Dow gets off to its best yearly start since 2018 despite Wednesday's 466-point drop

MW Dow gets off to its best yearly start since 2018 despite Wednesday's 466-point drop

By Vivien Lou Chen and Isabel Wang

The blue-chip average has been bolstered by a rally in industrial and financial stocks

The blue-chip Dow Jones Industrial Average fell 466 points on Wednesday, but was nonetheless off to a solid start for 2026.

The Dow Jones Industrial Average is having its best start to a new year since 2018, bolstered by financial and industrial names like Goldman Sachs Group Inc. $(GS)$ and Caterpillar Inc. $(CAT)$.The blue-chip gauge was up 1.9% through the first four trading days of the year as of Wednesday's close, based on preliminary data from Dow Jones Market Data. That marks its best four-day start in eight years, despite a pullback that saw the Dow DJIA fall 466 points, or 0.9%, to close at 48,996.08 on Wednesday. Back in 2018, the Dow rose 2.3% during the first four trading days of that year.Investors have been rotating into more cyclical and value-oriented sectors since late 2025, when questions started to emerge about the ability of some Big Tech companies to quickly monetize their massive investments in building out artificial-intelligence technology.

This has helped the Dow outpace the S&P 500 and Nasdaq Composite recently.

That trend slammed into reverse on Wednesday, with the Nasdaq COMP outperforming the Dow and the S&P 500 SPX posting a smaller decline than the blue-chip index. The S&P 500 and Nasdaq Composite have respectively tallied their best four-day starts to a new year since 2023 and 2019, up by 1.1% and 1.5%.

"The trend we saw at the end of 2025 was more strength in cyclical stocks and sectors, like financials and industrials," said Ross Mayfield, a Kentucky-based investment strategist at Baird Private Wealth Management. "That strength is continuing into the new year and helping to boost less tech-centric indexes like the Dow."

After finishing Tuesday's session at an all-time closing high of 49,462.08, the Dow opened near 49,576 on Wednesday after payroll processor ADP reported that the private sector had added 41,000 jobs in December, reversing a loss of 29,000 from November.

The blue-chip index then lost steam during Wednesday's session as investors weighed a better-than-expected services-sector PMI reading for December against the fading likelihood of a quarter-point interest-rate cut by the Federal Reserve later this month.

They also assessed global risks from the U.S. intervention in Venezuela and the Trump administration's aggressive rhetoric targeting Greenland, Colombia and Cuba.

U.S. military actions over the weekend in Venezuela, which led to the capture of leader Nicolás Maduro, haven't spooked the stock market. The Cboe Volatility Index VIX - a gauge of expectations for near-term volatility conveyed by S&P 500 Index option prices - currently sits around 15, signaling either extreme bullishness or complacency among investors, according to Mark Malek, chief investment officer at Siebert Financial in New York.

Senior portfolio manager Keith Buchanan of Globalt Investments in Atlanta chalked up the Dow's early 2026 rise to pent-up demand for equities following tax-related losses taken by investors at the end of 2025.

"We feel there might have been tax-loss harvesting occurring and now that this is behind us, we see some pent-up buying," Buchanan said in a phone interview.

Expectations for strong economic growth in 2026 also appear to be helping to boost the market. Regarding the economic outlook, "there's a quarter of growth that should land somewhere north of 3% from a real GDP standpoint in the U.S. and some of that is obviously momentum that could continue into 2026," he added. "The market is anticipating some of this economic strength and is anticipating growth from an earnings standpoint. A stable environment is kind of a low bar for earnings growth."

Added to this mix are expectations for a couple of Fed rate cuts in 2026, plus ongoing fiscal stimulus, he said.

"All of this comes together to create a market that is not screaming that it is at a top or triggering us, in our shop, to be bailing out of equities wholesale," Buchanan said.

-Vivien Lou Chen -Isabel Wang

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(END) Dow Jones Newswires

January 07, 2026 16:38 ET (21:38 GMT)

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