State of Market: Close 12/18/25
Stocks close higher as tech leads; bonds bid with long-end yields above 4%
Micron-fueled AI rebound and cooler inflation headlines aid risk appetite; banks lag, energy ekes out gains despite softer crude; gold and silver slip while bitcoin retreats
TendieTensor.com State of Market Close
•
Overview
U.S. equities finished the session broadly higher, with technology leadership and resilience in small-caps offsetting a softer tape in financials. The S&P 500 proxy (SPY) settled above yesterday’s close, joined by gains in the Nasdaq 100 proxy (QQQ), the Dow (DIA), and the Russell 2000 (IWM). Sector performance skewed toward growth, with the tech-heavy XLK advancing, while financials (XLF) slipped. Energy (XLE) managed gains even as crude benchmarks, reflected by USO, drifted lower. In rates, Treasury ETFs across the curve (TLT, IEF, SHY) rose, consistent with a bid for duration alongside market narratives around a cooler inflation reading. Precious metals softened (GLD, SLV), and broad commodities (DBC) were weaker as both oil (USO) and natural gas (UNG) declined. In FX, the euro eased versus the dollar, while crypto traded lower, with both bitcoin (BTCUSD) and ether (ETHUSD) below their session opens by the close.
Macro backdrop: yields, inflation, expectations
Treasury benchmarks show a curve that remains upward sloping from the 2-year to the long end: 2-year at 3.48%, 5-year at 3.69%, 10-year at 4.15%, and 30-year at 4.82%. That term structure underscores a still-elevated term premium and a higher long-run real rate regime relative to the front end. The upward bias at the long end continues to influence equity valuation sensitivity and sector-relative performance, particularly for long-duration growth shares versus balance-sheet-sensitive cyclicals.
On the inflation front, the Bureau of Labor Statistics’ headline CPI index for November stands at 325.031, with core CPI at 331.068. Market-based inflation expectations remain relatively anchored: the 5-year breakeven is 2.35%, the 10-year 2.27%, and the 5y5y forward 2.18%. That combination—sticky but not accelerating realized price levels, alongside contained long-run expectations—has supported the day’s bid in duration and risk assets. Today’s session was also influenced by headlines noting a cooler-than-expected consumer inflation figure (per CNBC coverage), a narrative consistent with the constructive tone in rates and growth equities.
Fed commentary remains a swing factor. MarketWatch highlighted remarks from a top Fed candidate, Christopher Waller, who sees inflation declining over the next few months and room for a moderate rate-cut path. At the same time, prior commentary from the Atlanta Fed’s Raphael Bostic suggested caution about the pace of future easing. For now, stable medium-term inflation expectations and an improved growth/inflation mix provided enough room for equities to advance and Treasurys to rally on the day.
Equities and sectors
- SPY finished above its prior close, with the last trade at 676.48 compared with 671.40 yesterday. That advance reflects broad participation, with gains in both large-cap growth and small-caps.
- QQQ outperformed, closing at 609.15 versus 600.41 previously, tracing strength in mega-cap tech and semiconductors.
- DIA posted a marginal gain to 480.49 (479.80 prior), helped by a steady industrial complex despite crosscurrents in commodities and AI-related capital-spending headlines.
- IWM added to breadth, closing at 248.72 versus 247.24, a constructive sign for risk appetite and domestic cyclicals into year-end.
At the sector level, dispersion remained notable:
- XLK advanced to 141.53 from 139.39. Technology benefitted from a rebound in the AI complex tied to Micron’s strong results and upbeat outlook, as reported by MarketWatch, which lifted sentiment across select chip names. Separate coverage cautioned that the AI trade may not be fully “back” until more durable catalysts arrive next year, underscoring how earnings and capex visibility remain the critical swing variables.
- XLF slipped slightly to 54.54 from 54.63, lagging the tape even as some bank-specific commentary from CNBC referenced rising price targets after strong recent runs. With long-end yields still elevated, loan growth, credit costs, and capital return remain in focus, and investors used strength to consolidate in the group today.
- XLE rose to 43.195 from 42.76, an interesting divergence versus softer crude benchmarks (USO down). That lift may reflect positioning and relative valuation dynamics within the sector more than commodity-tape confirmation today.
