Stock Rally Wavers at End of Best Week in a Month: Markets Wrap
(Bloomberg) — The post-Christmas session on Wall Street saw stocks fluctuating near their all-time highs as recent signs of economic resilience reinforced positive expectations for corporate profits.
While the S&P 500 wavered, it headed toward its best week in a month. Volume was 50% below the average of the past 30 days. Most megacaps fell, but Nvidia Corp. rose on a licensing deal with artificial-intelligence startup Groq. Freeport-McMoRan Inc. paced gains in materials producers as gold hit a record.
Action in bonds was muted, with Treasuries set for a monthly loss, yet on pace for their best year since 2020 after three Federal Reserve rate cuts. The dollar churned at the end of its worst week since June.
In a relatively uneventful session, investors wondered whether stocks will be able to notch a “Santa Claus Rally”. The period typically encompasses the last five trading days of the year and the first two of the new one. This time around the window opened on Dec. 24.
One intriguing aspect of that pattern is the historical connection to future performance. A positive outcome has seen the S&P 500 deliver an average January gain of 1.4% and a 10.4% surge for the full year that follows, said Adam Turnquist at LPL Financial.
“In the short-term, I believe in Santa Claus,” said Steve Sosnick at Interactive Brokers. “I could easily see a run at 7,000 just because we’re already so close. There’s a reason ‘don’t short a dull tape’ applies.”
Sosnick notes there are a lot more people who have incentive to push their holdings to a high year-end close than there are those who have any particular interest in selling before then.
The S&P 500 hovered near 6,930. The yield on 10-year Treasuries was little changed at 4.14%.
Oil fell as investors assessed a step forward in Ukraine peace talks which could lead to a deal that allows more Russian oil into global markets. China vowed to prevent the yuan’s exchange rate from overshooting.
Despite the subdued action across stocks, bonds and currencies on Friday, gold, silver and platinum extended a historic advance.
The surge has been supported by elevated central-bank purchases, inflows to exchange-traded funds and Fed policy easing. Lower borrowing costs are a tailwind for precious metals, which don’t pay interest, and traders are betting on more rate cuts in 2026.
After the rally we’ve seen in the precious metals in the last couple of months, “traders in the space must be looking at the AI boom and thinking ‘hold my beer’,” said Bespoke Investment Group strategists.
While the S&P 500 has doubled — on a total return basis — since the October 2022 start of the bull market, all three precious metals have beaten the equity gauge in the span, they noted.
“If the current AI-driven bull market for stocks is a ‘bubble,’ then certainly what we’ve seen in precious metals lately qualifies as well,” Bespoke said. “Ironically, many bears that call the AI trade a speculative bubble also recommend increasing exposure to gold and other precious metals.”
“While I’ve been talking about a broadening out (and rotation to other areas) of this AI-led rally, I also want to reiterate that keeping Mag 7, mega-cap tech and AI exposure is important,” said Tom Essaye at The Sevens Report.
The point here is that while bubble concerns are valid, this AI movement hasn’t yet reached levels that are similar to other “bubble bursts,” he said.
“Markets remain constructive, but selective,” said Craig Johnson at Piper Sandler. “The combination of improving breadth and easing inflation supports the call for a Santa Claus rally. Leadership continues to narrow toward AI, cyclicals, and select defensives.”
Seasonal tailwinds may help, but confirmation via breadth and participation is still required, he noted.
“A gain during the final five days of the old year and first two of the new year traditionally offers an early warning signal to the market’s appreciation potential for the year ahead,” said Sam Stovall at CFRA. “It is obviously not fool proof, since it gave false readings in the past two years.”
Of course, past performance is never a guarantee of future results, he warned.
“While overall market breadth remains somewhat narrow for an index near record highs, the trend is moving in the right direction, supported by a rotation toward cyclical sectors,” Turnquist said.
Among the risks to the market, Turnquist at LPL cites increased scrutiny over AI — given lofty expectations for earnings and spending. Inflation concerns may also resurface, he noted, reducing prospects for rate cuts, while continued labor market weakness could add to economic uncertainty.
“The consensus among Wall Street investment strategists is that the magic will last,” said Ed Yardeni, founder of Yardeni Research. “However, the first half of 2026 could see a correction if bond yields rise significantly, given mounting concerns that monetary and fiscal policies might be overly stimulative.”
What supports stock prices over the long term are expanding earnings, which essentially require a growing economy, according to Jose Torres at Interactive Brokers.
“If the reacceleration continues as we flip the calendar, the market doesn’t need monetary policy accommodation to continue appreciating,” he said.
Torres expects “sufficient fuel” from fiscal stimulus, lighter taxation, capital expenditure depreciation incentives, milder regulations, and subdued energy costs to sustain the run, amid amplified top and bottom lines.
Corporate Highlights:
Target Corp. rose after the Financial Times reported that an activist investor built up a stake in the big-box retailer, citing people it didn’t identify. Warner Bros. Discovery Inc. slid after a report from the New York Post that Paramount Skydance could walk away from its $30-per-share cash bid and instead litigate against the company’s board for how it handled the process. Coupang Inc. rose after Yonhap News reported the e-commerce company has identified the former employee who allegedly accessed personal data of 33 million customers and retrieved all hard disk drives and devices that the ex-worker used. Coinbase Global Inc. Chief Executive Officer Brian Armstrong said that a former customer service agent for the largest US crypto exchange was arrested in India, months after hackers bribed customer service representatives to gain access to customer information. Tory Bruno, the former chief executive officer and president of United Launch Alliance, will become the president of the new national security group at Blue Origin, the Jeff Bezos-founded space venture that is one of ULA’s biggest suppliers and rivals. China Vanke Co., which just days ago got a reprieve on a local bond, has gained further breathing room after investors agreed to extend the grace period of another note, helping the embattled developer avert an imminent default once again. A Dutch nonprofit is seeking €1.4 billion ($1.6 billion) in compensation from Tata Steel’s Netherlands units, alleging that harmful emissions from its operations have caused environmental harm and health damage to nearby residents. Indian technology services provider Coforge Ltd. agreed to buy Encora at an enterprise value of $2.35 billion in an all-stock deal, adding artificial intelligence, data and product engineering expertise. Some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 3 p.m. New York time The Nasdaq 100 was little changed The Dow Jones Industrial Average fell 0.2% The MSCI World Index was little changed Bloomberg Magnificent 7 Total Return Index was little changed The Russell 2000 Index fell 0.7% Nvidia rose 1.8% Freeport rose 1.7% Target rose 2.1% Warner Bros Discovery fell 1.4% Coupang rose 7.2% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1775 The British pound fell 0.2% to $1.3497 The Japanese yen fell 0.5% to 156.54 per dollar Cryptocurrencies
Bitcoin fell 0.5% to $87,385.87 Ether fell 0.7% to $2,924.14 Bonds
The yield on 10-year Treasuries was little changed at 4.13% Germany’s 10-year yield was unchanged at 2.86% Britain’s 10-year yield was little changed at 4.51% The yield on 2-year Treasuries declined two basis points to 3.48% The yield on 30-year Treasuries advanced two basis points to 4.82% Commodities
West Texas Intermediate crude fell 2.8% to $56.72 a barrel Spot gold rose 0.9% to $4,520.39 an ounce ©2025 Bloomberg L.P.
