Markets lean cautious as 2026 opens: Tech soft, energy in focus

Introduction#

U.S. stocks closed lower on Thursday in a broadly risk-off but orderly session, setting a cautious tone as markets step into the first full trading days of 2026. According to Monexa AI, the S&P 500 (^SPX) finished at 6,845.50 (−0.74%), the Dow (^DJI) at 48,063.29 (−0.63%), and the Nasdaq Composite (^IXIC) at 23,241.99 (−0.76%). The NYSE Composite (^NYA) slipped to 22,003.93 (−0.65%), while volatility was mixed: the CBOE Russell 2000 Volatility Index (^RVX) rose to 19.43 (+0.67%) and the VIX (^VIX) eased to 14.81 (−0.94%). Overnight, global markets showed a firmer tone, with Asia and Europe mostly higher and U.S. futures stabilizing alongside rising Treasury yields in early European hours, according to Monexa AI’s overnight news digest and coverage from Reuters.

The key question before the bell is whether Thursday’s broad, mild declines mark the start of a rotation away from 2025’s tech-led leadership or simply profit-taking to begin the year. Sector and single‑stock patterns point to both dynamics at work: modest pullbacks in mega‑cap technology dampened the indices, while idiosyncratic strength in select consumer and aerospace names created pockets of resilience. Investors should anchor on three drivers into the open: the rate backdrop as yields edge higher in Europe, evolving AI hardware narratives surrounding NVDA and peers, and a developing rotation watchlist in Energy and defensives.

Market Overview#

Yesterday’s Close Recap#

According to Monexa AI, U.S. benchmarks settled lower with below-average index turnover and a defensive tilt. The S&P 500 remained above its 50‑day moving average (6,800.34) and well above its 200‑day (6,280.60), despite closing roughly 1.45% below its 52‑week high (6,945.77). The Dow also held comfortably above its 50‑ and 200‑day averages, while the Nasdaq Composite stayed within reach of its recent highs despite technology softness. Volatility measures diverged: small‑cap volatility (^RVX) ticked higher even as the VIX eased—an early‑year reminder that positioning remains uneven across market caps.

The weight of big technology was the swing factor. According to Monexa AI’s heatmap, NVDA (−0.55%), AAPL (−0.45%), and GOOGL (−0.27%) registered modest declines that nonetheless exerted outsized index pressure. Semiconductors underperformed, with MU (−2.47%) lagging. Outside tech, weakness in Financials (fintech and crypto‑adjacent names) and Real Estate compounded the drift. Notable outliers included NKE (+4.12%) in Consumer Discretionary and TDG (+1.02%) in Industrials.

Overnight Developments#

Overnight tone skewed constructive, with Asia and Europe generally higher and U.S. equity futures modestly firmer, while Treasury yields pushed up as European trade began, according to Monexa AI’s overnight feed. Reuters reported U.S. authorities granted an annual approval for certain chipmaking tool exports to China for TSMC—an incremental input into the semis supply chain narrative heading into 2026. Monexa AI also flagged headlines noting the U.S. dollar had its worst annual performance since 2017 into year-end 2025, a backdrop that can support commodities and internationally exposed equities if it persists.

On policy and trade, Monexa AI’s overnight digest highlighted the U.S. decision to scale back proposed tariffs on Italian pasta makers—cutting duties from as high as 92% to 2.26% after review—reducing a small but symbolically important trade overhang. Asian currencies were mixed, with rate‑cut expectations for the Federal Reserve offering a tentative backstop to risk sentiment in the region, according to Monexa AI’s summary of overnight coverage.

Macro Analysis#

Economic Indicators to Watch#

With pre‑market economic prints limited, the focus into today’s open is the rates and liquidity backdrop. According to Monexa AI, U.S. Treasury yields rose as the European session got underway, a development that typically pressures long-duration growth assets at the margin while supporting value, financials, and select cyclicals. Into early 2026, Monexa AI’s curated research notes that late‑2025 pricing in Treasury and Fed funds futures implied a more accommodative policy path this year, with markets discounting rate cuts beyond the Federal Reserve’s publicly projected path. This dynamic, if sustained, would gradually loosen financial conditions—potentially favoring small caps and interest‑sensitive equities even as day‑to‑day moves remain driven by headline rates volatility.

Investors should also track the U.S. dollar trajectory. According to Monexa AI’s news archive citing the prior year’s performance, the greenback posted its weakest year since 2017. If that trend extends, it may support commodity‑linked equities, diversified multinationals through translation effects, and emerging‑market risk assets. Conversely, a quick rebound in the dollar—particularly if yields jump—could temper that support.

