US Markets: A Tech-Led "Santa Rally" Meets Year-End Profit Taking

Wall Street finishes 2025 within sight of record highs despite a final-week pull-back. This update covers the S&P 500's double-digit annual gains and the impact of the Federal Reserve's recent pivot.

The US stock market is ending 2025 on a high note, even as the final sessions of December saw some minor profit-taking. The S&P 500 is on track for an annual gain of over 17%, while the Nasdaq Composite has surged nearly 26% over the year, primarily fueled by the relentless expansion of Artificial Intelligence (AI) infrastructure. However, the last few days have seen heavyweights like Nvidia and Tesla ease slightly as investors lock in gains ahead of the 2026 tax year.

The defining theme of the final quarter has been the Federal Reserve's shift in policy. The Fed's December meeting minutes, released yesterday, confirmed a "deeply divided" committee that ultimately favored a third consecutive interest rate cut. This "dovish" stance has kept the 10-year Treasury yield near 4.12%, providing a cushion for equity valuations. While tech remains the leader, defensive sectors like healthcare and utilities have seen a late-December rotation as recession fears—though fading—linger in the background.

Corporate news also provided some year-end fireworks. Intel saw a significant jump after Nvidia completed a $5 billion share purchase, a move that analysts see as a strategic consolidation in the AI chip market. Meanwhile, Meta Platforms closed the year strong following its acquisition of the AI startup Manus. As traders head into the New Year, the consensus for 2026 remains cautiously optimistic, with many analysts setting S&P 500 targets near the 8,000 mark.