US stocks got off to a good start! The S&P Dow teamed up to record highs, and the market rotation in the sector accelerated

The Zhitong Finance App learned that US stocks closed at record highs on Tuesday, with the materials, industrial and financial sectors leading the way, and market capital is pouring into sectors that have lagged behind before. The S&P 500 index rose 0.6%, rising for the third consecutive trading day, as traders set their sights on sectors other than technology stocks, and such weighted indices rose even more, reaching 1.2%. The Nasdaq 100 closed up 0.9%, while the Dow Jones Industrial Average, representing the old economy, rose 1%, also closing at a milestone high.

“If there's one clear theme, it's rotation,” said Michael O'Rourke, chief market strategist at Jonestrading Institutional Services LLC. “Overall, investors still want to invest in this market, but they're looking for relatively more valuable sectors outside of last year's leaders and star stocks.”

Earlier, weaker-than-expected US service sector PMI data boosted the market's hopes for the Federal Reserve to cut interest rates further, driving major US stock indexes higher. Business activity and critical employment data will also be released later this week.

Richmond Federal Reserve Chairman Thomas Barkin said that future monetary policy will require “careful judgment,” and pointed out that interest rates are currently in a neutral range. Meanwhile, Federal Reserve Governor Stephen Milan said that the Federal Reserve will need to cut interest rates by more than 1 percentage point in 2026.

Goldman Sachs Group's new chief US stock strategist Ben Snyder predicts that due to extreme market concentration and the evolution of artificial intelligence (AI) trading, the stock market will usher in a “micro-rotation” year this year. According to the bank's data, the top ten constituents of the S&P 500 account for 41% of the market value and contributed 53% of the benchmark index's 2025 increase.

Snyder wrote in a report to clients that as corporate adoption increases, the increase in AI spending is expected to exceed expectations, while the overall growth rate will slow down. This will spawn a rotating market, “posing a two-way risk to the overall index.”

Meanwhile, Castle Securities's Scott Rubner said that this year's “January effect” seemed particularly real. The capital flow at the beginning of the year and the expansion of the range of market increases laid the foundation for an overall rise in US stocks. As markets reopen at the end of the holidays, cash associated with pension contributions, year-end bonuses, and discretionary wealth management instructions is rapidly flowing into passive-risk assets.

Although the incident where the US military captured Venezuelan President Nicolas Maduro last weekend caused shock in the geopolitical field, Wall Street's reaction has so far been lackluster. Some safe-haven assets have risen, particularly gold and US debt. However, the Chicago Board Options Exchange Volatility Index (VIX) remained low and traded below 16 points.

Wall Street bulls still need to overcome many hurdles if they want the stock market to reap positive returns in 2026: ongoing trade tension, a fatigued economy, and artificial intelligence-themed transactions that are far from winning. But there is also positive support from the market.

“The bulls have fiscal and monetary stimulus behind them as they enter 2026,” Vital Knowledge founder Adam Crisaffley wrote in a Tuesday morning report.

According to the survey, most investors expect the stock market to rise further this year. According to a survey of 590 respondents in the last three weeks of December last year, 60% believe the S&P 500 index will rise by as much as 20% in 2026. Less than a third of participants expected the benchmark index to fall.

The market correction and subsequent recovery last year suggest that the stock market may usher in a further rise. Historically, after falling at least 15%, the S&P 500 index rebounded and achieved an annual increase similar to 2025 only four times, and the previous one showed a strong rise in the year after each one.

According to Citigroup's strategist headed by Chris Montagu, stock allocation levels for various US indices declined last week as long positions were closed and new short positions were established. His team pointed out that positions in S&P 500 and Nasdaq futures are still close to neutral and not very risky.

The International Consumer Electronics Show (CES) held in Las Vegas this week provided a weather vane for artificial intelligence-themed deals, with tech companies issuing business announcements and showcasing new products.

Chaowei Semiconductor (AMD.US) has unveiled a new chip for enterprise data centers. Nvidia CEO Hwang In-hoon said the company's highly anticipated Rubin processor is expected to be deployed by customers in the second half of the year. Intel, for its part, presented a laptop based on a newly designed processor.

Sandisk Corp. (SNDK.US) and its peers were the best-performing stocks in the S&P 500 index on Tuesday. The stock surged about 47% in the first three trading days of 2026. Western Digital (WDC.US) and Seagate Technologies (STX.US) are also at the top of the growth list.

In terms of company news, after Maduro's dismissal last weekend, oil traders such as the Toko Group will hold talks with the US government on how to resume buying Venezuelan crude oil and supplying fuel to the country.

Sportswear company Under Armour (UA.US) shares soared after Fairfax Financial Holdings revealed its considerable shareholding in the company.