State of Market: Close 12/17/25
Tech slides into the close as AI trade unwinds; commodities firm, crypto weakens, and yields hold ahead of CPI
SPY and QQQ finished below Tuesday’s closes, led lower by megacap/AI software headlines; gold, silver, oil and natural gas advanced; Treasury yields remain anchored with 10-year near 4.18% as the market awaits delayed CPI and Fed chair signals.
TendieTensor.com State of Market Close
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Equities faded into Wednesday’s close, with major U.S. index ETFs finishing below Tuesday’s levels and technology leading the pullback. The day’s tone was framed by a run of headlines suggesting the AI trade is unwinding at the margin amid funding concerns for data-center buildouts, while commodity markets strengthened and crypto extended its recent slide. Treasury yields were little changed in the latest available readings, leaving the macro backdrop steady but tense ahead of a delayed Consumer Price Index print and ongoing speculation about Federal Reserve leadership and the 2026 policy path.
Overview of the tape
- SPY last traded at 671.30 versus a previous close of 678.87, signaling a softer broad market close.
- QQQ finished at 600.36 versus 611.75 previously, underlining tech underperformance.
- DIA closed near 479.77 versus 481.98 and IWM at 247.20 versus 249.90, pointing to more modest downside across Dow components and small caps relative to the tech-heavy Nasdaq proxy.
Sector dynamics showed a clear tilt away from technology and toward defensives and commodity-linked exposures. XLK, the Technology Select Sector SPDR, ended at 139.37 versus 142.56 previously. Financials (XLF) were essentially flat at 54.63 against 54.64 prior, while Health Care (XLV) slipped to 153.81 versus 154.07. The energy sector line item in today’s feed recorded 42.75 versus 43.04 previously; notably, that entry is labeled XLE but carries an XLU symbol flag in the quote payload, so we treat it as an energy/utilities proxy rather than a definitive energy-sector read. Even so, the combination of softer tech and steadier financials/health care fit the day’s more defensive rotation.
Macro backdrop: rates, inflation, expectations
The Treasury curve in the latest available data remained inverted in the front end and anchored across the long end:
- 2-year yield: 3.51%
- 5-year yield: 3.73%
- 10-year yield: 4.18%
- 30-year yield: 4.84%
Inflation readings as of September showed CPI at 324.368 on the index level and core CPI at 330.542, while PCE sat at 127.625 with core PCE near 126.954. Market-based inflation expectations were contained into November: roughly 2.35% over five years and 2.27% over ten years. Forward five-to-ten-year pricing hovered lower still in the latest datapoint referenced in the feed. Those anchored expectations square with the day’s policy rhetoric: MarketWatch reported that Fed governor Christopher Waller, a finalist for chair, sees inflation falling over the next three to four months and room for a moderate pace of cuts—on the order of 100 basis points. At the same time, Atlanta Fed President Raphael Bostic expressed concern about inflationary risks tied to fiscal/tax policy, indicating no rate cuts in 2026 in his baseline.
Taken together, the policy narrative remains two-handed: a near-term window for gradual easing if inflation cooperates, with caveats around policy-induced price pressure. That ambiguity aligns with the stability of intermediate and long Treasury yields and the largely unchanged prices in benchmark bond ETFs today: TLT (87.825 versus 87.88 prior), IEF (96.525 versus 96.54), and SHY (82.975 versus 82.96) finished near Tuesday’s levels. Into Thursday’s delayed CPI (as highlighted by MarketWatch), the market appeared hesitant to push rates in either direction.
Equities and sectors: AI-driven drawdown inside tech
Today’s selloff in QQQ and XLK echoed several headlines pointing to fatigue in the AI trade and a reassessment of capital intensity and financing for hyperscale data centers.
- MarketWatch noted that Nvidia and Broadcom were among AI leaders falling sharply as investors scrutinize debt-funded AI infrastructure, including rumors and chatter around financing tied to Oracle and CoreWeave. A separate MarketWatch piece highlighted Broadcom’s worst three-day slide since 2020, while CNBC’s Investing Club underscored that Oracle was leading the market lower earlier in the session.
