Market Overview
U.S. stock markets closed higher on Friday, December 22, 2025, as artificial intelligence trade regained momentum following a volatile week shaped by heavy economic data releases. The market rebound came after investors processed a substantial backlog of economic information released following a 43-day government shutdown, with particular optimism driven by cooler-than-expected inflation figures that eased concerns about future interest rate trajectories.
Sector Performance and Market Dynamics
Market leadership remained narrowly concentrated, with only consumer discretionary and health care sectors posting gains among S&P 500 components. The S&P 500 and NASDAQ finished the week modestly higher, while the Dow, Global Dow, and small-cap Russell 2000 ended lower, reflecting mixed investor sentiment across different market segments.
Energy emerged as the weakest performer during the period, with crude oil prices falling to their lowest levels in nearly five years. This decline reflects global oversupply concerns compounded by lingering trade tensions that continue to weigh on commodity markets.
Economic Data and Labor Market Softening
Employment growth showed signs of deceleration in November, with payrolls increasing by just 64,000—a significant slowdown from previous months. The unemployment rate rose to 4.6%, marking an increase from both the prior month and year-earlier levels. Wage growth also moderated, declining to a 3.5% year-over-year pace, suggesting cooling labor market pressures.
Initial jobless claims declined for the week ended December 13, though continuing claims rose, indicating a labor market that is cooling but not contracting sharply. This mixed signal suggests a gradual softening rather than a sharp deterioration in employment conditions.
Inflation Relief and Consumer Spending
The most encouraging economic news came from inflation data, which showed meaningful easing of price pressures. The Consumer Price Index rose just 0.2% over the two-month period ended in November. On a 12-month basis, headline inflation slowed to 2.7%, while core inflation eased to 2.6%, both figures indicating progress toward price stability.
Retail sales data revealed essentially flat performance in October, though spending remained higher than a year ago, with strong growth concentrated in online sales and food services. This pattern reflects shifting consumer preferences toward digital commerce and experiential spending.
Housing Market and Energy Prices
Existing home sales increased modestly in November, while inventory tightened slightly, maintaining structural constraints in the housing market. Home prices dipped from October levels but remained higher year over year, suggesting a stabilizing but still elevated pricing environment.
Gasoline prices continued their downward trajectory, with the national average dropping below $2.90 per gallon. This decline reflects both lower crude oil prices and ample supply conditions, providing some relief to consumers at the pump.
Market Outlook and Year-End Expectations
Moderation in inflation has increased optimism among investors that seasonal year-end strength—commonly referred to as a “Santa Claus rally”—could still materialize in the final weeks of 2025. This sentiment reflects a delicate balance between concerns about labor market softening and relief from cooling price pressures.
Looking ahead, market participants will focus closely on updated gross domestic product data as the government works through delayed releases following the shutdown. Continued monitoring of inflation trends and labor market conditions will be essential for assessing economic momentum heading into 2026, as investors attempt to gauge the trajectory of growth and monetary policy in the coming year.