US stocks fell on Monday as losses in large technology names weighed on the market following last week’s surge to fresh record levels for the S&P 500.
The S&P 500 slipped 0.4%, while the Nasdaq Composite fell 0.7%, underperforming as investors pulled back from growth-oriented technology stocks.
The Dow Jones Industrial Average was comparatively resilient, edging 43 points lower, or 0.1%.
The economic data calendar is relatively light this week, but investors will receive another signal on monetary policy when the Federal Reserve releases minutes from its December meeting on Wednesday at 2 p.m. ET.
Those minutes are expected to offer insight into how policymakers are thinking about the path of interest rates heading into 2026.
AI trade loses momentum after strong weekly gains
The retreat was led by stocks tied to the artificial intelligence trade, which had posted solid advances in the prior week.
Shares of Nvidia fell more than 2% on Monday, while Oracle also dropped more than 2%. Micron Technology slid over 1%.
The pullback followed a strong run in those names last week, when Nvidia gained more than 5%, Micron rose roughly 7%, and Oracle advanced about 3%.
Investors appeared to lock in profits after the rally, applying pressure to a sector that has been a dominant driver of market performance throughout 2025.
Friday’s session capped the recent run, with the S&P 500 touching an intraday record high of 6,945.77 before finishing just below flat.
Despite Monday’s decline, the broader market remains near historic highs.
Strong year for 2025
Even with Monday’s weakness, 2025 has been a banner year for US equities.
The S&P 500 is up nearly 18% year to date, while the Dow Jones Industrial Average has gained 14.5%, putting it on track for its strongest annual performance since 2021.
The Nasdaq Composite continues to lead, rising more than 22% so far this year.
Markets are also entering the so-called Santa Claus rally period, which has historically been favourable for stocks.
Since 1950, the S&P 500 has averaged gains of more than 1% during the final five trading days of the year and the first two sessions of the following year, according to data from the Stock Trader’s Almanac.
The 2026 outlook
Looking ahead, strategists remain broadly constructive on the market’s medium-term outlook.
According to Bloomberg data, the average year-end 2026 target for the S&P 500 among major investment firms stands at 7,555, implying roughly 9% upside from current levels.
Forecasts range from a low of 7,000 to a high of 8,100, with some projections clustering around 7,700, suggesting potential gains closer to 11%.
That optimism is underpinned by earnings expectations. Wall Street forecasts call for S&P 500 earnings per share of about $306 in 2026, representing growth of roughly 12.5% from the current consensus estimate of $272.
Valuation assumptions are relatively stable, with strategists expecting the forward price-to-earnings multiple to remain near 22 by the end of next year.
Analysts at Goldman Sachs have pointed to solid US economic growth, a weaker dollar, and productivity gains driven by artificial intelligence as key factors supporting earnings expansion.
They also note that profitability among the largest stocks continues to play an outsized role, with the seven biggest companies in the index accounting for roughly a quarter of total S&P 500 earnings.
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