State of Market: Close 12/16/25
Tech steadies as cyclicals lag: QQQ edges higher while SPY and Dow finish lower; bonds bid, energy and nat gas slide
Mixed close reflects rotation and policy crosscurrents—long-end yields remain elevated versus front-end, gold flat, crypto firmer
TendieTensor.com State of Market Close
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U.S. markets closed the session mixed, with growth leadership stabilizing even as cyclicals lost ground and energy commodities fell. The day’s action reflected an ongoing tug-of-war between improving financial conditions in the front end of the curve, a still-elevated long end, and shifting expectations for policy and sector leadership. Technology showed resilience, while small caps, financials, and health care eased. Bonds were bid across the curve, and oil and natural gas retreated, pressuring broad commodity proxies.
At the index level, the S&P 500 proxy (SPY) finished modestly lower at 678.86 versus a prior close of 680.73, down about 0.3%. The Nasdaq-100 proxy (QQQ) edged higher to 611.80 from 610.54, up roughly 0.2%, highlighting a reassertion of large-cap tech strength after recent rotation. The Dow proxy (DIA) softened to 481.99 from 485.17, off about 0.7%, while small caps (IWM) settled at 249.89 versus 251.93, down approximately 0.8%, consistent with a risk-on pause outside of mega-cap tech.
Macro backdrop: yields, inflation, and expectations
Treasury yield data through December 12 show a curve that is no longer deeply inverted at the front but retains a substantial term premium at the long end. The 2-year stands at 3.52%, the 5-year at 3.75%, the 10-year at 4.19%, and the 30-year at 4.85%. Today’s price action in duration-sensitive bond ETFs suggests further firming in prices (and thus modestly lower yields intraday), with long and intermediate maturities outperforming the very front end. Against this yield structure, the equity market’s split close looks rational: growth sectors can digest modest rate relief, while economically sensitive pockets struggle with late-cycle growth concerns.
On inflation, the latest available CPI index levels (September) show headline CPI at 324.368 and core CPI at 330.542. Market-based inflation expectations remain contained: 5-year breakevens are 2.35%, 10-year at 2.27%, and the 5y5y forward at 2.18%. That anchoring aligns with recent commentary that inflation pressures should not reaccelerate. MarketWatch reported that two Federal Reserve officials who often differ—Fed Governor Stephen Miran and New York Fed President John Williams—both indicated they are not worried about inflation going forward. At the same time, policy commentary is mixed: Atlanta Fed President Raphael Bostic flagged worries that proposed tax changes could fuel inflation, saying he does not expect rate cuts in 2026, adding a note of longer-horizon caution. Meanwhile, Wharton’s Jeremy Siegel characterized the Fed’s approach as a “dovish version of a hawkish cut,” implying easing financial conditions that could shift leadership away from the narrow group of AI beneficiaries and toward broader cyclicals—though today’s tape suggests that leadership transition remains uneven.
Activity indicators add to the cautious tone. S&P’s December survey pointed to a sagging U.S. economy into year end, attributing softness to tariffs, inflation, and weaker sales. That mix helps explain why small caps and some cyclical sectors lagged despite lower front-end rate expectations.
Equities and sector performance
- SPY closed at 678.86 versus 680.73, down about 0.3%. Breadth skewed defensive-to-mixed rather than offensively risk-on.
- QQQ rose to 611.80 from 610.54, up roughly 0.2%, a sign of tech stabilization following recent weakness across AI-linked leaders.
- DIA slipped to 481.99 from 485.17, down about 0.7%, consistent with underperformance in more cyclical Dow constituents.
- IWM fell to 249.89 from 251.93, down around 0.8%, reflecting continued sensitivity to the macro slowdown signals and higher effective real yields on the long end.
Sectors told a similar story. Financials (XLF) eased to 54.63 from 54.99, off approximately 0.7%, a move that maps to the day’s bid for duration and the softer macro read-through from S&P’s survey. Technology (XLK) gained to 142.53 from 142.30, about +0.2%, mirroring the QQQ grind higher. Health care (XLV) fell more decisively to 154.04 from 156.10 (about -1.3%). News flow was heavy in pharma and health care: Pfizer’s modest 2026 outlook (CNBC) and its revision to 2025 revenue guidance (MarketWatch) underscore that large-cap pharma faces a longer runway for new investments to pay off, potentially weighing on sentiment in the group.