- XLV edged up to 153.90 from 153.79. MarketWatch highlighted filings by Eli Lilly and Novo Nordisk for next-generation weight-loss drugs, keeping attention on innovation-led demand trends within healthcare. Defensive characteristics and secular growth stories continue to be a stabilizer for the sector.
Thematically, AI remained a central narrative driver. Beyond Micron’s beat, market writers flagged concerns around debt-funded data center buildouts pressuring some AI beneficiaries, with Oracle’s shares cited under pressure earlier this week on funding chatter. Another MarketWatch piece noted that CoreWeave and Nebius shares rebounded as debt fears moderated, showing how quickly sentiment can swing as investors parse financing, customer demand, and utilization trends. Today’s upside in tech suggests the market is still willing to reward credible earnings and capex roadmaps even as it discounts parts of the ecosystem with more tenuous funding.
Bonds
Treasurys rallied across the curve:
- TLT last traded 88.205 versus 87.80 previously.
- IEF closed at 96.76 from 96.52.
- SHY ended at 83.025 from 82.97.
The synchronized bid—from short to long maturities—aligns with the day’s inflation narrative and steady inflation expectations. With the 10-year yield level at 4.15%, the carry and duration trade remains sensitive to upcoming price data and policy remarks. A MarketWatch piece noted that bonds are on track for their best year since 2020, but warned not to extrapolate returns into next year given possible volatility in inflation and rates. Today’s move fits within that cautionary framework: favorable data can extend the rally, but the room for error narrows if growth or prices re-accelerate.
Commodities
- GLD dipped to 398.53 from 399.29, a modest pullback in bullion despite lower real-rate narratives. Metals sentiment is mixed: MarketWatch featured a contrarian call to take profits in silver after a record-breaking run, while another note argued precious metals could “party like the 1970s.”
- SLV fell to 59.31 from 60.26, consistent with the profit-taking angle some analysts suggested.
- USO eased to 67.185 from 67.98. MarketWatch framed 2025 as a historic year for oil with prices tracking toward five-year lows, citing ample supply and softer demand—factors that continue to cap rallies even as production adjusts.
- UNG declined to 12.02 from 12.64, reflecting ongoing softness in natural gas.
- DBC, a diversified commodities proxy, slipped to 22.695 from 22.85, echoing the weaker energy complex and softer metals.
FX and crypto
- EURUSD’s mark stood near 1.1722 by the close, below its reported open around 1.1742, indicating a modest euro slip versus the dollar. That move sits comfortably with the day’s risk-on tone in U.S. equities and stable inflation expectations, but the magnitude was contained.
- BTCUSD marked around 85,092, down from a reported open near 86,731; ETHUSD was about 2,802 versus an open near 2,837. Crypto’s pullback today contrasts slightly with equity risk appetite, suggesting traders continue to distinguish between macro-driven duration trades and idiosyncratic crypto flows.
Notable company and policy headlines
- Semiconductors/AI: MarketWatch reported Micron’s beat and positive outlook, underpinning broader chip gains, yet other coverage flagged that the AI trade’s more durable phase may not arrive until 2026. Oracle-related funding chatter and subsequent rebounds in CoreWeave/Nebius highlight the market’s sensitivity to AI capex funding dynamics.
- Banks: A CNBC note pointed to increased price targets on select bank stocks after strong runs. Despite that, XLF ended slightly lower today, a reminder that near-term positioning can overshadow incremental positive fundamental takes.
- Healthcare/Obesity: MarketWatch highlighted filings by Eli Lilly and Novo Nordisk for next-generation weight-loss drugs, a key secular theme supporting the healthcare complex.
- Cannabis: MarketWatch reported marijuana stocks jumping on expectations that President Trump could sign an executive order to reclassify the drug—an ongoing policy watch item that could shift regulatory and operating frameworks for the industry.
- Energy: MarketWatch chronicled a historically weak year for oil prices as supply exceeds demand, a backdrop evident in USO’s decline today even as XLE ticked higher.
