U.S. Stocks Hover at Record Highs Amid Economic Resilience and AI-Fueled Optimism

U.S. stock indexes remain near record highs, driven by economic resilience and interest in AI stocks, despite previous selloffs. Investors are optimistic about sustained growth, with the S&P 500, Dow, and Nasdaq on track for annual gains. Analysts predict strong profit growth in the upcoming years, driven by AI investments.

U.S. stock indexes remained close to historic highs on Friday, buoyed by signs of a robust economy and renewed investor interest in AI-affiliated companies. The S&P 500 reached an intraday record before pulling back slightly, while the Dow Jones Industrial Average was just 0.5% shy of its December 12 high.

The stock market bounced back after last week's decline, where AI and tech stocks faced scrutiny over high valuations and capital expenses threatening profits. Nevertheless, strong economic indicators and anticipated policy easing under a new Federal Reserve chair, along with fresh AI investment interest, spurred market recovery, setting the stage for a third consecutive year of gains for the S&P 500, Dow, and Nasdaq.

Brian Jacobsen, chief economist at Annex Wealth Management, indicated 2026 would challenge markets to show productivity and margin gains from AI investments. S&P 500 companies are expected to see a profit increase of 15.5% in 2026, up from the 13.2% projected for 2025, according to LSEG data. Investors are now eagerly observing if the seasonal 'Santa Claus rally' will come to pass, which involves the S&P 500 gaining in the final five trading days of the year and the first two of January.

(With inputs from agencies.)