Multiple articles highlighted crosscurrents in the broader tech complex. J.P. Morgan’s top semiconductor picks (MarketWatch) and Broadcom’s recent three-day slide (MarketWatch) show a sector in rotation, not a uniform trend. Oracle’s shares and bonds have been wrestling with financing questions around AI spending (MarketWatch), and ServiceNow’s slide raised concerns about potential acquisitive growth strategies (MarketWatch). On the other side, Tesla “flirted with a new high” on optimism around AI and autonomy (MarketWatch), and a contrarian Nvidia call from Wall Street’s lone bear (MarketWatch) indicates the debate around AI demand durability remains intense. The day’s modest gain in XLK suggests investors are still willing to own secular winners even as leadership broadens selectively.
Positioning and sentiment
A Bank of America fund manager survey captured by MarketWatch showed record low cash levels and the most bullish sentiment in roughly 3.5 years. That backdrop supports the idea that pullbacks are being met with buying in favored areas—today, large-cap tech—while more discretionary or growth-at-a-reasonable-price pockets can lag when macro data waver.
Bonds
Treasury ETFs advanced across the curve, with the 20+ year proxy (TLT) at 87.91 last versus 87.40 prior, up about 0.6%; the 7–10 year (IEF) at 96.54 versus 96.27, up roughly 0.3%; and the 1–3 year (SHY) at 82.97 versus 82.92, up about 0.1%. This is consistent with a day of modest yield compression. Contextualizing with the latest official yields (10-year 4.19% and 30-year 4.85% as of Dec. 12) suggests the curve remains relatively steep from 10s to 30s, keeping the long-duration cost of capital elevated even as front-end relief continues. Such a mix tends to favor cash-generative growth franchises over more levered cyclicals, which was visible in today’s equity dispersion.
Commodities
Gold was essentially flat, with GLD at 395.85 versus 395.80 (about unchanged). Silver lagged, with SLV at 57.74 versus 58.11 (around -0.6%). Broad commodities weakened: the diversified basket DBC closed near 22.57 versus 22.81 (-1.1%), with energy the main drag. USO fell to 66.19 from 67.89 (about -2.5%), and UNG slid to 12.11 from 12.46 (about -2.9%). The risk-off tone in energy fits with macro survey softness and tariff-related growth concerns noted by S&P’s December read. It also dovetails with ongoing industry repositioning: MarketWatch detailed Ford’s decision to pivot from aggressive EV targets to hybrids and grid-scale energy storage, alongside a sizable charge, underscoring the evolving economics of the energy transition.
FX and crypto
The euro-dollar pair (EURUSD) was little changed, with a mark near 1.1749, reflecting limited FX impulse on the day. Crypto was firmer: Bitcoin (BTCUSD) marked around 87,592 versus an open near 85,805, up about 2.1% on the session range provided, while Ethereum (ETHUSD) rose roughly 1.1% (2,948 versus a 2,917 open). The resilience in crypto contrasts with softness in energy and small caps, and may reflect continued risk appetite for alternative assets even as equity leadership remains narrow.
Notable company and policy developments from headlines
- Federal Reserve commentary: MarketWatch reported Bostic’s view that tax policy risks could keep 2026 cuts off the table, while another MarketWatch piece cited Williams and Miran as seeing inflation as less of a problem going forward. The policy mix remains nuanced: Siegel’s “dovish hawkish cut” frame (MarketWatch) suggests leadership could broaden, though today’s tape favored large-cap tech.
- Health care: CNBC highlighted Pfizer’s modest 2026 outlook and MarketWatch reported a revision to 2025 revenue guidance, factors that likely weighed on XLV today.
- Technology and AI: J.P. Morgan’s semiconductor preferences (MarketWatch), a bearish Nvidia view (MarketWatch), and Oracle’s funding questions (MarketWatch) point to ongoing debate over AI capex sustainability and beneficiaries. ServiceNow weakness (MarketWatch) added to stock-specific volatility. Tesla-related optimism (MarketWatch) supported the day’s tech tone.
- Consumer and positioning: MarketWatch’s survey of fund managers showed record low cash and high bullishness, a context that can amplify rotations and compress drawdowns in favored sectors.
- Cannabis: MarketWatch reported continued strength in cannabis shares on renewed rescheduling hopes. While not reflected directly in today’s ETF dashboards, it’s a theme to monitor for policy-sensitive small- and mid-caps.
