US blue-chip benchmarks reached fresh record levels with the Dow Jones Industrial Average and S&P 500 delivering solid gains despite mixed sector performance. The 30-stock Dow advanced 159 points or 0.30% to close at 49,621.43, while the broader S&P 500 index gained 0.10% to reach 6,949.46 points, extending the market's record-breaking momentum.

Mixed Performance Across Major Indices

While the Dow and S&P 500 celebrated new highs, the tech-heavy Nasdaq Composite declined 0.10% shortly after the opening bell, highlighting divergent performance across major US equity benchmarks. The contrasting movements reflect varied investor sentiment across different market segments.

Sector Performance and Market Breadth

Market breadth remained challenging with six of the eleven sectoral indices trading in negative territory. Materials and financials sectors led the declines, indicating selective investor appetite despite the headline indices reaching record levels. This mixed sectoral performance suggests cautious optimism rather than broad-based market enthusiasm.

Individual Stock Movements

Among major companies, chipmaker Intel surged 4.00% while pharmaceutical giant Eli Lilly gained 3.00%, providing significant support to the broader market indices. However, technology stalwarts faced pressure with Texas Instruments, AMD, and Moderna all posting declines, contributing to the Nasdaq's underperformance.

Treasury Market and Bond Yields

The bond market provided a supportive backdrop for equities as the yield on the 10-year Treasury bond declined 3 basis points to 4.14%. This reduction in borrowing costs helped underpin investor confidence and contributed to the record-setting performance in blue-chip indices, even as technology stocks faced headwinds.

US stock market optimism remains strong as new survey data reveals significantly higher expectations for 2026, with the latest Markets Pulse survey predicting another substantial advance that would mark a historic four-year streak not seen since the end of the previous century. This represents a notable shift from earlier Wall Street strategist forecasts of more modest gains.

Survey Results Show Bullish Sentiment

The S&P 500 Index will climb 20% in 2026, according to 60% of the 590 respondents to the Markets Pulse poll conducted in the last three weeks of December. This projection substantially exceeds the earlier Bloomberg strategist consensus of 9.20% gains, indicating growing market confidence despite the index's already impressive performance trajectory.

Less than a third of participants expected losses for the stocks benchmark while only a tenth saw more than 20% gains for the index. The survey reveals a stark contrast with currency expectations, as more than three-quarters of respondents predict the dollar's struggles will persist into a second year.

Market Performance and AI-Driven Rally

The optimistic projections build upon an exceptional recent performance, with the S&P 500 finishing with a 16% gain and achieving 39 record highs throughout the year. Seemingly endless demand for artificial intelligence investment has been the primary catalyst propelling the equity benchmark to these new heights.

Frank Monkam, head of cross asset macro strategy and trading at Buffalo Bayou Commodities, noted that "the macro mix increasingly points to an environment where dollar weakness and bullish equities could very much coexist."

Leadership Shift and AI Bubble Concerns

Survey participants are anticipating significant shifts in equity market leadership, with particular focus on technology giants that have driven recent gains. When asked which outperforming assets are most likely to turn into losers in 2026, more than a third picked chip giant Nvidia Corp, despite the company's 39% gain making it the second-best performer among the Magnificent Seven group.

When asked to identify trades investors are not yet positioned for, the bursting of the AI bubble garnered the largest share of participant responses at 33%, highlighting growing concerns about sustainability of technology valuations. The precious metal extended its record-breaking run following a weekend US raid that captured Venezuelan President Nicolas Maduro, spurring demand for its perceived haven qualities.

Dollar Weakness and Policy Implications

The survey reveals strong conviction regarding continued dollar weakness, with 76% of participants expecting declines to persist following the worst performance since 2017. Among those expecting declines, 42% anticipate losses for the Bloomberg Dollar Spot Index between 2.50% and 7.50%.

The greenback is expected to face pressure from anticipated Federal Reserve policy, with markets pricing in a further half percentage point of interest-rate cuts in 2026, following three-quarters of a point of easing in the previous year. Conversely, the outlook for lower borrowing costs, combined with fiscal stimulus from President Donald Trump's tax-cut law, is viewed as a major catalyst for continued stock gains.

Risk Factors and Historical Context

Despite the bullish sentiment, several factors warrant caution. Historical data shows that annual returns for stocks and the dollar have diverged half the time over the last two decades, with stocks typically thriving while the dollar languishes in environments with sufficient growth to support risk sentiment but slow enough to sustain policy accommodation.

Jane Foley, head of currency strategy at Rabobank in London, suggested that widespread bearish dollar sentiment might actually provide support: "The dollar should be far more resilient even on bad US economic news this year. If we are to assume that US stocks move higher this year, I would expect that to allow the dollar some support — even though many investors will hedge their dollar exposure."

The potential for a four-year winning streak would represent a rare achievement in market history, last accomplished at the end of the previous century, underscoring the exceptional nature of the current bull market cycle driven primarily by artificial intelligence investment themes.