Global and Geopolitical Factors#

Regulatory and trade currents remain in focus. Reuters reported ongoing export‑control risks around advanced AI chips directed to China in 2025, which shaped product planning and supply chain adjustments across the semiconductor complex. While the overnight U.S. approval referenced above provides TSMC with a defined tool‑export window, the overall regime remains fluid, and investors should expect periodic headline risk for AI and semis supply chains.

On a structural note, Monexa AI highlighted the Securities and Exchange Commission’s late‑2025 approval allowing mutual fund complexes to offer ETF share classes within the same fund structure. Though not an immediate trading catalyst, the move is a potential long‑tail headwind for legacy high‑fee share classes and a tailwind for platforms with ETF manufacturing scale, with implications for asset managers such as BLK.

Sector Analysis#

Sector Performance Table#

Breadth deteriorated modestly on Thursday with nearly all major sectors in the red. According to Monexa AI, Technology and Industrials were among the laggards, while pockets of strength emerged in specific Consumer Discretionary names and select Aerospace & Defense. Energy softened despite isolated positives among the integrateds.

Technology’s pullback carried outsized index impact given its weight, with semiconductors, hardware, and software broadly lower in the −1.0% to −2.5% range. Monexa AI’s heatmap flagged pronounced relative weakness in FICO (−3.16%), APP (−2.87%), and MU (−2.47%), while mega‑caps NVDA (−0.55%) and AAPL (−0.45%) declined modestly but weighed on indices. Communication Services slipped as large ad platforms softened—META (−0.88%) and GOOGL (−0.27%)—though telecom defensives such as T (+0.10%) eked out gains.

Financial Services illustrated the market’s quality preference: large banks such as JPM (−0.37%) were relatively resilient, while crypto‑exposed and retail‑fintech names underperformed, including COIN (−2.36%) and HOOD (−2.04%). In Consumer Cyclical, NKE surged +4.12%, offsetting broader weakness from TSLA (−1.04%), AMZN (−0.74%), and travel names like BKNG (−1.32%). Healthcare modestly declined, though managed care pockets such as MOH (+1.69%) outperformed even as UHS (−3.13%) and MRNA (−3.03%) sold off.

Industrials saw broad weakness across equipment and manufacturing—EMR (−1.90%), FAST (−1.81%)—with selective strength in Aerospace & Defense, notably TDG (+1.02%). Energy fell, led by E&Ps such as EQT (−1.89%) and TPL (−1.87%), while integrateds were mixed with XOM (−0.54%) and CVX (+0.07%). Real Estate underperformed with lodging and office exposures weak—HST (−3.06%), BXP (−2.58%)—and logistics/towers also lower, including PLD (−1.05%) and AMT (−0.65%). Basic Materials declined, with miners such as NEM (−1.97%) and FCX (−1.21%) weaker, partly offset by CF (+0.53%). Utilities eased broadly—CEG (−1.08%), AES (−1.10%)—with renewables‑linked NEE (−0.32%) comparatively resilient.

Company-Specific Insights#

Earnings, Upgrades/Downgrades, and Notable Movers#

The tape remains highly sensitive to AI and consumer narratives as 2026 begins. On the AI hardware front, banks and brokers reiterated constructive stances on NVDA into year‑end 2025. Wells Fargo reiterated an Overweight with a $265 price target following clarification that Groq entered a non‑exclusive licensing agreement with NVIDIA, with Groq leadership set to join NVIDIA to scale low‑latency inference globally, according to Monexa AI’s aggregation of sell‑side notes. BofA Securities also reiterated Buy with a $275 target following the Groq news flow, underscoring the strategic importance of inference for the next leg of AI compute demand.

Beyond NVIDIA, there were several notable single‑name updates heading into 2026. Citizens raised its price target on GOOGL to $385 on accelerating search fundamentals and AI catalysts (Gemini, Cloud, Waymo, TPUs), per Monexa AI’s compilation of research notes. MoffettNathanson reiterated Buy on DDOG, arguing the recent pullback is overdone given accelerating AI‑native workloads. In Energy, Roth/MKM reaffirmed Buy on DVN after reviewing the company’s 2026 production plan. In renewables, Clear Street upgraded PLUG to Buy on improved risk‑reward, while acknowledging financing‑related dilution in its revised $3 target.

Idiosyncratic consumer stories continued to cut through. UBS reiterated Buy on SIG after positive holiday read‑throughs, while it maintained a Neutral view on NKE despite improving brand indicators—consistent with Thursday’s market‑leading move in the stock but tempered by a longer‑than‑expected turnaround timeline, according to Monexa AI’s research feed. In staples and packaged foods, Bernstein lowered its target on LW, with guidance implying a sharper second‑half EBITDA decline in FY26; shares slipped modestly (−0.14%). In government services, BofA cut PSN to a $90 target following a key FAA contract loss to Peraton.