- Policy leadership: MarketWatch noted rising odds for Kevin Warsh in the Fed chair discussion. Any shift in leadership could alter the reaction function, particularly around balance-sheet policy and term premium management.
Outlook—what to watch next
- Economic data: MarketWatch flagged a “messy” November jobs report setup; labor-market clarity will be pivotal for the soft-landing narrative and for small-cap performance. S&P’s December weakness bears monitoring across new orders, pricing, and hiring plans.
- Earnings and corporate updates: CNBC highlighted upcoming reports from FedEx and Jabil. Guidance on freight, inventory restocking, supply chains, and AI-related demand will inform sector leadership into year-end.
- Policy path: Watch for additional Fed speak and any updates on fiscal proposals that could reframe the inflation outlook into 2026, in light of Bostic’s caution. The Fed chair selection process (MarketWatch’s Warsh note) is another variable for term premium and curve shape.
- Sector rotations: With cash levels low (per MarketWatch), moves can be abrupt. Keep an eye on whether nascent broadening takes hold or if leadership re-narrows to megacap tech.
- Commodities and energy transition: Follow-through in oil and gas after today’s declines, and industry repositioning themes (e.g., Ford’s pivot) may influence industrials and select tech sub-sectors tied to grid and storage.
Risks
- Reacceleration in inflation from tariffs or policy shifts could lift long-end yields, pressuring duration-sensitive equities and risk assets.
- AI capital-spending disappointments or financing strains (as flagged around Oracle and broader data-center concerns) could tighten financial conditions for the tech ecosystem.
- Policy uncertainty around Fed leadership and rate path could widen term premium, lifting mortgage and corporate borrowing costs.
- Growth downside: S&P’s December survey softness underscores risk to small caps and cyclicals if orders and hiring slow further.
- Positioning risk: With record-low cash allocations (MarketWatch), any negative surprise can prompt quick de-risking and amplify volatility.
Bottom line
Today’s mixed close—QQQ up, SPY and Dow lower, small caps lagging—fits a market weighing modestly easier front-end conditions against a still-expensive long end of the curve and uneven growth signals. Bonds were bid, gold was flat, and energy commodities fell. Headlines continue to argue for both patience and selectivity: policy is in flux, growth data are mixed, and sector leadership is rotating. For now, investors continue to favor cash-generative secular growers while marking down areas most exposed to cyclicality and commodity weakness.
U.S. markets closed the session mixed, with growth leadership stabilizing even as cyclicals lost ground and energy commodities fell. The day’s action reflected an ongoing tug-of-war between improving financial conditions in the front end of the curve, a still-elevated long end, and shifting expectations for policy and sector leadership. Technology showed resilience, while small caps, financials, and health care eased. Bonds were bid across the curve, and oil and natural gas retreated, pressuring broad commodity proxies.
At the index level, the S&P 500 proxy (SPY) finished modestly lower at 678.86 versus a prior close of 680.73, down about 0.3%. The Nasdaq-100 proxy (QQQ) edged higher to 611.80 from 610.54, up roughly 0.2%, highlighting a reassertion of large-cap tech strength after recent rotation. The Dow proxy (DIA) softened to 481.99 from 485.17, off about 0.7%, while small caps (IWM) settled at 249.89 versus 251.93, down approximately 0.8%, consistent with a risk-on pause outside of mega-cap tech.
Macro backdrop: yields, inflation, and expectations
Treasury yield data through December 12 show a curve that is no longer deeply inverted at the front but retains a substantial term premium at the long end. The 2-year stands at 3.52%, the 5-year at 3.75%, the 10-year at 4.19%, and the 30-year at 4.85%. Today’s price action in duration-sensitive bond ETFs suggests further firming in prices (and thus modestly lower yields intraday), with long and intermediate maturities outperforming the very front end. Against this yield structure, the equity market’s split close looks rational: growth sectors can digest modest rate relief, while economically sensitive pockets struggle with late-cycle growth concerns.