- In software, MarketWatch reported ServiceNow sinking toward its worst day in 11 months, with concerns that the company could get more acquisitive to maintain growth. Another MarketWatch item suggested Oracle’s weakness was tied to worries some analysts view as “almost irrelevant,” but the headline tone nonetheless reflected negative sentiment.
The rotation theme was also present in healthcare and staples narratives, though with milder price impact. MarketWatch observed that Eli Lilly has outperformed Nvidia in recent weeks, raising the prospect of a near-term reversal but signaling a broader market appetite for non-tech growth. Health care’s sector proxy (XLV) modestly trailed the S&P proxy today but fared better than tech.
Financials were essentially unchanged (XLF), a reasonable outcome considering the steady rate backdrop and no fresh credit shock in the day’s flow, though MarketWatch flagged persistent concerns in a key corner of financial markets and a separate item about fund managers running record-low cash balances—ingredients for a potentially more volatile response to any upside inflation surprise.
Energy and cyclicals presented a mixed picture. The sector line item recorded a slight decline in the energy/utilities slot, but commodity proxies rallied: oil (USO 67.97 versus 66.17) and broad commodities (DBC 22.84 versus 22.58) advanced, as did natural gas (UNG 12.635 versus 12.10). MarketWatch reminded investors that 2025 has been a historic year for crude with prices trending toward five-year lows; today’s bounce fits with the notion of a market overshoot that could slow supply and re-stabilize balances. Another piece argued that energy equities can behave like “the new bonds” in an inflationary landscape—a framing that resonates with today’s cross-asset moves if inflation stays sticky while rates drift lower.
Commodities: precious metals lead
Gold and silver extended gains amid policy uncertainty and tech weakness. GLD ended at 399.28 versus 395.89, while SLV finished 60.27 versus 57.73 previously. MarketWatch amplified a thesis from Albert Edwards that precious metals could be setting up for a late-1970s-style phase; whether or not investors buy the analogy, today’s resilience in gold and silver alongside flat rates and weaker tech fits a classic risk-parity hedge pattern ahead of CPI.
FX and crypto
In foreign exchange, EURUSD traded toward the top of today’s indicated range, with a mark near 1.1739 and a reported intraday span between roughly 1.1722 and 1.1739. A steadier euro versus the dollar is consistent with contained U.S. rate expectations and some reduction in U.S.-exceptionalism risk premia.
Crypto remained a pressure point. Bloomberg reported bitcoin falling below $86,000 as it sank toward the year’s lows. Into the close, BTCUSD marked around 85,869 with a session low near 85,244 in the feeds and an open above 86,700. ETHUSD traded near 2,822 versus an open around 2,932, with a low close to 2,789. The backdrop—more cautious liquidity conditions, a rethink of leverage in AI/tech, and risk-off positioning ahead of CPI—appeared to spill over into digital assets.
Notable corporate and thematic drivers
- AI funding and data centers: Multiple pieces (MarketWatch and CNBC) tied tech weakness to skepticism about the scale and financing of AI infrastructure. A separate MarketWatch feature highlighted how the AI trade has even influenced Asian currencies via local-to-dollar flows.
- Stock-specific pressure in software: ServiceNow’s slide and Oracle’s retreat underscored that the market is taking a harder look at acquisition-driven growth and hyperscaler demand pathways.
- Rotation to non-tech growth and travel: MarketWatch noted Eli Lilly’s recent outperformance versus Nvidia, and a separate piece spotlighted a rally in Southwest Airlines to multi-year highs as analysts anticipated improved profitability in 2026. That aligns with better transport leadership observed in prior sessions.
- IPO tone: CNBC reported Medline’s debut after pricing at $29 and raising $6.26 billion, reinforcing constructive issuance conditions into year-end and cautiously optimistic sentiment into 2026.
- Policy watch: MarketWatch and CNBC covered Fed chair finalists and messaging. Waller’s comments about independence and gradual cuts contrasted with Bostic’s caution about 2026. MarketWatch also noted two typically divergent Fed officials agreeing that inflation should not be a problem going forward, contributing to a largely rangebound rates market.