AI Supply Chain and Policy Watch#

AI‑hardware headlines remain a pre‑market driver. Reuters reported in late December that Groq reached a non‑exclusive licensing arrangement with NVDA and that Groq leadership would move to NVIDIA, while Groq remains independent—positioning NVIDIA to broaden its inference toolkit beyond core GPU architectures. NVIDIA’s Q3 FY26 results showed GAAP gross margins of 73.4% and guided Q4 margins to approximately 74.8% GAAP and 75.0% non‑GAAP, highlighting the company’s mix shift toward high‑margin data‑center compute and ecosystem monetization through partnerships with OpenAI, Google Cloud, Microsoft, Oracle, and xAI, according to NVIDIA’s investor materials.

Regulatory supervision remains a standing macro variable. Reuters has documented export‑control headwinds for advanced AI chips bound for China in 2025, which drove product and manufacturing adjustments across the supply chain. Separately, Reuters reported the U.S. granted an annual approval for certain TSMC tool exports to China at year‑end, clarifying (but not eliminating) a key operational uncertainty in the semis stack. These policy fluctuations can periodically reprice semis and AI‑exposed equities during the session.

Consumer and Platform Ecosystems#

According to Monexa AI’s overnight coverage, reports suggested AAPL is scaling back production and marketing for Vision Pro amid softer sell‑through than core products—a development consistent with a Services‑and‑iPhone‑led profit mix that underpins the brand’s moat heading into 2026. Additional headlines pointed to OpenAI shifting manufacturing of a Jony Ive‑designed AI hardware device to Foxconn ahead of a targeted 2026 launch, with potential ecosystem spillovers for platform players AAPL and GOOGL. While not immediate revenue drivers, these hardware ecosystem signals can influence where investors position within the large‑cap tech complex at the margin.

Global Overnight Shifts: How They May Drive Today’s Open#

Rates, Dollar, and Commodities#

The day’s opening tone will likely key off the push‑and‑pull between rising yields and a still‑benign volatility backdrop. According to Monexa AI, the VIX at 14.81 sits below its 50‑ and 200‑day averages, while ^RVX nudged up, hinting at small‑cap fragility. A persistently softer dollar—Monexa AI notes 2025 marked its weakest year since 2017—would be supportive for commodities and exporters if it continues, aiding segments like Energy metals and global industrials. Conversely, the overnight rise in Treasury yields at the start of European trading, flagged by Monexa AI’s news digest, argues for some valuation pressure on duration‑sensitive growth at the open, particularly high‑multiple software and semis.

Breadth and Leadership Watch#

Breadth deterioration coupled with a low VIX is typically a sign of position trimming rather than stress. According to Monexa AI’s heatmap, Thursday’s selling was broad and measured, with most sectors down roughly −0.6% to −1.2%. The leadership question for early 2026 is whether profitable AI infrastructure and platform names can re‑assert relative strength even as investors rotate toward high‑quality defensives and oversold cyclicals. Thursday offered a template: NKE rallied on idiosyncratic factors while semis and fintech weakened. Watch NVDA, AAPL, and GOOGL as barometers for the broader risk tone, alongside sector bellwethers in Energy (XOM, CVX and Financials (JPM.

Domestic Sectors to Watch Before the Bell#

Technology: AI Inference Narrative vs. Yield Sensitivity#

AI‑linked hardware and software remain the fulcrum. NVIDIA’s margin guidance and ecosystem expansion—documented in company filings—support the case for durable profitability in training and inference, but day‑to‑day, the group remains yield‑sensitive. According to Monexa AI, MU (−2.47%) and DDOG (−1.08%) illustrated the market’s willingness to derate growth on small rate moves, even as longer‑cycle theses stay intact. APP (−2.87%) and FICO (−3.16%) show that highly rated mid‑caps can amplify downside in thin tapes.

Energy: Oversold Screens and Integrated Stability#

Energy’s retreat (−0.92%) came with underperformance from E&Ps like EQT and royalty plays such as TPL, while integrateds XOM and CVX were comparatively stable. According to Monexa AI’s curated commentary, multiple strategists entered 2026 highlighting oversold conditions and improving setup for high‑quality Energy, particularly where balance sheets and capital return programs are strongest. Stock‑specific research support for DVN reinforces that investors may get paid to wait via disciplined capex and returns, even if crude tapes remain choppy near‑term.