On inflation, the latest available CPI index levels (September) show headline CPI at 324.368 and core CPI at 330.542. Market-based inflation expectations remain contained: 5-year breakevens are 2.35%, 10-year at 2.27%, and the 5y5y forward at 2.18%. That anchoring aligns with recent commentary that inflation pressures should not reaccelerate. MarketWatch reported that two Federal Reserve officials who often differ—Fed Governor Stephen Miran and New York Fed President John Williams—both indicated they are not worried about inflation going forward. At the same time, policy commentary is mixed: Atlanta Fed President Raphael Bostic flagged worries that proposed tax changes could fuel inflation, saying he does not expect rate cuts in 2026, adding a note of longer-horizon caution. Meanwhile, Wharton’s Jeremy Siegel characterized the Fed’s approach as a “dovish version of a hawkish cut,” implying easing financial conditions that could shift leadership away from the narrow group of AI beneficiaries and toward broader cyclicals—though today’s tape suggests that leadership transition remains uneven.
Activity indicators add to the cautious tone. S&P’s December survey pointed to a sagging U.S. economy into year end, attributing softness to tariffs, inflation, and weaker sales. That mix helps explain why small caps and some cyclical sectors lagged despite lower front-end rate expectations.
Equities and sector performance
- SPY closed at 678.86 versus 680.73, down about 0.3%. Breadth skewed defensive-to-mixed rather than offensively risk-on.
- QQQ rose to 611.80 from 610.54, up roughly 0.2%, a sign of tech stabilization following recent weakness across AI-linked leaders.
- DIA slipped to 481.99 from 485.17, down about 0.7%, consistent with underperformance in more cyclical Dow constituents.
- IWM fell to 249.89 from 251.93, down around 0.8%, reflecting continued sensitivity to the macro slowdown signals and higher effective real yields on the long end.
Sectors told a similar story. Financials (XLF) eased to 54.63 from 54.99, off approximately 0.7%, a move that maps to the day’s bid for duration and the softer macro read-through from S&P’s survey. Technology (XLK) gained to 142.53 from 142.30, about +0.2%, mirroring the QQQ grind higher. Health care (XLV) fell more decisively to 154.04 from 156.10 (about -1.3%). News flow was heavy in pharma and health care: Pfizer’s modest 2026 outlook (CNBC) and its revision to 2025 revenue guidance (MarketWatch) underscore that large-cap pharma faces a longer runway for new investments to pay off, potentially weighing on sentiment in the group.
Multiple articles highlighted crosscurrents in the broader tech complex. J.P. Morgan’s top semiconductor picks (MarketWatch) and Broadcom’s recent three-day slide (MarketWatch) show a sector in rotation, not a uniform trend. Oracle’s shares and bonds have been wrestling with financing questions around AI spending (MarketWatch), and ServiceNow’s slide raised concerns about potential acquisitive growth strategies (MarketWatch). On the other side, Tesla “flirted with a new high” on optimism around AI and autonomy (MarketWatch), and a contrarian Nvidia call from Wall Street’s lone bear (MarketWatch) indicates the debate around AI demand durability remains intense. The day’s modest gain in XLK suggests investors are still willing to own secular winners even as leadership broadens selectively.
Positioning and sentiment
A Bank of America fund manager survey captured by MarketWatch showed record low cash levels and the most bullish sentiment in roughly 3.5 years. That backdrop supports the idea that pullbacks are being met with buying in favored areas—today, large-cap tech—while more discretionary or growth-at-a-reasonable-price pockets can lag when macro data waver.
Bonds
Treasury ETFs advanced across the curve, with the 20+ year proxy (TLT) at 87.91 last versus 87.40 prior, up about 0.6%; the 7–10 year (IEF) at 96.54 versus 96.27, up roughly 0.3%; and the 1–3 year (SHY) at 82.97 versus 82.92, up about 0.1%. This is consistent with a day of modest yield compression. Contextualizing with the latest official yields (10-year 4.19% and 30-year 4.85% as of Dec. 12) suggests the curve remains relatively steep from 10s to 30s, keeping the long-duration cost of capital elevated even as front-end relief continues. Such a mix tends to favor cash-generative growth franchises over more levered cyclicals, which was visible in today’s equity dispersion.
Commodities
Gold was essentially flat, with GLD at 395.85 versus 395.80 (about unchanged). Silver lagged, with SLV at 57.74 versus 58.11 (around -0.6%). Broad commodities weakened: the diversified basket DBC closed near 22.57 versus 22.81 (-1.1%), with energy the main drag. USO fell to 66.19 from 67.89 (about -2.5%), and UNG slid to 12.11 from 12.46 (about -2.9%). The risk-off tone in energy fits with macro survey softness and tariff-related growth concerns noted by S&P’s December read. It also dovetails with ongoing industry repositioning: MarketWatch detailed Ford’s decision to pivot from aggressive EV targets to hybrids and grid-scale energy storage, alongside a sizable charge, underscoring the evolving economics of the energy transition.
