Weekly Market Performance — December 12, 2025

Markets Blog

David Matzko, LPL Research

LPL Research provides its Weekly Market Performance for the week of December 8, 2025. This week could be classified as the tale of two halves for stocks, with the first half of the week characterized by muted trading ahead of the highly anticipated December Federal Reserve (Fed) rate decision. While the latter half saw stocks whipsaw and erase a modest weekly gain for the S&P 500. International stocks were mixed, with European shares trading flat while the Asia-Pacific region closed mostly higher with local central banks broadly in focus. Meanwhile, Treasury yields continued to face upward pressure, while the U.S. dollar and commodity markets dipped over the last five days.

Index Performance

U.S. and International Equities

U.S. Equities: Major U.S. averages closed mixed this week with the S&P 500 and Nasdaq ending below the flatline while the Dow and small cap Russell 2000 advanced. Equity trading was relatively quiet throughout the first half of the week, tempered by a rising yield backdrop as investors held back on outsized bets ahead of the Fed’s final monetary policy decision of the year. Fed Chair Jerome Powell and company delivered a third consecutive 0.25% rate cut on Wednesday, and while the policy decision and expectations of just one cut in 2026 matched expectations, stocks jumped on a less hawkish-than-feared tone around the economic and inflationary outlook, overshadowing remarks that the central bank is well positioned to wait. Plus, the authorization of additional Treasury purchases was flagged as a risk sentiment tailwind.

Stocks briefly moved higher, scoring fresh records on Thursday as investors rotated toward cyclical pockets of the market on dented AI sentiment as Oracle’s (ORCL) quarterly report failed to meet Wall Street’s high hopes. However, big tech heavyweights led a Friday slide after an earnings beat from Broadcom (AVGO) was shrugged off as the semiconductor software provider’s sales outlook fell short of lofty expectations. Adding to Friday’s risk-off mood were hawkish-leaning remarks from Fed members favoring slightly more restrictive policy due to inflation running above the Fed’s target level. Some consumer takeaways were also in focus this week after JPMorgan Chase (JPM) raised 2026 expense forecasts and stated consumers appear fragile, while Home Depot (HD) offered underwhelming 2026 fiscal year guidance.

International Equities: European stocks ended flat on the week, reversing week-to-date gains on Friday as U.S. stocks fell to end the week. Local central banks also drew attention this week, in addition to U.S. monetary policy. The European Central Bank (ECB) was in focus ahead of next week’s rate decision, with headlines flagging members beginning to turn away from dovish rhetoric. ECB speakers stated their support for the central bank’s wait-and-see stance ahead of next week’s decision, while market chatter surrounded recent economist surveys suggesting the next move may be a rate hike. Plus, the Swiss National Bank (SNB) held rates steady despite inflation reaching six-month lows in November. Elsewhere, Germany was among the outperformers as aerospace and defense names received a boost after lawmakers prepared to approve 29 contracts totaling $61 billion for military gear and services.

Major Asian markets ended mixed on the week. Japanese shares outperformed, broadly dominating headlines ahead of next week’s highly anticipated Bank of Japan (BOJ) rate decision. Market pricing for a rate hike remained above 90%, lifting key beneficiaries to outperformance such as banking and insurance names. Investor sentiment also received a boost after Finance Minister Katayama stated bonds will be managed appropriately, alleviating some anxiety over recent bond and currency turbulence. Meanwhile, Hong Kong dropped, weighed down by chip-related shares after President Trump provided NVIDIA (NVDA) with authorization to ship its H200 chips to China. Although, Hong Kong and mainland China pared losses Friday after policymakers pledged fiscal and monetary policy support in 2026 at the conclusion of the annual Central Economic Work Conference. South Korea, Taiwan, and Australia all rose.

Fixed Income, Currency, and Commodity Markets

Fixed Income, Currency, and Commodity Markets

Fixed Income: Core bonds, measured by the Bloomberg Aggregate Index, traded lower this week, with Treasuries tracking their worst week since June. Headlines over the last five days have been focused on President Trump’s expected nomination of White House National Economic Council Director Kevin Hassett as the next Fed Chair when Jerome Powell’s term ends in May. Hassett generally holds a dovish stance, suggesting prioritization of growth and employment through aggressive rate cuts, if needed. Reports around the expected nomination led to a modest steepening of the U.S. Treasury yield curve, with short-term yields falling and inflation breakevens widening slightly, signaling expectations of easier monetary policy and mild inflation concerns. However, yields were driven higher by doubts on how much the Fed might lower rates in 2026.