Financials and Real Estate: Quality Over Beta#

Financials declined (−1.01%) with a pronounced split between traditional banks and crypto‑exposed fintech. JPM held up relatively well, while COIN and HOOD fell more sharply. Real Estate remained the weakest pocket with lodging and office REITs rolling over—HST, BXP—while logistics and towers like PLD and AMT also slipped. With rate volatility elevated overnight, beta‑heavy interest‑rate exposures may remain tactically challenged into the open.

Extended Analysis: Positioning, Risk, and What the Tape Is Saying#

The market’s message into Friday morning is one of rotation and selectivity rather than capitulation. According to Monexa AI, index volumes were below average on Thursday—^SPX turnover of 1.74 billion versus a 5.18 billion average—signaling trimming rather than forced selling. The S&P 500’s close above its 50‑day average keeps the primary uptrend intact, but leadership is narrowing, and the sensitivity of growth equities to modest rate moves is reasserting itself.

AI remains the secular growth axis. NVIDIA’s Q3 FY26 margin profile (mid‑70s) and explicit ecosystem partnerships—OpenAI, Google Cloud, Microsoft, Oracle, xAI, and Anthropic—indicate that the company is building multiple monetization vectors beyond raw GPU shipments, according to NVIDIA’s investor materials. Reuters has chronicled a late‑2025 market narrative of “tech leadership fatigue,” where high valuations in AI leaders met a more demanding cost‑of‑capital backdrop. That tension will likely define early‑2026 positioning: use weakness in profitable AI infrastructure leaders with clear pricing power and ecosystem lock‑in to build positions methodically, while avoiding lower‑quality momentum where rate sensitivity overwhelms fundamentals.

The dollar and trade policy are secondary but relevant drivers. Monexa AI flagged the dollar’s poor 2025 as a nascent tailwind for commodities and global earnings translation. At the margin, tariff de‑escalation—such as the U.S. scaling back duties on Italian pasta makers—reduces noise in consumer staples and import‑sensitive categories, though the effects are small in index terms.

Consumer signals are mixed but improving at the edges. UBS’s survey work suggests brand momentum at NKE is stabilizing, and market price action reflected this with a +4.12% move. Yet several Discretionary heavyweight bellwethers—AMZN, TSLA, travel via BKNG—were lower, a pattern that keeps the sector in a stock‑picker’s regime heading into the post‑holiday update cycle.

Risk management remains paramount. With ^RVX up and VIX down, dispersion may widen between small caps and large caps intra‑day. Coupled with rising yields at the European open, that argues for favoring liquidity and balance sheet quality into the U.S. open, scaling into weakness rather than chasing early strength, and using index‑level volatility compression to source single‑name ideas where the thesis is driven by cash flow durability rather than multiple expansion.

Conclusion#

Morning Recap and Outlook#

According to Monexa AI, Thursday’s session closed with broad, mild declines, led by Technology and Industrials, while select idiosyncratic winners—NKE, TDG, CF—offered evidence of stock‑specific opportunity. Overnight, Asian and European equity tone was firmer and U.S. futures steadied, even as Treasury yields pushed higher in early European trade. Policy headlines continued to filter through AI supply chains, with Reuters highlighting a one‑year approval for TSMC’s tool exports to China and prior coverage documenting NVIDIA’s evolving approach to inference via a Groq licensing arrangement.

Into the open, three catalysts deserve attention. First, the rates path: higher yields can compress multiples on software and semis, so watch leadership from NVDA, AAPL, and GOOGL. Second, the dollar and commodities: a persistently softer dollar supports Energy metals and exporters, aiding names like XOM and CVX. Third, sector rotation: oversold Energy, resilient managed care (MOH, UNH −0.64%), and select Consumer Discretionary stories (NKE offer tactical setups.

For portfolio positioning, the message is to lean into quality and liquidity, use weakness in profitable AI infrastructure to add selectively, and be judicious with high‑beta cyclicals until the rate path and demand data provide clearer confirmation. The primary uptrend remains intact above the S&P 500’s 50‑day average, but leadership breadth is narrowing—raising the bar for stock selection as 2026 gets underway.

Key Takeaways#

The indices closed lower with a mild risk‑off tone, but the trend remains intact above key moving averages, according to Monexa AI. Technology weakness—especially in semis and software—was the main drag, while idiosyncratic winners in Consumer and Aerospace balanced the tape. Overnight, global equities firmed and Treasury yields rose in Europe, setting a two‑way risk backdrop into the U.S. open. Policy developments around AI hardware and export controls remain a persistent source of dispersion. Investors should focus on quality balance sheets, cash‑flow durability, and secular winners in AI infrastructure, while keeping a rotation watchlist in Energy and defensives in case yield sensitivity flares at the open.