Outlook
Into year-end, flows and positioning could remain as important as fundamentals. Goldman Sachs, via MarketWatch, suggested the next two weeks may skew favorable for equities, while emphasizing that 2026 may be more about stock-picking than broad factor bets. With inflation expectations anchored around 2.2%–2.35% and the 10-year near 4.15%, the market will look for confirmation that inflation continues to cool without a sharp growth air pocket. Earnings guidance—especially from AI hardware, software, and cloud beneficiaries—will serve as the next litmus test for how quickly capex converts to profitable demand. In rates, the rally across TLT/IEF/SHY shows investors are willing to extend duration on benign inflation headlines, but the balance of risks into 2026 argues for selectivity and hedges.
What to watch next
- Incoming inflation releases for confirmation that November’s cooling persists into early 2026.
- Fed communication and dot-path proxies, with particular attention to remarks like those highlighted from Christopher Waller on moderate cuts and inflation trajectories.
- AI capex funding updates and earnings from the semiconductor ecosystem, including memory demand signals and cloud spending visibility.
- Energy supply/demand adjustments that could stabilize crude after a historically weak year; watch for USO/DBC trend inflections.
- Policy developments around cannabis rescheduling and potential downstream effects on operators and financial access.
- Market breadth and small-cap follow-through, with IWM’s resilience a constructive barometer for domestic growth sensitivity.
Risks
- Re-acceleration in inflation that lifts long-end yields above current levels, undermining duration trades and growth equity multiples.
- AI buildout funding stress or customer digestion that delays expected earnings ramps in 2026.
- Policy surprises (tariffs, tax changes, executive actions) that alter earnings trajectories or inflation dynamics.
- Commodities volatility, particularly a disorderly move in oil or gas that spills into energy equities or credit.
- FX shocks that tighten global financial conditions via a stronger dollar.
- Liquidity fragmentation into year-end that amplifies moves beyond fundamentals.
Bottom line
Today’s higher close across SPY, QQQ, DIA, and IWM reflects a constructive mix of cooler inflation headlines, anchored long-run expectations, and selective strength in growth and innovation themes. Rates markets joined the move, with gains across TLT, IEF, and SHY, even as long-end yields remain elevated on an absolute basis. Commodities softened, with oil and gas weakness weighing on broad baskets and precious metals easing. Near term, the path of least resistance leans constructive so long as inflation data cooperate and AI-related earnings visibility continues to firm. But as multiple sources cautioned, 2026 is shaping up to be a stock picker’s market, with dispersion across sectors and themes likely to persist.
Overview
U.S. equities finished the session broadly higher, with technology leadership and resilience in small-caps offsetting a softer tape in financials. The S&P 500 proxy (SPY) settled above yesterday’s close, joined by gains in the Nasdaq 100 proxy (QQQ), the Dow (DIA), and the Russell 2000 (IWM). Sector performance skewed toward growth, with the tech-heavy XLK advancing, while financials (XLF) slipped. Energy (XLE) managed gains even as crude benchmarks, reflected by USO, drifted lower. In rates, Treasury ETFs across the curve (TLT, IEF, SHY) rose, consistent with a bid for duration alongside market narratives around a cooler inflation reading. Precious metals softened (GLD, SLV), and broad commodities (DBC) were weaker as both oil (USO) and natural gas (UNG) declined. In FX, the euro eased versus the dollar, while crypto traded lower, with both bitcoin (BTCUSD) and ether (ETHUSD) below their session opens by the close.
Macro backdrop: yields, inflation, expectations
Treasury benchmarks show a curve that remains upward sloping from the 2-year to the long end: 2-year at 3.48%, 5-year at 3.69%, 10-year at 4.15%, and 30-year at 4.82%. That term structure underscores a still-elevated term premium and a higher long-run real rate regime relative to the front end. The upward bias at the long end continues to influence equity valuation sensitivity and sector-relative performance, particularly for long-duration growth shares versus balance-sheet-sensitive cyclicals.
On the inflation front, the Bureau of Labor Statistics’ headline CPI index for November stands at 325.031, with core CPI at 331.068. Market-based inflation expectations remain relatively anchored: the 5-year breakeven is 2.35%, the 10-year 2.27%, and the 5y5y forward 2.18%. That combination—sticky but not accelerating realized price levels, alongside contained long-run expectations—has supported the day’s bid in duration and risk assets. Today’s session was also influenced by headlines noting a cooler-than-expected consumer inflation figure (per CNBC coverage), a narrative consistent with the constructive tone in rates and growth equities.