Bonds and positioning
ETF proxies showed minimal net change: TLT 87.825 (versus 87.88), IEF 96.525 (versus 96.54), and SHY 82.975 (versus 82.96). With the 10-year yield last at 4.18% and inflation expectations around 2.3%, real rates remain restrictive enough to discipline valuations, particularly in long-duration tech. At the same time, fund manager surveys flagged by MarketWatch indicated very low cash balances, which can increase the amplitude of any post-CPI move given limited dry powder and crowding in popular trades.
Outlook: what to watch next
- CPI (Thursday, delayed): MarketWatch emphasized that inflation was rising before the government shutdown. An upside surprise would likely challenge tech multiples and firm front-end yields; a downside surprise would validate Waller’s gradual-cut path and probably extend the bid in gold/silver while stabilizing tech.
- AI capex and credit: Scrutiny of AI data-center funding (Oracle, CoreWeave context) bears watching for knock-on effects in semis, software, and certain REIT/infra exposures.
- Fed chair watch: Messaging from finalists (Waller, Warsh) and the balance between 2025 easing and 2026 policy constraints could reset the curve and equity leadership.
- Commodities and energy positioning: After a historic year for oil to the downside, any stabilization could shift sector leadership even if the energy ETF proxy underperformed today. Precious metals momentum remains a barometer of policy credibility and risk hedging.
- Crypto sentiment: With BTCUSD near recent lows, volatility around macro prints could propagate into broader risk.
Risks
- Upside CPI surprise that revives inflation fears and reprices the front end of the curve.
- AI-spend disappointment or funding stress that undermines the capex cycle and weighs on semis/software leadership.
- Policy uncertainty: tariffs, tax legislation, and Fed leadership outcomes that change the distribution of rate paths for 2026.
- Market structure/liquidity: Persistent stresses in key funding or credit market corners, as flagged by MarketWatch, could tighten conditions abruptly.
- Positioning extremes: Low-cash institutional positioning risks sharper drawdowns if data disappoints.
Bottom line
The closing profile featured a defensively tilted equity tape with technology under pressure, steady rates, firm precious metals, higher energy and natural gas proxies, and weaker crypto. With the 10-year anchored near 4.18% and market inflation expectations contained around 2.3%, the next leg will be dictated by the CPI print and evolving Fed leadership signals. Until then, leadership is likely to remain choppy, with investors selectively rotating toward earnings resilience and away from capital-intensive AI narratives that rely on abundant, low-cost funding.
Equities faded into Wednesday’s close, with major U.S. index ETFs finishing below Tuesday’s levels and technology leading the pullback. The day’s tone was framed by a run of headlines suggesting the AI trade is unwinding at the margin amid funding concerns for data-center buildouts, while commodity markets strengthened and crypto extended its recent slide. Treasury yields were little changed in the latest available readings, leaving the macro backdrop steady but tense ahead of a delayed Consumer Price Index print and ongoing speculation about Federal Reserve leadership and the 2026 policy path.
Overview of the tape
- SPY last traded at 671.30 versus a previous close of 678.87, signaling a softer broad market close.
- QQQ finished at 600.36 versus 611.75 previously, underlining tech underperformance.
- DIA closed near 479.77 versus 481.98 and IWM at 247.20 versus 249.90, pointing to more modest downside across Dow components and small caps relative to the tech-heavy Nasdaq proxy.
Sector dynamics showed a clear tilt away from technology and toward defensives and commodity-linked exposures. XLK, the Technology Select Sector SPDR, ended at 139.37 versus 142.56 previously. Financials (XLF) were essentially flat at 54.63 against 54.64 prior, while Health Care (XLV) slipped to 153.81 versus 154.07. The energy sector line item in today’s feed recorded 42.75 versus 43.04 previously; notably, that entry is labeled XLE but carries an XLU symbol flag in the quote payload, so we treat it as an energy/utilities proxy rather than a definitive energy-sector read. Even so, the combination of softer tech and steadier financials/health care fit the day’s more defensive rotation.
