(Jan 16): US stocks extended gains on Friday as the euphoria over technology stocks continued for a second day.
The S&P 500 Index rose 0.07% at 9.56am in New York, gaining for a second-straight session, further recovering from its first back-to-back drop of the year. Meanwhile, the Nasdaq 100 Index advanced 0.2%, while a gauge of chipmakers gained 1.75%. And the Russell 2000 Index advanced 0.2%, with the small-cap benchmark looking to top the S&P 500 for an 11th straight session.
“The message from the markets is that a procyclical global upswing is underway with value and small-cap stocks outperforming year to date and equities broadening out with the S&P 500 equal-weighted index continuing to outperform the market-cap index,” said Doug Beath, global equity strategist at Wells Fargo Investment Institute.
However, while there has been a strong start to 2026, Beath would “not be surprised if markets experience volatility in the coming weeks as fourth-quarter earnings progress and the threat of escalating geopolitical tensions remains”.
Thursday saw a revival in the artificial intelligence trade after Taiwan Semiconductor Manufacturing Co delivered a strong outlook. There had been growing doubts about the technology, leading traders to look elsewhere for growth.
Now, with a series of Big Tech earnings on the horizon, the waning interest in the AI trade seems to be reversing. Still though, the Nasdaq 100 is tracking for a weekly decline.
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However, amid the up-and-down week for the S&P 500 and Nasdaq 100, the Russell 2000 has continued to impress. The gauge has managed to beat the S&P 500 over 10 straight sessions, its longest streak since 1990.
“There’s a new king of the hill to start 2026,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. “Instead of large-cap growth, small-cap value is taking the crown. After years of head-fakes — moments when it seemed big-cap tech’s dominance might finally give way to broader market participation — the long-anticipated ‘Great Rotation’ may finally be taking shape.”
Mid-cap stocks have had a strong start to the year globally, according to XTB’s Kathleen Brooks, who noted that there were several reasons why the firm liked the cohort, including tech risks. Brooks points to the performance of Sandisk Corp and the semiconductor sector more broadly as a sign that the concentration risk is “real” for blue-chip stocks again this year.
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“If investor enthusiasm for the AI trade sours, then the S&P 500 could sell off sharply,” said Brooks. “In contrast, there is a broader group of top performers on the Russell 2000, for example, the top performing sectors include basic materials, energy and telecoms. Tech is only the fourth top performing sector.”
Brooks adds that the top performing stock on the Russell 2000 year-to-date through Thursday’s close — pharmaceutical firm Erasca Inc — has potential to be resilient should the tech trade unwind.
Regional bank earnings
With big bank earnings out of the way, other names in the space took centre stage to report. Regional bank PNC Financial Services Group Inc advanced 3.7% after reporting an increase in fourth-quarter revenue. The metric beat consensus expectations as financing and dealmaking by middle-market customers accelerated.
Meanwhile, Regions Financial Corp dropped after earnings per share and total loans in the fourth quarter missed the average analyst estimate. The regional bank also received a downgrade at Wells Fargo following the print. Shares in State Street Corp also declined following results. The trust bank told investors it sees year expenses being up 3% to 4%, and also expects net interest income to be up low-single-digits percentage.
Other notable movers include JB Hunt Transport Services Inc, which fell after fourth-quarter revenue missed estimates, extending the ongoing freight slump.
Looking ahead to next week, Wells Fargo Investment Institute’s Beath said investors will have “more time to digest the significant geopolitical events and policy announcements from this past week and may not be so sanguine, which could bring about more volatility”, he said.
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