Here is Schwab's early look at the markets for Monday, December 22.
Earnings and data grow scarce this week and next, while trading volume could thin. U.S. markets close at 1 p.m. ET on Wednesday for Christmas Eve before shutting for Thursday's Christmas holiday. This means investors might discount any strong up or down moves, owing to possible lack of conviction.
The end of the year sometimes brings volatility due to thin volume and "window dressing" as fund managers use the final days to close losing positions and buy shares that performed better. However, volatility ended last week in deep slumber, with the Cboe Volatility Index below 15.
Improving sentiment around AI and bitcoin helped the S&P 500 index avoid a second straight week of losses Friday following four straight declines through Wednesday. It remains down slightly for December, still on pace for its first losing month since April but close to break-even for the month. Oracle, which suffered deep losses earlier this month, put a charge into the tech sector Friday as it rose more than 6% on news TikTok has an agreement to sell its U.S. business to a joint venture controlled in part by Oracle, Silver Lake, and Abu Dhabi-based MGX.
Though stocks struggled much of the last two months as investors rotated out of tech stocks amid AI spending worries, the S&P 500 index remains on pace for solid double-digit gains this year, the third year in a row of strong performance. This came despite notable policy uncertainty throughout 2025 that sent volatility soaring several times.
"The economy has proven to be incredibly resilient," said Liz Ann Sonders, chief investment strategist at the Schwab Center for Financial Research, or SCFR. "The market has done what it often does, which is climb a wall of worry."
A Bank of Japan, or BOJ, rate hike put central bank policy front and center Friday. Though not unexpected, the decision took rates there to a 30-year high and means Japanese investors might extract money from U.S. investments and put it to work at home as yields grow more attractive. U.S. Treasuries, along with the dollar, could be canaries in the coal mine for such moves.
A more hawkish policy by the BOJ over time could mean Japanese investors extract funds from U.S. investments to put their money to work at home. The U.S. 10-year Treasury note yield climbed four basis points Friday to 4.15%, partly supported by the BOJ move, though policy makers there didn't signal further hikes in the immediate future.
This followed a drop in yields Thursday following benign U.S. Consumer Price Index, or CPI data. Analysts have doubts about CPI's accuracy due to the government shutdown.
"Like the labor market, we’ll need to see a few more months of data now the government is open to better gauge the state of the economy," said Collin Martin, head of fixed income research and strategy, SCFR. "The near-term timing of cuts hasn’t changed—the likelihood of a cut in January is still low—but the fed funds futures market has priced in a higher probability of a cut this spring. If yesterday’s inflation trend is confirmed, then an earlier rate cut would be justified."
Martin noted that the 2-year Treasury yield late last week was at the bottom of the 3.4% to 3.6% range it’s held since early September, while the 10-year yield was near the high-end of the 4% to 4.2% range it’s held.
"Those yields should be driven more by the expected terminal rate rather than short-term shifts in the actual timing of rate cuts," Martin said. "We continue to expect the 10-year yield to hover near 4% unless economic growth is expected to slow considerably."
The terminal fed funds rate—which represents where rates are expected to ultimately settle to not hurt growth or spark inflation—is expected to be around 3%, according to the Fed's recent quarterly projections.
New York Fed President John Williams said Friday he sees no urgency for further rate cuts, Bloomberg reported.
Chances of a Fed rate cut in January ended the old week near 22%, down from 27% a couple days earlier, according to the CME FedWatch Tool. A better chance might come in March when futures trading indicates better than 50% odds of rates being lower than today.
Tomorrow provides a look back at the government's third quarter gross domestic product, or GDP, among the last key data points of the year.
That report, due at 8:30 a.m. ET Tuesday, is expected to show seasonally adjusted annual growth of 3%, according to Briefing.com consensus, down from 3.8% in the government's last estimate. Still, this is backward-looking data and investors may be more focused on what the economy does this quarter during holiday shopping season. That data likely won't be available until late next month.
In data Friday, final December University of Michigan Consumer Sentiment declined to 52.9, down sharply from 74.0 a year ago. The consensus had been 53.3, unchanged from the preliminary. Long-run inflation expectations, closely watched by the Fed, stayed at 3.2%, down from November's 3.4%. Labor market expectations lifted a bit this month, though a 63% of consumers still expect unemployment to continue rising during the next year.
U.S. existing home sales for November slightly topped consensus at a seasonally adjusted annual 4.13 million, and prices continued to climb. Sales fell 1% year over year but rose 0.5% from October.
Earnings go into hibernation the next two weeks. Big banks formally kick off fourth-quarter earnings season in mid-January, and there's a lot of positive analyst sentiment around financial stocks due to the favorable yield curve, fiscal policy changes starting in 2026, and possible strength in the initial public offering (IPO) and merger environments.
In sector action Friday, info tech rallied for the second day followed by industrials, health care, and financials. Materials also finished with solid gains. The sector mix near the top suggests a continued broadening out beyond the mega caps and into sectors that might benefit from the continued AI buildout—expected to be a big economic tailwind again next year. Defensive utilities and staples finished with losses.
Eight of 11 S&P 500 sectors climbed Friday, the second day of broad gains in a row. Only five of 11 sectors rose over the full week, however.
Checking individual Friday performances, FedEx moved up about 1% as earnings topped Wall Street's consensus and the company raised the low end of its fiscal 2026 revenue growth outlook. There were also signs of progress in the company's cost-cutting initiative.
Nike skidded 11% Friday, hurt by a 17% revenue dip in its important Greater China market. That was the sixth consecutive quarter of weaker Nike sales there. Analysts said demand remains uncertain and guidance looks conservative as Nike forecast declining fiscal third quarter sales.
Lamb Weston fell nearly 26% Friday despite quarterly results exceeding analysts' earnings and revenue estimates. It also guided above consensus for fiscal 2026. Concerns about margin possibly dragged shares.
United Healthcare, Humana and other health insurers lost ground late Friday after the White House announced an initiative with pharmaceutical companies to reduce drug prices and said he would set up a meeting with health insurers to discuss how to get costs down.
Nvidia jumped 3.8% after Reuters reported that the U.S. is reviewing sales of advanced Nvidia AI chips to China.
Technically, the Nasdaq 100 and S&P 500 index enter the week looking a bit stronger on the charts after both briefly fell below their 50-day moving averages last week and clawed back to finish above them by Friday. The S&P 500's 50-day moving average of 6,767 might be a level to watch this week on any pullbacks.
The Dow Jones Industrial Average® ($DJI) added 183.04 points Friday (+0.38%) to 48,134.89; the S&P 500 index (SPX) climbed 59.74 points (0.88%) to 6,834.50, and the Nasdaq Composite® ($COMP) rose 301.26 points (+1.31%) to 23,307.62.
For the week, the DJIA slipped 0.67%, the SPX inched up 0.10%, the Nasdaq rose 0.48%, and the Russell 2000 index of small caps lost 0.86%.