Macro backdrop: rates, inflation, expectations
The Treasury curve in the latest available data remained inverted in the front end and anchored across the long end:
- 2-year yield: 3.51%
- 5-year yield: 3.73%
- 10-year yield: 4.18%
- 30-year yield: 4.84%
Inflation readings as of September showed CPI at 324.368 on the index level and core CPI at 330.542, while PCE sat at 127.625 with core PCE near 126.954. Market-based inflation expectations were contained into November: roughly 2.35% over five years and 2.27% over ten years. Forward five-to-ten-year pricing hovered lower still in the latest datapoint referenced in the feed. Those anchored expectations square with the day’s policy rhetoric: MarketWatch reported that Fed governor Christopher Waller, a finalist for chair, sees inflation falling over the next three to four months and room for a moderate pace of cuts—on the order of 100 basis points. At the same time, Atlanta Fed President Raphael Bostic expressed concern about inflationary risks tied to fiscal/tax policy, indicating no rate cuts in 2026 in his baseline.
Taken together, the policy narrative remains two-handed: a near-term window for gradual easing if inflation cooperates, with caveats around policy-induced price pressure. That ambiguity aligns with the stability of intermediate and long Treasury yields and the largely unchanged prices in benchmark bond ETFs today: TLT (87.825 versus 87.88 prior), IEF (96.525 versus 96.54), and SHY (82.975 versus 82.96) finished near Tuesday’s levels. Into Thursday’s delayed CPI (as highlighted by MarketWatch), the market appeared hesitant to push rates in either direction.
Equities and sectors: AI-driven drawdown inside tech
Today’s selloff in QQQ and XLK echoed several headlines pointing to fatigue in the AI trade and a reassessment of capital intensity and financing for hyperscale data centers.
- MarketWatch noted that Nvidia and Broadcom were among AI leaders falling sharply as investors scrutinize debt-funded AI infrastructure, including rumors and chatter around financing tied to Oracle and CoreWeave. A separate MarketWatch piece highlighted Broadcom’s worst three-day slide since 2020, while CNBC’s Investing Club underscored that Oracle was leading the market lower earlier in the session.
- In software, MarketWatch reported ServiceNow sinking toward its worst day in 11 months, with concerns that the company could get more acquisitive to maintain growth. Another MarketWatch item suggested Oracle’s weakness was tied to worries some analysts view as “almost irrelevant,” but the headline tone nonetheless reflected negative sentiment.
The rotation theme was also present in healthcare and staples narratives, though with milder price impact. MarketWatch observed that Eli Lilly has outperformed Nvidia in recent weeks, raising the prospect of a near-term reversal but signaling a broader market appetite for non-tech growth. Health care’s sector proxy (XLV) modestly trailed the S&P proxy today but fared better than tech.
Financials were essentially unchanged (XLF), a reasonable outcome considering the steady rate backdrop and no fresh credit shock in the day’s flow, though MarketWatch flagged persistent concerns in a key corner of financial markets and a separate item about fund managers running record-low cash balances—ingredients for a potentially more volatile response to any upside inflation surprise.
Energy and cyclicals presented a mixed picture. The sector line item recorded a slight decline in the energy/utilities slot, but commodity proxies rallied: oil (USO 67.97 versus 66.17) and broad commodities (DBC 22.84 versus 22.58) advanced, as did natural gas (UNG 12.635 versus 12.10). MarketWatch reminded investors that 2025 has been a historic year for crude with prices trending toward five-year lows; today’s bounce fits with the notion of a market overshoot that could slow supply and re-stabilize balances. Another piece argued that energy equities can behave like “the new bonds” in an inflationary landscape—a framing that resonates with today’s cross-asset moves if inflation stays sticky while rates drift lower.
Commodities: precious metals lead
Gold and silver extended gains amid policy uncertainty and tech weakness. GLD ended at 399.28 versus 395.89, while SLV finished 60.27 versus 57.73 previously. MarketWatch amplified a thesis from Albert Edwards that precious metals could be setting up for a late-1970s-style phase; whether or not investors buy the analogy, today’s resilience in gold and silver alongside flat rates and weaker tech fits a classic risk-parity hedge pattern ahead of CPI.
FX and crypto
In foreign exchange, EURUSD traded toward the top of today’s indicated range, with a mark near 1.1739 and a reported intraday span between roughly 1.1722 and 1.1739. A steadier euro versus the dollar is consistent with contained U.S. rate expectations and some reduction in U.S.-exceptionalism risk premia.
