December 13, 2025 Market Update
Market Recap: Riding on the Fed’s Coattails.
Most segments of the U.S. stock market delivered mixed results this week following the Federal Reserve’s quarter-point interest-rate cut, discussed below. Investors generally interpreted the decision as supportive without signaling immediate economic stress. The Dow Jones Industrial Average and the S&P 500 traded near recent highs, and small-cap stocks also participated, with the Russell 2000 finishing the week in the black.
The tech-heavy Nasdaq, however, was unable to keep pace, especially later in the week, as investors questioned whether massive spending on artificial intelligence infrastructure will ultimately be rewarded. The S&P 500 also gave back some ground by week’s end. Oracle’s shares were especially hard hit after the company signaled plans to spend heavily on AI and cloud infrastructure.
In the bond market, Treasury prices initially rose and yields moved lower following the Fed’s announcement. While bond investors continue to price in the possibility of additional rate cuts next year, some of those gains moderated later in the week as markets weighed inflation risks and the pace of future easing.
For the moment, it seems Mr. Market is cautiously leaning into the idea that easier monetary policy can support markets without reigniting inflation. How long that delicate balance can hold remains to be determined.
Market Performance
Market Commentary. Buckle Up, It Could be a Bumpy Ride.
The Federal Reserve announced on Wednesday that it would cut its interest-rate target by a quarter point to a range of 3.5 percent to 3.75 percent. The Fed also said it would resume buying short-term Treasurys to support liquidity in the banking system. None of that came as a surprise.
What did catch the markets’ attention were Chairman Powell’s remarks afterward. He opened his press conference with a cautious tone, noting that the Fed is “well positioned to wait and see how the economy evolves” before cutting rates again. He added that the policy rate now sits “within a broad range of estimates of its neutral value.”
Later, though, Powell reversed direction. The labor market “seems to have significant downside risks,” he said, and the fact that three officials dissented from the decision for the first time in six years only added to the uncertainty.
Looking to 2026, the debate now centers on whether the Fed will hold rates steady to avoid reigniting inflation or if softening labor conditions will push policymakers toward additional cuts. At this point, the answer to that vexing question remains unclear. The fact that Chairman Powell’s term ends in May only adds to the uncertainty.
In Case You Missed It: There’s enough oil at sea to make a Texan jealous.
Global oil-at-sea hit roughly 1.4 billion barrels this week, about 24 percent above the seasonal average from 2016 to 2024, according to Vortexa. Shipments from Russia, Iran, and Venezuela that fall under sanctions are up 82 percent year to date, a sign of how much shadow supply is moving across the world’s oceans.