In contrast, the Nasdaq Composite lost 5.30 points, or 0.02%, settling at 23,236.69. The performance capped a volatile session that saw a midday blip before the recovery took hold.
Trump's Tariff Reprieve Lifts Furniture Retailers
In a significant development for specific sectors, former President Donald Trump's decision to delay tariff increases provided a direct boost to furniture retailers. The White House announced that Trump signed a proclamation to postpone hikes in tariffs for upholstered furniture, kitchen cabinets, and vanities for another year.
This news sent shares of major furniture retailers soaring. Wayfair, Williams-Sonoma, and RH (Restoration Hardware) all ended the trading day sharply higher, demonstrating the immediate market impact of trade policy signals.
Challenges and Outlook for 2026
Despite the day's gains, analysts caution about elevated risks. Savita Subramanian, Bank of America's equity and quant strategist, noted in a client note that stocks trade expensive on 18 of 20 measures, warning of "elevated risks to the index level in the near term." While the S&P 500 is of higher quality now, the note stated that risks to the index abound in 2026.
Market sentiment remains finely balanced, with the Federal Reserve's monetary policy trajectory expected to set the tone for global markets in 2026. Recent economic data and expectations of a new dovish Fed chair have prompted investors to price in further interest rate reductions. Dennis Dick, chief market strategist at Stock Trader Network, predicted, "The next Fed Chair is probably going to be much more dovish than Jerome Powell... we actually see in the second half of this year that interest rates go down substantially."
Key data to watch includes next week's labor market report, especially after Chair Powell's recent caution against further cuts without clarity on jobs. The market's stellar comeback in 2025 from April's lows—triggered by Trump's 'Liberation Day' tariffs—is a reminder that possible tariff surprises will remain on investors' radar throughout the year.
Other notable movers included Tesla, which slipped after reporting an annual sales drop for the second consecutive year. Consumer discretionary stocks like Amazon also faced pressure, limiting the gains of the Nasdaq and S&P 500. The trading day concluded a year where the Dow, S&P 500, and Nasdaq all notched double-digit gains for the third straight year—a feat last seen from 2019 to 2021.