Fed commentary remains a swing factor. MarketWatch highlighted remarks from a top Fed candidate, Christopher Waller, who sees inflation declining over the next few months and room for a moderate rate-cut path. At the same time, prior commentary from the Atlanta Fed’s Raphael Bostic suggested caution about the pace of future easing. For now, stable medium-term inflation expectations and an improved growth/inflation mix provided enough room for equities to advance and Treasurys to rally on the day.
Equities and sectors
- SPY finished above its prior close, with the last trade at 676.48 compared with 671.40 yesterday. That advance reflects broad participation, with gains in both large-cap growth and small-caps.
- QQQ outperformed, closing at 609.15 versus 600.41 previously, tracing strength in mega-cap tech and semiconductors.
- DIA posted a marginal gain to 480.49 (479.80 prior), helped by a steady industrial complex despite crosscurrents in commodities and AI-related capital-spending headlines.
- IWM added to breadth, closing at 248.72 versus 247.24, a constructive sign for risk appetite and domestic cyclicals into year-end.
At the sector level, dispersion remained notable:
- XLK advanced to 141.53 from 139.39. Technology benefitted from a rebound in the AI complex tied to Micron’s strong results and upbeat outlook, as reported by MarketWatch, which lifted sentiment across select chip names. Separate coverage cautioned that the AI trade may not be fully “back” until more durable catalysts arrive next year, underscoring how earnings and capex visibility remain the critical swing variables.
- XLF slipped slightly to 54.54 from 54.63, lagging the tape even as some bank-specific commentary from CNBC referenced rising price targets after strong recent runs. With long-end yields still elevated, loan growth, credit costs, and capital return remain in focus, and investors used strength to consolidate in the group today.
- XLE rose to 43.195 from 42.76, an interesting divergence versus softer crude benchmarks (USO down). That lift may reflect positioning and relative valuation dynamics within the sector more than commodity-tape confirmation today.
- XLV edged up to 153.90 from 153.79. MarketWatch highlighted filings by Eli Lilly and Novo Nordisk for next-generation weight-loss drugs, keeping attention on innovation-led demand trends within healthcare. Defensive characteristics and secular growth stories continue to be a stabilizer for the sector.
Thematically, AI remained a central narrative driver. Beyond Micron’s beat, market writers flagged concerns around debt-funded data center buildouts pressuring some AI beneficiaries, with Oracle’s shares cited under pressure earlier this week on funding chatter. Another MarketWatch piece noted that CoreWeave and Nebius shares rebounded as debt fears moderated, showing how quickly sentiment can swing as investors parse financing, customer demand, and utilization trends. Today’s upside in tech suggests the market is still willing to reward credible earnings and capex roadmaps even as it discounts parts of the ecosystem with more tenuous funding.
Bonds
Treasurys rallied across the curve:
- TLT last traded 88.205 versus 87.80 previously.
- IEF closed at 96.76 from 96.52.
- SHY ended at 83.025 from 82.97.
The synchronized bid—from short to long maturities—aligns with the day’s inflation narrative and steady inflation expectations. With the 10-year yield level at 4.15%, the carry and duration trade remains sensitive to upcoming price data and policy remarks. A MarketWatch piece noted that bonds are on track for their best year since 2020, but warned not to extrapolate returns into next year given possible volatility in inflation and rates. Today’s move fits within that cautionary framework: favorable data can extend the rally, but the room for error narrows if growth or prices re-accelerate.
Commodities
- GLD dipped to 398.53 from 399.29, a modest pullback in bullion despite lower real-rate narratives. Metals sentiment is mixed: MarketWatch featured a contrarian call to take profits in silver after a record-breaking run, while another note argued precious metals could “party like the 1970s.”
- SLV fell to 59.31 from 60.26, consistent with the profit-taking angle some analysts suggested.
- USO eased to 67.185 from 67.98. MarketWatch framed 2025 as a historic year for oil with prices tracking toward five-year lows, citing ample supply and softer demand—factors that continue to cap rallies even as production adjusts.
- UNG declined to 12.02 from 12.64, reflecting ongoing softness in natural gas.
- DBC, a diversified commodities proxy, slipped to 22.695 from 22.85, echoing the weaker energy complex and softer metals.