Meanwhile, upward pressure on yields this week was likely spilling over from an extended rise in JGB yields. The massive stimulus plan recently unveiled by the Takaichi administration has added upward pressure on yields on fresh fiscal jitters, as well as monetary policy concerns due to friction between central bankers and the administration. However, long-dated JGBs felt some relief this week following a strong 30-year auction and reports that Tokyo is willing to accept a Bank of Japan (BOJ) rate hike. However, the rest of the Treasury curve continued to move higher, with the 10-year yield trading near 19-year highst still believes the Fed will cut rates three more times by the end of 2026.

Commodities and Currencies: The broader commodities complex traded higher this week. West Texas Intermediate (WTI) crude oil reversed intra-week weakness after Russia-Ukraine peace talks failed to yield an agreement amid a surge in attacks against Russian energy infrastructure. Increased attacks supported crude as tankers loading in the Black Sea may demand higher rates, although elevated production elsewhere and oversupply concerns continue to linger. Gold traded slightly lower on the week through Friday afternoon, remaining above $4,200/ounce. Firmed rate cut expectations and a weaker dollar were supportive for the yellow metal, however, this support was countered by profit taking and ebbing haven buying. The U.S. dollar index was dragged lower by the bolstered rate cut hopes, while the yen and pound strengthened.

Economic Weekly Roundup

Is Goldilocks Here? Fed Chair Powell and team voted to cut rates by 0.25% to a target range of 3.50–3.75%, to no surprise. However, the new Summary of Economic Projections (SEP) seems to paint the Goldilocks scenario. Compared to the previous edition, the current SEP has higher growth expectations, lower inflation, and lower unemployment. Inflation must cool significantly for the committee to cut more than two times in 2026. The Federal Open Market Committee (FOMC) growth expectations and unemployment forecasts are too strong for committee members to pencil in three cuts. Our view is that inflation will materially ease throughout next year. As an aside, investors will have to wait until next year to hear the name of Chair Powell’s likely successor. Kevin Hassett, the current Director of the National Economic Council is the favored candidate based on betting market odds.

Bottom line: There is no risk-free path for monetary policy, but it seems the committee is banking on higher productivity as the magic elixir, producing stronger growth despite softer job creation and without a resurgence of inflation. FOMC projections of stronger growth and lower unemployment suggest the Fed could remain on hold in Q1, especially if the economy responds to the tailwinds from fiscal and policy support. The first cut next year may come as late as Q2 but too early to tell.

The Week Ahead

The following economic data is slated for the week ahead, but some U.S. government data releases are slated for intermittent release before month-end due to the recent shutdown.  

• Monday: Empire Manufacturing (Dec), NAHB Housing Market Index (Dec)

• Tuesday: Change in Nonfarm, Private, and Manufacturing Payrolls (Nov), Average Hourly Earnings (Nov), Average Weekly Hours All Employees (Nov), Unemployment Rate (Nov), Underemployment Rate (Nov), Labor Force Participation Rate (Nov), Retail Sales (Oct), New York Fed Services Business Activity (Dec), S&P Global U.S. Manufacturing, Services, and Composite PMIs (Dec preliminary), Business Inventories (Sep)

• Wednesday: MBA Mortgage Applications (Dec 12)

• Thursday: Initial Jobless Claim (Dec 13), Continuing Claims (Dec 6), Headline and Core CPI), Real Average Hourly and Weekly Earnings (Nov), Philadelphia Fed Business Outlook (Dec), Kansas City Fed Manufacturing Activity (Dec), Total Net TIC Flows (Oct), Net Long-term TIC Flows (Oct)

• Friday: Existing Home Sales (Nov), University of Michigan Consumer Sentiment Report (Dec final), Kansas City Fed Services Activity (Dec)

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

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This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

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