S&P 500 Extends Record-Breaking $17.5 Trillion Run: Markets Wrap

(Bloomberg) — A relatively quiet session on Wall Street before Christmas saw stocks hitting all-time highs, with more signs the jobs market is not quickly deteriorating supporting bets on a soft economic landing.

Investors hoping for a “Santa Claus Rally” — which typically encompasses the last five trading sessions of the year and the first two of the new one — saw the S&P 500 rising at the start of that period. Volume was almost 50% below the average of the past month. Bond yields and the dollar fell.

The subdued action contrasts with the extreme turbulence driven by the tariff storm earlier in the year that put the equity benchmark on the brink on a bear market. Since then, stocks have surged, with every dip being bought at record pace and the fear of missing out dominating sentiment.

While the impressive rally briefly stalled as exuberance over artificial intelligence was questioned in the final stretch of the year, bets the Federal Reserve will have further room to cut rates in 2026 kept fueling optimism over Corporate America’s profits.

“We believe investors should position for further advances in equity markets,” Ulrike Hoffmann-Burchardi at UBS Global Wealth Management said this week. “We maintain our attractive rating on US equities. We find compelling opportunities in tech, health care, utilities, as well as financials, which should broaden the foundation for further gains.”

As traders parsed the latest economic data, they’re sticking with their call that the Fed makes two quarter-point reductions in policy rates next year, one more than officials’ median forecast.

Applications for US unemployment benefits fell last week, highlighting the seasonal swings in the data at this time of year. Wednesday’s figures are consistent with a labor market seeing relatively low layoffs, a trend that has remained intact throughout the year despite heightened economic uncertainty.

“For now, we expect two rate cuts next year, likely in the first half, and, provided unemployment doesn’t spiral, a resilient economy, cooling inflation and easier policy should be supportive for risk assets in the year ahead,” Magdalena Ocampo at Principal Asset Management said this week.

The S&P 500 hovered near 6,930. A closely watched volatility gauge — the VIX — hit the lowest this year. Intel Corp. fell after a report that Nvidia Corp. halted a test to use Intel’s production process to make advanced chips. Nike Inc. climbed about 5%.

The yield on 10-year Treasuries slid three basis points to 4.14%. The dollar dropped 0.1%. Trading at the New York Stock Exchange wraps up at 1 p.m. local time, while the recommended close for Treasuries is one hour later.

“The stock market is finally starting to eke out some gains for December after a choppy few weeks, and just in time for the market’s Santa Claus rally, which we expect to take place in its typical format via the last several trading days of the year,” said Paul Stanley at Granite Bay Wealth Management.

With the S&P 500 heading toward its third straight year of double-digit gains, questions about a shift in leadership have surfaced amid lofty tech valuations and concerns about ambitious AI spending plans.

“Investors often view the Magnificent Seven stocks as a single, unified force, assuming they move in lockstep and that the broader market’s success depends on their leadership,” said Brian Levitt at Invesco. “This perception is understandable given their outsized weight in major indexes, but it oversimplifies reality.”

In fact, Levitt notes that the narrative doesn’t match the numbers. Most of these megacaps are actually underperforming the S&P 500 this year — with the US equity benchmark up about 18% in the span.

“Valuations in tech are high, but some Magnificent Seven names have actually underperformed the S&P 500 this year, which suggests that there is still more room to run and that not all tech stocks are trading at runaway or complacent valuations,” Stanley said.

Meantime, breadth is becoming healthier, with an increasing number of stocks participating in the rally.

“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.”

Seasonal tailwinds may help, but confirmation via breadth and participation is still required, Johnson noted.

“Seasonals remain favorable, and we see at least 5% upside into year-end,” said Thomas Lee at Fundstrat Global Advisors. “And this is arguably the base case, given that in 2025, the Fed only started cutting in September.”

Lee noted that his mirrors September 1998 and September 2024. In both instances, S&P 500 gained 13% in the fourth quarter.

“The Federal Reserve will likely refrain from any more rate cuts until there is a new Fed Chair mid-year,” said Clark Bellin at Bellwether Wealth. “We believe stocks can move higher during this time even without additional rate cuts from here.”

Corporate Highlights:

Nike Inc. rose after a filing showed that Apple Inc.’s Tim Cook purchased $2.95 million worth of shares on Dec. 22. Tricolor Holdings founder Daniel Chu collected nearly $30 million in compensation in the year leading up to the subprime auto lender’s collapse amid alleged fraud, according to a lawsuit filed by the trustee overseeing the company’s liquidation. Sanofi agreed to buy Dynavax Technologies Corp. for about $2.2 billion, as it seeks to expand a vaccines business currently anchored by its flu shot franchise. BP Plc agreed to sell a majority stake in its Castrol lubricants division to US investment firm Stonepeak Partners, marking a key milestone as the oil and gas major seeks to reduce debt and reset its business. KKR & Co. and PAG agreed to buy the real estate holdings of beermaker Sapporo Holdings Ltd. in one of Japan’s largest property deals this year. Honda Motor Co. will buy out LG Energy Solution Ltd.’s facilities and other assets from their joint battery plant in Ohio for about 4.2 trillion won ($2.9 billion) as America’s pullback in electric vehicles continues to ripple across the industry’s supply chain. Tokyo Electric Power Co. plans to restart the world’s largest nuclear power plant next month, marking the Japanese utility’s return to atomic energy nearly 15 years after the Fukushima disaster. China’s Jiangxi Copper Co. has agreed to buy copper miner SolGold Plc in a deal that values the company at little over $1 billion. Chinese home appliance maker Haier Smart Home Co. agreed to sell a 49% stake in its India unit to Bharti Enterprises Ltd. and Warburg Pincus. Some of the main moves in markets:

Stocks

The S&P 500 rose 0.3% as of 12:30 p.m. New York time The Nasdaq 100 rose 0.2% The Dow Jones Industrial Average rose 0.6% The MSCI World Index rose 0.2% Bloomberg Magnificent 7 Total Return Index was little changed The Russell 2000 Index rose 0.3% Intel fell 1.3% Nike rose 4.7% Currencies

The Bloomberg Dollar Spot Index fell 0.1% The euro fell 0.1% to $1.1780 The British pound fell 0.1% to $1.3501 The Japanese yen rose 0.2% to 155.93 per dollar Cryptocurrencies

Bitcoin fell 0.4% to $87,301.7 Ether fell 1.1% to $2,940.62 Bonds

The yield on 10-year Treasuries declined three basis points to 4.14% Germany’s 10-year yield was little changed 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 3.51% The yield on 30-year Treasuries declined three basis points to 4.79% Commodities

West Texas Intermediate crude rose 0.1% to $58.46 a barrel Spot gold fell 0.1% to $4,478.82 an ounce ©2025 Bloomberg L.P.