Crypto remained a pressure point. Bloomberg reported bitcoin falling below $86,000 as it sank toward the year’s lows. Into the close, BTCUSD marked around 85,869 with a session low near 85,244 in the feeds and an open above 86,700. ETHUSD traded near 2,822 versus an open around 2,932, with a low close to 2,789. The backdrop—more cautious liquidity conditions, a rethink of leverage in AI/tech, and risk-off positioning ahead of CPI—appeared to spill over into digital assets.
Notable corporate and thematic drivers
- AI funding and data centers: Multiple pieces (MarketWatch and CNBC) tied tech weakness to skepticism about the scale and financing of AI infrastructure. A separate MarketWatch feature highlighted how the AI trade has even influenced Asian currencies via local-to-dollar flows.
- Stock-specific pressure in software: ServiceNow’s slide and Oracle’s retreat underscored that the market is taking a harder look at acquisition-driven growth and hyperscaler demand pathways.
- Rotation to non-tech growth and travel: MarketWatch noted Eli Lilly’s recent outperformance versus Nvidia, and a separate piece spotlighted a rally in Southwest Airlines to multi-year highs as analysts anticipated improved profitability in 2026. That aligns with better transport leadership observed in prior sessions.
- IPO tone: CNBC reported Medline’s debut after pricing at $29 and raising $6.26 billion, reinforcing constructive issuance conditions into year-end and cautiously optimistic sentiment into 2026.
- Policy watch: MarketWatch and CNBC covered Fed chair finalists and messaging. Waller’s comments about independence and gradual cuts contrasted with Bostic’s caution about 2026. MarketWatch also noted two typically divergent Fed officials agreeing that inflation should not be a problem going forward, contributing to a largely rangebound rates market.
Bonds and positioning
ETF proxies showed minimal net change: TLT 87.825 (versus 87.88), IEF 96.525 (versus 96.54), and SHY 82.975 (versus 82.96). With the 10-year yield last at 4.18% and inflation expectations around 2.3%, real rates remain restrictive enough to discipline valuations, particularly in long-duration tech. At the same time, fund manager surveys flagged by MarketWatch indicated very low cash balances, which can increase the amplitude of any post-CPI move given limited dry powder and crowding in popular trades.
Outlook: what to watch next
- CPI (Thursday, delayed): MarketWatch emphasized that inflation was rising before the government shutdown. An upside surprise would likely challenge tech multiples and firm front-end yields; a downside surprise would validate Waller’s gradual-cut path and probably extend the bid in gold/silver while stabilizing tech.
- AI capex and credit: Scrutiny of AI data-center funding (Oracle, CoreWeave context) bears watching for knock-on effects in semis, software, and certain REIT/infra exposures.
- Fed chair watch: Messaging from finalists (Waller, Warsh) and the balance between 2025 easing and 2026 policy constraints could reset the curve and equity leadership.
- Commodities and energy positioning: After a historic year for oil to the downside, any stabilization could shift sector leadership even if the energy ETF proxy underperformed today. Precious metals momentum remains a barometer of policy credibility and risk hedging.
- Crypto sentiment: With BTCUSD near recent lows, volatility around macro prints could propagate into broader risk.
Risks
- Upside CPI surprise that revives inflation fears and reprices the front end of the curve.
- AI-spend disappointment or funding stress that undermines the capex cycle and weighs on semis/software leadership.
- Policy uncertainty: tariffs, tax legislation, and Fed leadership outcomes that change the distribution of rate paths for 2026.
- Market structure/liquidity: Persistent stresses in key funding or credit market corners, as flagged by MarketWatch, could tighten conditions abruptly.
- Positioning extremes: Low-cash institutional positioning risks sharper drawdowns if data disappoints.
Bottom line
The closing profile featured a defensively tilted equity tape with technology under pressure, steady rates, firm precious metals, higher energy and natural gas proxies, and weaker crypto. With the 10-year anchored near 4.18% and market inflation expectations contained around 2.3%, the next leg will be dictated by the CPI print and evolving Fed leadership signals. Until then, leadership is likely to remain choppy, with investors selectively rotating toward earnings resilience and away from capital-intensive AI narratives that rely on abundant, low-cost funding.