Cyclical Rotation Drives Broad Gains as Tech Retreats

U.S. equity markets delivered a mixed performance, with broad-based gains across most sectors offset by a sharp pullback in technology. The S&P 500 finished essentially flat, the Nasdaq Composite declined 0.5%, and the Dow Jones Industrial Average outperformed with a 0.6% advance.

Despite the uneven index-level results, market participation was notably constructive. Nine of the eleven S&P 500 sectors closed higher, underscoring a renewed rotation into cyclical areas of the market.

Energy led the advance, surging 3.2% as oil prices rebounded sharply following recent weakness tied to developments in Venezuela. Crude oil futures settled $1.76 higher, up 3.1% on the day, at $57.75 per barrel.

Consumer discretionary also posted strong gains, rising 1.7% as a solid batch of economic data reinforced expectations for continued growth. Homebuilder stocks were among the standout performers, rallying sharply and sending the U.S. home construction ETF up more than 4%. The sector also benefited from strength in select mega-cap names, including solid advances in Amazon and Tesla.

Even with those gains, mega-cap growth stocks broadly struggled. The mega-cap growth ETF fell 0.8%, weighed down almost entirely by weakness in the information technology sector, which dropped 1.5%. NVIDIA was the primary drag among the largest technology names, while the semiconductor group extended its pullback for a second consecutive session. Memory and storage stocks were hit particularly hard, giving back a meaningful portion of their recent gains.

Health care was the only other sector to finish lower, declining 0.9% amid continued pressure on pharmaceutical and biotech stocks.

In contrast, consumer staples staged a notable rebound after a weak start to the year. The sector climbed 2.3%, supported by strong earnings-related moves. Constellation Brands jumped after delivering a top- and bottom-line beat, while Costco rallied on better-than-expected December comparable sales growth.

Industrials added 0.7%, aided by strength in defense stocks. Shares of several major defense contractors rallied after President Trump called for a substantial increase in the U.S. military budget, lifting sentiment across the group.

Outside of large caps, smaller stocks returned to favor. The Russell 2000 gained 1.1% and the S&P MidCap 400 rose 0.4%, both rebounding from the prior session’s decline and extending their early year-to-date leadership over the major indices.

Overall, the session reflected a broadening of market leadership as investors position for a potentially strong economic backdrop in 2026. Cyclical and small-cap stocks showed renewed momentum, while attention now shifts to a busy end of the week highlighted by the December employment report and an anticipated Supreme Court ruling on the legality of President Trump’s sweeping IEEPA tariffs.

Our FTinvest 11 model portfolio surged 2.78% to close at 932.89, marking a strong rebound and bringing the portfolio index within 0.46% of its all-time high of 937.19. This sharp upward move reflects renewed investor confidence and underscores the portfolio’s ability to recover quickly following recent market softness.

The rally reinforces FTinvest 11’s underlying strength, grounded in disciplined value investing and active management. As markets digest early-year macro signals, the portfolio’s positioning continues to demonstrate resilience and upside potential, reaffirming its long-term strategy into 2026.