Fed Easing Expectations Lift Equities, Commodities Mixed, Dollar Steady

Index Update:  U.S. stocks closed higher on Friday, December 19, 2025, as tech shares rebounded strongly amid renewed AI optimism, offsetting weakness in consumer names. Oracle jumped 6.6% on TikTok deal reports, Micron surged around 10% on strong AI demand forecasts, while Nike plunged over 10% after weak China sales and margin pressure. The S&P 500 rose 0.88% to close at 6,834.50, the Dow Jones Industrial Average gained 0.38% to 48,134.89, and the Nasdaq Composite advanced 1.31% to 23,307.62. For the week, the S&P 500 and Nasdaq posted modest gains of about 0.1% and 0.5%, respectively, while the Dow fell 0.7%.

Market Movers:  On Friday, top gainers included Micron Technology (up 10%), Oracle (up 6.6%), and Nvidia (up ~3.9%), fueled by AI momentum and chip demand. On the downside, Nike fell sharply (10.5%) after disappointing China revenue and tariff impacts, followed by Home Depot (down ~2.7%).

Commodities Update:  Oil prices continued to slide, with WTI and Brent futures extending a second straight weekly decline as oversupply concerns and softening demand in China and the U.S. outweighed geopolitical risks, leaving prices down about 20% year to date. In contrast, precious metals remained strong: gold traded near its record high around USD 4,320 per ounce on expectations of U.S. rate cuts and geopolitical uncertainty, while silver hovered near record levels, supported by safe-haven demand, strong industrial usage, and tight supply, with both metals posting strong weekly and year-to-date gains.

Macro Updates:  U.S. capital flows recorded a net outflow of USD 37.3 billion in October 2025. While foreign investors increased holdings of long-term U.S. securities by USD 38.9 billion—driven by private investor purchases despite selling by official institutions—U.S. residents also raised their investments in long-term foreign securities, with net purchases of USD 21.4 billion.

Bonds Commentary:  The U.S. 10-year Treasury yield rose to about 4.14% on Friday, rebounding from a brief dip as investors weighed the Federal Reserve’s policy outlook. Softer inflation and a cooling labor market have strengthened expectations for rate cuts in 2026, though policy is widely expected to remain unchanged in January, with markets focusing on potential cuts from March onward.

Dollar Commentary:  The dollar index held near 98.5 on Friday and was set to end the week little changed, as investors assessed softer U.S. inflation and cooling labor market data that support the case for Fed rate cuts next year. While policy is expected to remain on hold in January, expectations for easing in 2026 persist, alongside added uncertainty from President Trump’s comments about appointing a new Fed chair inclined toward significant rate cuts.

Futures Update:  U.S. stock futures were slightly higher on Friday, extending gains from the prior session after softer-than-expected inflation data boosted expectations of future Federal Reserve rate cuts. However, gains were capped by weakness in Nike shares. Despite Thursday’s rebound, which ended four consecutive losing sessions, major Wall Street indices remain on track for weekly declines. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are each down around 0.8% for the week, reflecting lingering caution among investors.

Stocks experienced a strong upward move during trading on Friday, building on the significant rebound observed throughout Thursday's session. This upward momentum has offset the earlier weakness seen earlier in the week. The S&P 500 increased by 59.7 points, or 0.88%, closing at 7,834.49. From a technical standpoint, the index found support at key levels and gradually advanced, suggesting the potential for a sustained upward trend in the near term. The 14-day Relative Strength Index (RSI) has recovered from lower levels and crossed above the midpoint. Key support levels are around 6,775, with resistance expected near 6,940.