Stocks advanced on Monday, recovering from a mixed and volatile stretch on Wall Street that saw investors aggressively rotate out of high-valuation technology names and into more attractively priced parts of the market.
Traders also prepared for a wave of delayed US economic reports that are expected to steer sentiment through the week.
The Dow Jones Industrial Average climbed 168 points, or 0.4%, while the S&P 500 added 0.5% and the Nasdaq Composite rose 0.6%.
These gains followed a choppy week in which the S&P 500 and Nasdaq posted declines, pressured by sharp losses in a handful of artificial-intelligence bellwethers.
The S&P 500 fell 0.6% over the week, while the Nasdaq slid 1.7%. The Dow, which has less exposure to megacap tech and AI trade dynamics, outperformed with a 1.1% weekly gain.
AI leaders pull back
The retreat in technology shares was led by Oracle, which plunged 12.7%, and Broadcom, which shed more than 7%.
The broader S&P 500 tech sector dropped 2.3% as investors reassessed the pace and durability of AI-driven earnings growth.
Ed Yardeni, president of Yardeni Research, wrote that “The S&P 500’s Magnificent-7 might be less magnificent in 2026 as their fierce competition in the AI race starts to erode the monopolies they have enjoyed.”
He suggested that the “Impressive 493” could be the beneficiaries as leadership broadens beyond the largest AI-focused stocks.
Investors now turn their attention to an unusually packed economic calendar.
November nonfarm payrolls and October retail sales figures will be released on Tuesday after delays caused by the US government shutdown earlier this fall.
The November consumer price index report is due Thursday.
These releases are expected to influence expectations around economic resilience, inflation pressures and the Federal Reserve’s policy path into early 2026.
Citi sets 2026 S&P 500 target at 7,700
Citi initiated a bullish 2026 outlook for the US equity market, setting a year-end S&P 500 target of 7,700.
The forecast reflects expectations for strong corporate earnings and continued momentum from artificial intelligence investment.
Citi analysts wrote that AI infrastructure build-out will remain a defining market theme next year, but predicted a shift in emphasis: from companies enabling AI development to businesses adopting the technology at scale.
“While the AI emphasis is expected to be persistent, the evolution will likely follow a perceived winner versus loser dynamic,” the strategists said.
The projection implies a 12.7% gain from the index’s most recent close at 6,827.41.
Citi expects S&P 500 earnings per share to reach $320 by year-end, exceeding the roughly $310 consensus estimate.
Although Citi acknowledged that “a high valuation starting point is a hurdle,” the firm argued it is “not an insurmountable one,” provided earnings fundamentals continue to support price action.
The strategists added that, as the current bull market enters its fourth year, bouts of volatility should be expected and could be more pronounced than earlier in the cycle.
Citi outlined a wide range of potential outcomes, forecasting an S&P 500 level of 8,300 in a bull-case scenario and 5,700 in a bear case.
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