U.S. equity markets closed a volatile first trading session of 2026 in negative territory, as investor apprehension over lofty stock valuations overshadowed positive catalysts from the technology sector and trade policy.
Valuation Concerns Weigh on Broad Market
The S&P 500 index retreated from early gains on Friday, January 2, 2026, finishing little changed by the afternoon in New York. The shift in sentiment was driven primarily by a stark assessment of current market prices. Bank of America strategist Savita Subramanian noted in a client report that there is "no way to sugar coat it: the S&P 500 is expensive." Her analysis found that 18 out of 20 metrics indicated the benchmark index was "statistically expensive," reaching record highs by measures such as market capitalization-to-GDP and price-to-book-value ratios.
While Subramanian acknowledged that today's market components are of higher quality than in the past, she warned that "risks to the index abound in 2026." This caution echoed broader concerns, with JPMorgan Chase & Co.'s Michael Cembalest advising investors to ask "what could go wrong?" when markets are highly concentrated near all-time highs.
Sector Performance and Tech Highlights
Market action was mixed beneath the surface. Only five of the eleven major S&P 500 sectors advanced, led by industrials and energy. Declines were concentrated in consumer discretionary and communications stocks. The technology-heavy Nasdaq 100 Index slipped 0.2%.
However, semiconductor stocks shone brightly. The Philadelphia Semiconductor Index surged as much as 4.7% during the session, its largest intraday jump since November 24. This rally followed gains for Asian chipmakers and was fueled by specific standout performances. Micron Technology Inc. jumped as much as 8.8%, while Sandisk Corp. soared up to 13%, making them the top gainers on the S&P 500 for the day.
Optimism for next week's massive CES technology conference in Las Vegas provided a lift for some key players. Advanced Micro Devices Inc. (AMD) climbed 3.5% ahead of a scheduled keynote speech by CEO Lisa Su on Monday night. Nvidia Corp. added 1.8%, with its CEO Jensen Huang also set for multiple appearances at the event, where he is expected to focus on data centers and robotics.
Tariff Moves and Company-Specific News
Adding a layer of complexity to the trading day were signs of shifting trade policy. President Donald Trump's administration showed indications of easing certain tariff pressures, including delaying hikes on items like upholstered furniture. This news benefited companies like Wayfair Inc. and RH, which saw their shares rise.
On the downside, Tesla Inc. fell as much as 2% after reporting that its fourth-quarter vehicle deliveries slid by 16% year-over-year, a steeper decline than the roughly 11% drop analysts had anticipated.
The trading session followed a year-end where the S&P 500 closed 2025 about 1% below its December 24 record. Friday's trading volume returned to levels in line with the 20-day average after a quiet mid-week period. Investors are now looking ahead to the first major earnings report from Jefferies Financial Group Inc. and the upcoming U.S. jobs data for further market direction.
