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Stocks enter final stretch of 2025 just off record highs: What to watch this week.

stock :: 2025-12-22 :: source - yahoo finance

By Jake Conley

Stocks rallied on Friday to cap a mixed week for the major averages in what served as the final full trading week of 2025.

For the week, the tech-heavy Nasdaq Composite (^IXIC) rose about 0.4%, while the blue-chip Dow Jones Industrial Average (^DJI) fell about 0.7% and the benchmark S&P 500 (^GSPC) closed little changed.

All three major indexes will enter the final seven trading sessions of 2025 within 3% of their record highs.

In the week ahead, those investors still around during the holidays will turn their attention to the prospects of a "Santa Claus rally," while a few pieces of economic data out on Tuesday will clean up some of the lagging data delayed as a result of the government shutdown.

Tuesday morning's read on consumer confidence from the Conference Board should be the key focus, with one of 2025's defining narratives centering on the K-shaped economy that has emerged among American shoppers.

Markets in the US will be open for half a day on Wednesday and closed on Thursday for Christmas. Many international markets will remain closed on Friday as well.

'Consumers will likely still feel saltier'

American consumers are heading into the holidays with a bit less joy than last year.

While data from the University of Michigan released Friday showed a moderate uptick in consumer sentiment in December versus November, at 52.9 the index is 28.5% below last December's reading.

Similarly, housing sales ticked up for the third month in a row in November, but 2025 sales are looking likely to finish the year at a 25-year low, according to data from the National Association of Realtors.

"Consumers are loud and clear that they believe that the outlook for the economy has soured quite a bit since the beginning of the year," said Joanne Hsu, the director of the survey of consumers for the University of Michigan.

While consumer spending has by and large held up throughout the back half of the year, according to Bank of America, US households in the upper third of incomes are driving more than half of that spending; around a quarter of households are living paycheck to paycheck.

"The ‘K-shaped’ economy makes for a fragmented consumer," said Jeffrey Roach, chief economist for LPL Financial. "The affluent are fine, if not thriving, while lower-income households struggle with high rent payments, rising delinquencies, and job uncertainty."

Perhaps another reason why Thursday's inflation data from the Bureau of Labor Statistics arrived as such a surprise.

At a 2.7% headline increase in prices over the last 12 months, the November reading came in significantly below expectations. The reading should give the Federal Reserve the vote of confidence it needs to cut rates again next year, building on a total 75 basis points' worth of cuts in 2025, said Bill Adams, chief economist for Comerica Bank.

"The Fed will be heartened to see total and core CPI slow" as the report "bolsters the case for more interest rate cuts in 2026," Adams said in an email.

Even so, "Consumers will likely still feel saltier about inflation than the upbeat headline would suggest, since the prices of many essentials outside of shelter continue to rise rapidly," he said.

People shop at a mall decorated with holiday lights in Manhattan on December 18, 2025 in New York City. (Photo by Spencer Platt/Getty Images). Spencer Platt via Getty Images

'All but giving the green light'

Traders wait all year for the "Santa Claus Rally," which covers the final five trading days of one year and the first two of the next as one of the market's best-performing weekly windows.

On Friday, markets showed signs of meeting history's expectations. And, notably, so did Big Tech stocks.

Oracle (ORCL) stock, which has dropped almost 40% since its highs in September on worries over its AI commitments, rose more than 7% on Friday after news broke that the company is the lead buyer in a cohort of American partners buying TikTok from its Chinese owner ByteDance.

Nvidia (NVDA) shares also rose Friday after reports from Reuters said the Trump administration is reviewing plans for Jensen Huang's chipmaking giant to sell its second-most-powerful H200 chips to Chinese buyers. Nvidia stock was up 1% during premarket trading on Monday.

Micron's (MU) earnings report last week, and the stock's more than 10% rally in response, also settled some investor fears over the state of the AI and the broader market heading into the final handful of trading days in 2025.

"Lukewarm US labour market data, a surprise drop in US inflation figures, and a notionally dovish Fed is providing support for equity prices," Capital analyst Kyle Rodda wrote in a note to clients.

"Despite the Fed all but giving the green light for a Santa Rally, justifiable fears about valuations is keeping the handbrake on the market and holding it back from record highs."

Still, most strategists on Wall Street remain positive on the market outlook heading into next year, with the economic growth and earnings backdrop also offering reasons for investor enthusiasm outside of the AI trade, which has become a crutch for many over the last few years.

"2025 has been a good example of the early optimism phase [of the macroeconomic cycle] where many equity markets ... have seen valuations rise with earnings," Goldman Sachs analysts wrote in a client note.

"We believe that the optimism phase will continue in 2026."

James Denaro works on the floor at the New York Stock Exchange in New York, Wednesday, Dec. 10, 2025. (AP Photo/Seth Wenig). ASSOCIATED PRESS

Economic and earnings calendar

Monday

Economic data: Chicago Fed national activity index, September (-0.20 expected)

Earnings calendar: No notable earnings.

Tuesday

Economic data: ADP Weekly employment change, week ended Dec. 6 (16,250 previously); Personal consumption, third quarter (+2.7% expected); Core PCE index, quarter-on-quarter, third quarter (+2.9% expected); Durable goods orders, October preliminary reading (-1.5% expected, 0.5% previously); Industrial production, month-on-month, November (+0.1% expected, +0.1% previously); Richmond Fed manufacturing index, December (-15 previously); Conference Board consumer confidence, December (92.0 expected, 88.7 previously)

Earnings calendar: No notable earnings.

Wednesday

Economic data: MBA mortgage applications, week ended Dec. 19 (-3.8% previously); Initial jobless claims, week ended Dec. 20 (223,000 expected, 224,000 previously)

Earnings calendar: No notable earnings.

Thursday

Markets closed for Christmas.

Friday

Economic data: No notable economic data.

Earnings calendar: No notable earnings.

This week top market trends.

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