The , , and even-weighted are moving higher modestly this morning, while the S&P, , and Magnificent 7 are headed the other direction. Doubts about the viability of the practicality of the aggressive buildout plans for massive AI data centers continue. The concerns include financing, power and water supply, and even community acceptance. Besides tech being down 1% in the last month, utilities are down 3%.
These fears of delays cloud the existing uncertainty of the timing of the profitable return on the massive AI investment on the table. It also highlights the impact of the very high weight of mega tech in the S&P index. But believe it or not, revenue and earnings are forecasted to accelerate in 2026 due to higher guidance, especially from the data center companies that have a growing order backlog.
In the bigger picture, the positive momentum of non-tech names is very positive for the health of the market, giving confidence to the prospects for 2026. YTD, the only sector in the red is real estate (-0.3%), and for LTM is real estate (-4.8%) and consumer staples (-2.8%). YTD, the only sectors returning +20% remain tech (+22.6%) and communication services (+20.5%), which are also the only sectors +15% LTM. Tech is under pressure but still outperforming.
The focus remains on whether the will continue to reduce Fed Funds anytime soon. This is complicated by the still somewhat delayed data on employment and inflation. Today, Fed governor Waller expressed little concern about but saw labor as weakening. He thought rates should be as much as 1% lower under current conditions. If that were to transpire in early ’26, it would be very positive for equities. This leaves us in another situation where bad news is good news, where weak job data brings confidence of further rate cuts sooner, while raising recession fears at the same time. Today, the 2-year is up 2 bps to 3.5%.
On the commodity front, gold continues to rise, and more so to yet another new high. has clawed back above $56/bbl and is back above $4/mcf. Gasoline remains near the recent low. Crypto remains weak with Bitcoin still below $90K.
As the day rolls on, the opening trends continue, and the is flat. Hopes remain for a Santa Claus rally, which is defined as the last 5 trading days of the year and the first 2 days of January, where institutional traders have largely completed their window dressing for year-end portfolios. The 2026 outlook still remains strong.