U.S. equity markets ended the week on a firmer note, extending a late-week rally that helped major indexes stabilize after recent volatility. While the gains were modest, the tone was constructive, with investors increasingly focused on cooling inflation, a supportive central bank backdrop, and the prospect of a broader market rally as 2025 draws to a close.
The $S&P 500(.SPX)$ rose 0.9% on Friday, securing a small weekly gain of 0.1% and avoiding a second consecutive weekly decline for the first time since June. The Nasdaq Composite outperformed, climbing 1.3% on the day and 0.4% for the week, driven largely by renewed strength in technology stocks. $NVIDIA(NVDA)$ $Micron Technology(MU)$ $Palantir Technologies Inc.(PLTR)$
The Dow Jones Industrial Average gained 183 points on Friday, though it still finished the week down 0.6%, reflecting continued divergence beneath the surface of the market.
Trading conditions were relatively calm, with limited economic data and lighter participation typical of late December.
Inflation Relief Supports Sentiment
Investor confidence remained buoyed by Thursday’s cooler-than-expected CPI report, which reinforced expectations that inflation is easing without tipping the economy into recession.
The only notable data point Friday, the University of Michigan consumer sentiment index, came in slightly below expectations, but it did little to dampen the market’s positive mood. Inflation relief continues to outweigh softer sentiment indicators in shaping near-term equity positioning.
Leadership Broadens Beyond Mega-Cap Tech
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While AI-related technology stocks led Friday’s advance, gains were not limited to tech alone. Industrials, healthcare, financials, and materials all posted solid performances, signaling a potential broadening of market leadership.
Looking Ahead: Seasonality Meets Caution
With just seven trading days left in 2025, attention now turns to the traditionally strong Santa Claus rally period, which typically spans the final five trading days of the year and the first two of January.
Santa Claus rally
Next week will be quiet, with no major earnings reports and limited top-tier economic data, though investors will receive updated GDP and durable goods figures during the holiday-shortened trading week.
Conclusion
Markets are closing the year with cautious optimism. Cooling inflation, a friendlier Fed narrative, and signs of broader market participation are helping stabilize sentiment after a choppy stretch. While challenges remain, particularly around AI investment discipline and uneven sector performance, the late-year rally suggests investors are increasingly focused on where the market finishes, not how it started.
[Salute][ShakeHands]
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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.
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