The benchmark S&P 500 ended 0.03% lower than its opening in New York, while the blue-chip Dow Jones Industrial Average fell 0.04% and the Nasdaq Composite fell 0.09%. The small dips fueled a three-session rally, but left all three higher for the week and still delivered double-digit annual percentage gains.Megacap technology companies have driven the S&P 500 higher into 2025, and investors have expanded into cyclical sectors including financials and materials, broadening the rally and leaving the major U.S. indexes with a third straight year of gains.
Data suggesting that the US economy is resilient, combined with the possibility that a new central bank chairman to replace Jerome Powell could look to cut interest rates next year, is supporting markets. Recent pressure on AI stocks due to concerns about high valuations and profit-eroding capital expenditures has also eased.
Traders were anticipating a “Santa Claus rally,” which is declared if the S&P 500 advances in the last five trading days of the current year and the first two in January. This would be considered a good omen for stocks in 2026, after a volatile year. Geopolitical tensions boosted the appeal of precious metals as a safe haven, the day after the US carried out airstrikes on Islamic State militants in northwestern Nigeria. Silver hit a record high of $77.4 an ounce after surging 167% this year, supported by supply shortages and the metal’s designation as a key mineral for the US.
A weaker dollar further boosted the appeal of dollar-denominated gold to foreign investors, sending the metal to a record $4,549 an ounce. Gold prices fell slightly in late trading but remained 1.08% higher. Soojin Kim, commodities analyst at MUFG, said in a note that the rally could continue, supported by “major banks forecasting further gains in 2026, the strength of physical demand and lingering geopolitical and monetary uncertainties.”
Oil prices fell more than 2%, weighed down by the prospect of a global supply glut and possible progress on a peace deal with Ukraine.
DOLLAR DECEMBER BLUES
Investors are preparing for 2026 and focusing on when the US Federal Reserve could cut rates and by how much. Traders are pricing in at least two cuts during the year, but they don’t expect the Fed to take action before June.
The central bank has forecast another cut next year, but divisions among decision makers have left investors tense about the policy outlook. Markets are also waiting for President Donald Trump to appoint a Fed chairman to replace Powell, whose term ends in May. Any signal of what Trump will decide could impact markets in the coming week.
As a result, the US dollar is under pressure, pushing the euro, sterling and Swiss franc to highs. The dollar index, which measures the US currency against six rivals, rose 0.08% to 98.03 on Friday.
The Japanese yen weakened against the dollar as investors continued to look for possible interventions to support the currency. Analysts say year-end trading, when volumes are tight, provides an opportunity for authorities to take action.
The yen has weakened despite the Bank of Japan raising interest rates last week. Data on Friday showed core consumer inflation in the Japanese capital slowed in December but remained above the central bank’s 2% target, strengthening the case for further rate hikes.
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