The U.S. stock market hit a curious moment: a record-setting Dow on Monday, then a muted open and tepid futures the next day as traders digested the reasons behind the spike.
On Monday the 30-stock Dow closed at an all-time high — a move driven less by steady economic data than by a sudden geopolitical jolt. Markets rallied after reports that U.S. forces captured and removed Venezuelan leader Nicolás Maduro over the weekend. Investors quickly priced in the prospect that U.S. oil firms could gain new opportunities in Venezuela’s energy infrastructure, sending energy names sharply higher and lifting the indexes.
But Tuesday brought a more cautious tone. Futures were little changed as traders took stock, rotated positions and waited for fresh economic signals.
Why the Dow ran — and why it cooled
The immediate market reaction leaned toward winners you’d expect from a geopolitically charged energy story: Chevron, Exxon and other energy plays popped on Monday as traders anticipated reconstruction spending and renewed access to Venezuelan reserves. At the same time, defense contractors and traditional safe havens such as precious metals and Bitcoin saw some upside, reflecting the messy mix of optimism and risk-off positioning.
Yet the rally wasn’t a single-story affair. Nvidia — the poster child of the AI boom — and other tech names helped push the broader indices higher. Nvidia added nearly 2% on Tuesday, and AI-related stocks including Amazon, Micron and Palantir also contributed. Industry analysts say the current market is being tugged in two directions: geopolitical headlines that favor energy and defense, and structural technology themes that keep heavyweights like Nvidia relevant.
Tom O’Shea of Innovator ETFs captured that split succinctly: headline-grabbing events can create short-term volatility, but this time the S&P 500 rose with energy leading the gains on hopes U.S. companies may benefit from rebuilding opportunities.
The backdrop: weaker services activity and an eye on jobs
The rally arrives against mixed macro data. S&P Global’s services PMI fell to 52.5 in December — the slowest pace in eight months — signaling slower expansion in the service economy and a worrying dip in new business inflows and hiring momentum. That softer tone tempers enthusiasm and reminds investors that the cyclical story still matters.
All eyes now turn to this week’s labor-market prints: the ADP private payrolls report and Friday’s more comprehensive government jobs number. Those reports could either validate equities’ optimism or give bond markets—and rate expectations—another reason to reprice.
Not just geopolitics — AI keeps its gravity
Even with the Venezuela headlines, the AI narrative remains a gravitational force for markets. Comments from analysts such as Wedbush’s Dan Ives — who called the current moment a “table-pounder opportunity” to own names like Nvidia and Microsoft — underscore that investors are looking past short-term noise to long-term AI adoption and product cycles.
That thesis is buoyed by new tools and models hitting the market. Developments such as Microsoft’s MAI-Image-1 and advances in agentic assistants like Google’s AI Mode keep demand expectations for data-center hardware and cloud services elevated, which in turn supports chipmakers and cloud providers.
What traders are rotating into — and out of
The session showed some rotation rather than wholesale buying. Energy led gains after Monday’s surge but cooled on Tuesday as traders squared positions. A few corporate stories also moved individual tickers: Deutsche Bank’s upgrade of Shake Shack and leadership changes at AIG were among the headlines nudging specific stocks.
For portfolio managers the key calculus is balancing the binary geopolitical shock with the slower, stickier AI-driven earnings potential concentrated in a handful of mega-cap stocks. That mix explains why indexes can climb even as parts of the market trade sideways.
Markets are rarely single-threaded. Right now they’re digesting a short-term geopolitical event, softer services activity, and a persistent structural story in AI that keeps certain names elevated. Traders will be watching this week’s payroll reports closely; until then, expect choppy trading as investors pick through which narrative matters more for the months ahead.