FX and crypto
- EURUSD’s mark stood near 1.1722 by the close, below its reported open around 1.1742, indicating a modest euro slip versus the dollar. That move sits comfortably with the day’s risk-on tone in U.S. equities and stable inflation expectations, but the magnitude was contained.
- BTCUSD marked around 85,092, down from a reported open near 86,731; ETHUSD was about 2,802 versus an open near 2,837. Crypto’s pullback today contrasts slightly with equity risk appetite, suggesting traders continue to distinguish between macro-driven duration trades and idiosyncratic crypto flows.
Notable company and policy headlines
- Semiconductors/AI: MarketWatch reported Micron’s beat and positive outlook, underpinning broader chip gains, yet other coverage flagged that the AI trade’s more durable phase may not arrive until 2026. Oracle-related funding chatter and subsequent rebounds in CoreWeave/Nebius highlight the market’s sensitivity to AI capex funding dynamics.
- Banks: A CNBC note pointed to increased price targets on select bank stocks after strong runs. Despite that, XLF ended slightly lower today, a reminder that near-term positioning can overshadow incremental positive fundamental takes.
- Healthcare/Obesity: MarketWatch highlighted filings by Eli Lilly and Novo Nordisk for next-generation weight-loss drugs, a key secular theme supporting the healthcare complex.
- Cannabis: MarketWatch reported marijuana stocks jumping on expectations that President Trump could sign an executive order to reclassify the drug—an ongoing policy watch item that could shift regulatory and operating frameworks for the industry.
- Energy: MarketWatch chronicled a historically weak year for oil prices as supply exceeds demand, a backdrop evident in USO’s decline today even as XLE ticked higher.
Outlook
Into year-end, flows and positioning could remain as important as fundamentals. Goldman Sachs, via MarketWatch, suggested the next two weeks may skew favorable for equities, while emphasizing that 2026 may be more about stock-picking than broad factor bets. With inflation expectations anchored around 2.2%–2.35% and the 10-year near 4.15%, the market will look for confirmation that inflation continues to cool without a sharp growth air pocket. Earnings guidance—especially from AI hardware, software, and cloud beneficiaries—will serve as the next litmus test for how quickly capex converts to profitable demand. In rates, the rally across TLT/IEF/SHY shows investors are willing to extend duration on benign inflation headlines, but the balance of risks into 2026 argues for selectivity and hedges.
What to watch next
- Incoming inflation releases for confirmation that November’s cooling persists into early 2026.
- Fed communication and dot-path proxies, with particular attention to remarks like those highlighted from Christopher Waller on moderate cuts and inflation trajectories.
- AI capex funding updates and earnings from the semiconductor ecosystem, including memory demand signals and cloud spending visibility.
- Energy supply/demand adjustments that could stabilize crude after a historically weak year; watch for USO/DBC trend inflections.
- Policy developments around cannabis rescheduling and potential downstream effects on operators and financial access.
- Market breadth and small-cap follow-through, with IWM’s resilience a constructive barometer for domestic growth sensitivity.
Risks
- Re-acceleration in inflation that lifts long-end yields above current levels, undermining duration trades and growth equity multiples.
- AI buildout funding stress or customer digestion that delays expected earnings ramps in 2026.
- Policy surprises (tariffs, tax changes, executive actions) that alter earnings trajectories or inflation dynamics.
- Commodities volatility, particularly a disorderly move in oil or gas that spills into energy equities or credit.
- FX shocks that tighten global financial conditions via a stronger dollar.
- Liquidity fragmentation into year-end that amplifies moves beyond fundamentals.
Bottom line
Today’s higher close across SPY, QQQ, DIA, and IWM reflects a constructive mix of cooler inflation headlines, anchored long-run expectations, and selective strength in growth and innovation themes. Rates markets joined the move, with gains across TLT, IEF, and SHY, even as long-end yields remain elevated on an absolute basis. Commodities softened, with oil and gas weakness weighing on broad baskets and precious metals easing. Near term, the path of least resistance leans constructive so long as inflation data cooperate and AI-related earnings visibility continues to firm. But as multiple sources cautioned, 2026 is shaping up to be a stock picker’s market, with dispersion across sectors and themes likely to persist.