FX and crypto
The euro-dollar pair (EURUSD) was little changed, with a mark near 1.1749, reflecting limited FX impulse on the day. Crypto was firmer: Bitcoin (BTCUSD) marked around 87,592 versus an open near 85,805, up about 2.1% on the session range provided, while Ethereum (ETHUSD) rose roughly 1.1% (2,948 versus a 2,917 open). The resilience in crypto contrasts with softness in energy and small caps, and may reflect continued risk appetite for alternative assets even as equity leadership remains narrow.
Notable company and policy developments from headlines
- Federal Reserve commentary: MarketWatch reported Bostic’s view that tax policy risks could keep 2026 cuts off the table, while another MarketWatch piece cited Williams and Miran as seeing inflation as less of a problem going forward. The policy mix remains nuanced: Siegel’s “dovish hawkish cut” frame (MarketWatch) suggests leadership could broaden, though today’s tape favored large-cap tech.
- Health care: CNBC highlighted Pfizer’s modest 2026 outlook and MarketWatch reported a revision to 2025 revenue guidance, factors that likely weighed on XLV today.
- Technology and AI: J.P. Morgan’s semiconductor preferences (MarketWatch), a bearish Nvidia view (MarketWatch), and Oracle’s funding questions (MarketWatch) point to ongoing debate over AI capex sustainability and beneficiaries. ServiceNow weakness (MarketWatch) added to stock-specific volatility. Tesla-related optimism (MarketWatch) supported the day’s tech tone.
- Consumer and positioning: MarketWatch’s survey of fund managers showed record low cash and high bullishness, a context that can amplify rotations and compress drawdowns in favored sectors.
- Cannabis: MarketWatch reported continued strength in cannabis shares on renewed rescheduling hopes. While not reflected directly in today’s ETF dashboards, it’s a theme to monitor for policy-sensitive small- and mid-caps.
- Policy leadership: MarketWatch noted rising odds for Kevin Warsh in the Fed chair discussion. Any shift in leadership could alter the reaction function, particularly around balance-sheet policy and term premium management.
Outlook—what to watch next
- Economic data: MarketWatch flagged a “messy” November jobs report setup; labor-market clarity will be pivotal for the soft-landing narrative and for small-cap performance. S&P’s December weakness bears monitoring across new orders, pricing, and hiring plans.
- Earnings and corporate updates: CNBC highlighted upcoming reports from FedEx and Jabil. Guidance on freight, inventory restocking, supply chains, and AI-related demand will inform sector leadership into year-end.
- Policy path: Watch for additional Fed speak and any updates on fiscal proposals that could reframe the inflation outlook into 2026, in light of Bostic’s caution. The Fed chair selection process (MarketWatch’s Warsh note) is another variable for term premium and curve shape.
- Sector rotations: With cash levels low (per MarketWatch), moves can be abrupt. Keep an eye on whether nascent broadening takes hold or if leadership re-narrows to megacap tech.
- Commodities and energy transition: Follow-through in oil and gas after today’s declines, and industry repositioning themes (e.g., Ford’s pivot) may influence industrials and select tech sub-sectors tied to grid and storage.
Risks
- Reacceleration in inflation from tariffs or policy shifts could lift long-end yields, pressuring duration-sensitive equities and risk assets.
- AI capital-spending disappointments or financing strains (as flagged around Oracle and broader data-center concerns) could tighten financial conditions for the tech ecosystem.
- Policy uncertainty around Fed leadership and rate path could widen term premium, lifting mortgage and corporate borrowing costs.
- Growth downside: S&P’s December survey softness underscores risk to small caps and cyclicals if orders and hiring slow further.
- Positioning risk: With record-low cash allocations (MarketWatch), any negative surprise can prompt quick de-risking and amplify volatility.
Bottom line
Today’s mixed close—QQQ up, SPY and Dow lower, small caps lagging—fits a market weighing modestly easier front-end conditions against a still-expensive long end of the curve and uneven growth signals. Bonds were bid, gold was flat, and energy commodities fell. Headlines continue to argue for both patience and selectivity: policy is in flux, growth data are mixed, and sector leadership is rotating. For now, investors continue to favor cash-generative secular growers while marking down areas most exposed to cyclicality and commodity weakness.