US equity markets showed mixed results during the holiday-shortened final week of 2025, with the Dow Jones gaining 0.7% while the S&P 500 and Nasdaq declined 1.0% and 1.5% respectively. The weakness was primarily driven by AI with ongoing worries about returns from massive investments, leading to declines in mega-cap tech stocks like Microsoft, Nvidia and Oracle.
US Treasury yields moved 4-6bps higher, supported by better than expected jobless claims report. Meanwhile, alternative assets pulled back from recent highs, with Bitcoin trading in the $87,000-$90,000 range while gold and silver experienced profit-taking after hitting record highs in December.
Despite the mixed finish, 2025 marked a strong third consecutive year of double-digit gains for US equities, with the S&P 500 rising 17.9%, Nasdaq 21.2%, and the Dow gaining 14.9%, largely driven by AI boom expectations and Fed rate cuts. The Treasury market saw mixed performance, with the 10Y bond yield at 4.16%, 40bps tighter, while the 30Y bond finished higher by 8bps at 4.85%, with increased concerns about fiscal deficits and geopolitical risks.
This week's focus starts with the US-backed ousting of Venezuela's Nicolas Maduro over the weekend, which has already triggered rising oil prices, gains in energy stocks, a stronger dollar, and higher gold and silver prices. Markets will also closely monitor new important economic data such as manufacturing data and the highly expected payroll report on Friday.
