Weekly Index Performance (Week Ending December 19, 2025)
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S&P 500: +0.9% for the week (Closing: 6,834.50)
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Nasdaq Composite: +1.2% for the week (Closing: 23,689.05)
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Dow Jones Industrial Average: +0.4% for the week (Closing: 48,134.89)
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Russell 2000: +0.8% for the week (Closing: 2,526.98)
Volatility subsided, with the VIX easing back below 15 (closing around 14.9), reflecting calmer market internals and increasing confidence that inflation will continue trending downward into year-end.
Inflation and Policy: A Timely Holiday Gift
The long-awaited (and delayed) November CPI report finally landed on Thursday—and delivered a result even better than risk assets were hoping for.
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Headline CPI: +0.2% month-over-month, +2.7% year-over-year (vs. +3.1% forecast).
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Core CPI: +0.2% month-over-month, +2.6% year-over-year.
Disinflation was driven by easing shelter costs and a pullback in energy. The data, which covered the government shutdown period, was viewed with some caution but largely reinforced the Fed’s view that the inflation fight is won. Market-implied probabilities for another rate cut in early 2026 remain high.
Corporate Highlights: Mergers and Macro
Earnings season has largely wrapped, but corporate headlines continued to move individual names:
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Netflix (NFLX): Shares remained in focus as the Warner Bros. Discovery saga intensified. Contrary to cooling rumors, the WBD Board formally recommended shareholders approve the Netflix merger agreement on Wednesday, rejecting a hostile $30/share bid from Paramount.
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Broadcom (AVGO): Rebounded +3% on Friday, recovering from earlier weakness. While there was no new buyback announcement this week (the active $10B program runs through Dec 31), the stock moved in sympathy with the broader chip sector rally.
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NVIDIA (NVDA): Added +4% on Friday following reports that the Trump administration is reviewing restrictions on advanced AI chip sales to China, sparking hopes for a more favorable export environment.
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Delta (DAL): Gained +2% as lower fuel prices signal tailwinds for Q1 guidance.
Macro Data: Stabilization Across Sectors
Economic figures continue to reflect a "soft landing" landscape—modest growth, lower inflation, and resilient labor markets.
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Initial jobless claims: 221,000 (near cycle lows).
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Retail sales: +0.4% in November, driven by holiday spending and travel.
Valuation & Positioning: Still Rich, But Broadening
With the S&P 500 trading near 22x forward earnings, valuations remain historically elevated. However, the drop in Treasury yields following the CPI print provides support for these multiples.
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Bull Case: Momentum appears to be spreading beyond megacap tech. Seasonality, lower rates, and the "Goldilocks" inflation data could propel a "Santa Claus" rally through year-end.
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Bear Case: Profit-taking risk remains high. With the 10-year Treasury yield hovering near 4%, any hot economic data in early 2026 could challenge the soft-landing narrative.
Looking Ahead: Final Stretch of 2025
The coming holiday-shortened week features subdued trading volumes. Most portfolio managers now appear focused on tax-loss harvesting and positioning for 2026’s macro themes: real yields, productivity trends, and the continued consolidation of the streaming landscape.
