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US equities pulled back modestly midweek, but the broader picture for investors remains one of a strong year nearing its conclusion. The S&P 500 slipped about 0.2% on Wednesday, matching declines in the Nasdaq Composite, while the Dow Jones Industrial Average fell roughly 0.5%. The market is on a mild three-session losing streak, yet the losses have done little to dent what has been an impressive annual performance. The S&P 500 is on track for a gain of roughly 17% in 2025, its third consecutive double-digit advance, while the Nasdaq has climbed about 21% on the back of sustained enthusiasm around artificial intelligence. The Dow has lagged somewhat with a 13% gain, reflecting its lower exposure to technology stocks.

From a seasonal perspective, December has remained a buster month for equities. Both the Dow and the S&P 500 are on pace to finish the month higher, each notching what would be an eighth consecutive winning month, a streak not seen since 2018. The Nasdaq, however, has been roughly flat for the month, underscoring the more selective nature of recent gains.

Corporate and economic updates offered a mixed but generally stable backdrop. Nike (NKE) shares rose after multiple insiders, including board members and the CEO, increased their stakes following a difficult year in which the stock fell more than 17%. On the macro front, labor market data pointed to continued resilience. Initial jobless claims fell to 199K in the latest week, well below expectations, while continuing claims also declined, reinforcing the picture of a low-hire, low-fire environment as the year comes to a close.

Stocks had a rough start despite a strong finish

This strength marks a sharp recovery from the turmoil seen in early April, when sweeping tariff announcements triggered a near bear market drawdown that pushed the S&P 500 close to a 19% decline from its February high. Since then, investors have grown more confident that trade policy lessons were absorbed and that companies can adjust supply chains and pricing to protect margins. Even so, the recent softness has raised some concern, as the final trading days of the year and the first sessions of January are typically associated with the so-called Santa Claus rally. The current bout of profit taking may also be an early signal of choppier conditions ahead. While many strategists expect another positive year for stocks in 2026, there is growing debate over whether returns will be more range-bound as earnings growth works to justify elevated valuations.

Artificial intelligence continues to shape market narratives, though its influence has become more nuanced. After blockbuster gains in 2023 and 2024 tied to the emergence of generative AI, leadership broadened in 2025 and performance within the largest technology stocks diverged. Alphabet stood out with gains exceeding 65% as investors positioned it as a key AI beneficiary, while Amazon lagged with a much more modest advance. At the same time, returns outside the megacaps improved notably, with commodities delivering exceptional performance. Gold rose more than 64% this year and silver surged over 140%, putting both metals on track for their strongest annual gains since the late 1970s. This shift in market internals has fueled expectations that future returns may depend more on traditional fundamentals than on monetary policy or massive AI infrastructure spending.

Dow Jones daily chart

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