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Stocks were choppy in the second-to-last trading day of 2025 as market participants took in the final economic reports of the year. The main indexes eventually finished lower for a third straight day, which spells trouble for this year’s Santa Claus Rally.
At the close, the blue-chip Dow Jones Industrial Average was 0.2% lower at 48,367 and the tech-heavy Nasdaq Composite was down 0.2% at 23,419. The broader S&P 500 was off 0.1% at 6,896.
With today’s loss, the S&P 500 is now down 0.2% since the December 23 close – the official start of the Santa Claus Rally.
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According to LPL Chief Financial Strategist Adam Turnquist, negative returns during the seven-day period that encompasses the last five trading days of the year and the first two of the new year – the time frame for the Santa Claus Rally – have corresponded with an average January loss of -0.1% and a more modest annual return of 6.1% since 1950.
Meanwhile, positive returns during this seasonal time frame have resulted in an average January gain of 1.4% and a full-year return of 10.4%.
Since 1950, the S&P 500 has averaged a gain of 1.3% during this seasonal period.
Home prices rose more than expected in October
The stock market will be open for regular trading hours on New Year’s Eve but closed on Thursday for New Year’s Day. And the economic calendar is relatively light during the holiday-shortened week.
There were a handful of reports that were released today, including an update on home prices. The S&P Cotality Case-Shiller U.S. National Home Price’s 20-city composite was up 1.3% year over year in October, higher than the 1% increase economists expected.
Separate data from the Federal Housing Finance Agency (FHFA) also showed rising home prices in October.
“Clearly, slightly lower mortgage rates over the last several months are starting to have an impact on prices,” say Raymond James Chief Economist Eugenio Alemán and Economist Giampiero Fuentes. “Lower inventory of homes is probably putting some upward pressure on home prices across the country.”
Fed minutes reveal a divided committee
Wall Street also got a look at the minutes from the December Fed meeting. The Fed cut interest rates for a third straight time when it met in early December, though the decision wasn’t unanimous.
The Fed’s final gathering of 2025 also included the release of the Summary of Economic Projections (SEP), which indicated that most committee members anticipate just one rate cut in 2026.
“Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation declined over time as expected,” the minutes stated.
However, “some participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for some time after a lowering of the range at this meeting.”
According to CME Group FedWatch, futures traders are pricing in two 0.25% rate cuts next year – the first of which could arrive as soon as April.
In single-stock news, Meta Platforms (META) rose 1.1% after the Facebook parent said it will buy Singapore-based artificial intelligence (AI) startup Manus for more than $2 billion.
The move comes as Meta ramps up its spending in AI. And the company’s aggressive investments are “already delivering measurable improvements across Meta’s core platforms, from ad targeting to user engagement, and it’s central to future monetization opportunities,” wrote Matt Britzman, senior equity analyst at Hargreaves Lansdown in early December.
Meta’s purchase of Manus will expand the social media company’s use of AI agents, according to the press release.
Wedbush’s Dan Ives reveals top AI stock picks for 2026
Wedbush Securities analyst Daniel Ives – one of Wall Street’s biggest tech bulls – revealed his top AI stock picks for 2026 on CNBC’s “Squawk Box.” A few Magnificent 7 stocks made the list, including Apple (AAPL, -0.3%), which Ives believes could see a $100 per-share boost on its artificial intelligence monetization efforts.
Tesla (TSLA, -1.1%) and Microsoft (MSFT, +0.08%) were also included in Ives’ top picks.
Outside of the Mag 7, Ives included Palantir Technologies (PLTR, -1.8%) amid “unprecedented” demand for its AI platform. AI-powered cybersecurity firm CrowdStrike Holdings (CRWD, -0.06%) rounded out the list.
Notably absent from the top five is Nvidia (NVDA, -0.4%). While Ives says it remains a top overall pick going into the new year, he’s focused on the “derivatives of the AI revolution.”