US stock market's New Year "rotation market" continues: Technology stocks fell, while small-cap stocks rose in response.

On Thursday, investors sold off major tech stocks and shifted towards stocks that underperformed last year, resuming the intermittent trend of rotation in the US stock market since the beginning of 2026. The S&P 500 index closed basically flat in New York, after hitting a new high earlier this week; while the tech-heavy Nasdaq 100 index fell by 0.5%. In contrast, the Dow Jones Industrial Average rose by 0.6%, and small-cap stocks also saw a rebound, with the Russell 2000 index rising by 1.1%. Dave Lutz, stock sales trader and macro strategist at JonesTrading Institutional Services LLC, said, "It's the start of the year, and people are looking to put money into stocks they believe have the greatest potential for appreciation. Given the high valuations of tech stocks and the theoretical existence of an artificial intelligence bubble, small-cap stocks are the area worth investing in, especially under the favorable conditions of the Fed's loose policy." These factors are dampening investor interest in once-unstoppable tech giants: on the eighth day of January, the equal-weighted S&P 500 index (representing an average stock) is poised to outperform its market-cap weighted index for the third consecutive month. If this trend continues until the end of the month, it will mark the longest winning streak in three years. Meanwhile, President Trump's plan to increase the US military budget has boosted defense stocks. After Trump hinted at plans to increase defense spending to $1.5 trillion by 2027, stocks of companies like Lockheed Martin, Northrop Grumman, and Kratos Defense & Security Solutions, Inc. skyrocketed. Thomas Thornton, founder of hedge fund Telemetry LLC, said, "Trump is very active on social media (like proposing a ban on institutional buying of homes), causing stocks related to housing and major companies that buy houses to weaken. However, his casual mention of increasing defense budget speech has offset this impact." In other news, Chris Wright, U.S. Energy Corp. Secretary, stated after meetings with executives that ConocoPhillips, Exxon Mobil Corporation, and other US oil companies are exploring their roles in helping revitalize Venezuela's energy industry. At the same time, US labor productivity accelerated in the third quarter to the fastest pace in two years, further demonstrating that efficiency improvements are dampening inflation pressures from wage increases.