Jan 2 (Reuters) - U.S. stock index futures advanced on the first trading day of 2026, recovering after Wall Street logged declines in the last few sessions of 2025, as improving investor sentiment increased risk appetite.
The S&P 500, Dow and Nasdaq posted double-digit gains in 2025, their third consecutive year in the green, a run last seen during 2019-2021. The Dow posted its eighth monthly gain on the trot, the longest such streak since 2017-2018.
The rally was bolstered by an insatiable appetite
for artificial intelligence stocks that pushed all three indexes to record highs last year.
However, the rally slowed heading into end-2025 where the three main indexes logged declines for the last four sessions, defying expectations for a "Santa Claus rally", which typically sees the S&P 500 gain over the last five trading days of December and the first two in January, according to the Stock Trader's Almanac.
The losses were led by tech shares as investors repositioned their holdings for 2026, on expectations that growth would broaden across sectors this year.
On Friday, these heavyweight stocks stabilized in premarket trading, with Nvidia up 1.8% and Broadcom adding 1.6%.
At 05:45 a.m. ET, Dow E-minis were up 171 points, or 0.35%, S&P 500 E-minis were up 41.5 points, or 0.60%, and Nasdaq 100 E-minis were up 267 points, or 1.05%.
"We shouldn't extrapolate too far, as the first trading day has been an incredibly poor guide in recent times to how the rest of the year plays out," said analysts at Deutsche Bank.
They also highlighted that in the last three years, the S&P 500 started with a negative first session but ended with double-digit annual gains.
Wall Street made a stellar comeback in 2025 from April's lows when Trump's 'Liberation Day' tariffs sparked a meltdown in global markets, sent investors away from U.S. stocks and threatened growth by clouding the interest rate outlook.
The Federal Reserve's monetary policy trajectory will set the tone for global markets in 2026, after recent economic data and expectations of a new dovish Fed chair prompted investors to price in further reductions.
A final reading of S&P Global's economic activity survey is due later in the day.
But next week's labor market data will grab the spotlight, especially after Fed Chair Jerome Powell cautioned against further interest rate cuts until there was more clarity on jobs, at the central bank's December meeting.
Among stocks, U.S.-listed shares of Baidu jumped about 12% before the bell after the Chinese internet search giant said on Friday its AI chip unit Kunlunxin has confidentially filed a listing application with the Hong Kong stock exchange on January 1, paving the way for a spin-off and separate listing.
(Reporting by Purvi Agarwal in Bengaluru; Editing by Krishna Chandra Eluri)
