It was a volatile day for the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) on the first trading day of 2026. Both ETFs gapped higher at the open but gave up all of those gains by the afternoon. SPY managed to close in the green, while QQQ finished in negative territory.
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Semiconductor-related companies were the stars of the show, with Advanced Micro Devices (AMD), Intel (INTC), Micron Technology (MU), and Lam Research (LRCX) all closing higher by at least 4%. Nvidia (NVDA) finished the day with a 1.26% return.
2026 is a midterm elections year, which has historically been associated with weak returns. However, the returns tend to improve when the elections occur during a president’s second term. The S&P 500 has risen in every sixth year of prior presidential cycles, posting an average gain of 20.9% and a median return of 14.6%, according to Carson Group Chief Market Strategist Ryan Detrick.
At the same time, Bank of America strategist Savita Subramanian warned that the benchmark index is trading at elevated valuations, with 18 of the 20 metrics that she tracks near their respective highs. “No way to sugar coat it: the S&P 500 is expensive,” wrote Subramanian in a note, adding that some valuation metrics, like enterprise-value-to-sales and market-cap-to-GDP, have “never been more expensive.”
Elsewhere, President Trump announced on New Year’s Eve that he would postpone tariff hikes on upholstered furniture and kitchen cabinets by one year from the previously scheduled date of January 1, 2026. Trump raised the tariffs on the items to 25% last September.
“Given the ongoing productive negotiations regarding the imports of wood products, the President is delaying the tariff increase to allow for further negotiations to occur with other countries,” read a White House fact sheet.
Finally, U.S. manufacturing growth cooled in December, as the S&P Global Manufacturing Purchasing Managers’ Index (PMI) dropped to 51.8 from 52.2 month-over-month. A reading above 50 signals expansion, while a reading below 50 signals contraction.
“Something of a Wiley E Coyote scenario has developed, whereby – just like the cartoon character continues to run despite chasing the roadrunner off a cliff– factories are continuing to produce goods despite suffering a drop in orders,” said S&P Global Market Intelligence Chief Business Economist Chris Williamson. He added that the gap between production growth and declining orders is the widest since the 2008–2009 Great Recession.
The S&P 500 (SPX) closed with a 0.19% gain, while the Nasdaq 100 (NDX) fell by 0.17%.
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