Closing Recap 

U.S. stocks finished lower on Monday, marking a soft start to the final, holiday-shortened week of the year. The major indices gave back some of their recent gains as investors took profits in high-flying technology stocks. The S&P 500 and Nasdaq both fell for a second straight day, with the selling pressure concentrated in the tech and consumer discretionary sectors. In contrast, defensive sectors like Energy and Utilities outperformed. Trading volumes were predictably thin as many market participants remain away from their desks. The U.S. dollar was stable, while precious metals experienced a dramatic reversal, with silver and gold both plunging sharply after hitting record highs last week. Crude oil rallied on renewed geopolitical tensions, while Bitcoin’s struggles continued.

Key Takeaways 

• Tech Leads Market Lower: The Nasdaq and S&P 500 both fell as investors took profits in mega-cap tech stocks, which had driven the market to recent highs. 
• Stocks Dip in Quiet Holiday Trade: U.S. stocks finished a quiet, low-volume session lower, with profit-taking in the tech sector weighing on the Nasdaq as markets drift into the final trading days of the year.
• S&P 500 Set to Underperform Global Stocks: In a notable divergence, the S&P 500’s ~17% YTD gain is on track to underperform the MSCI All Country World ex-US index by the widest margin since the 2009 financial crisis.
• Silver and Gold Plunge on Profit-Taking: After a spectacular rally, precious metals were hit by a wave of heavy selling. Silver suffered its steepest one-day decline in five years, and gold also fell sharply. 
• Silver Steadies After Historic Plunge: After suffering its sharpest one-day drop in five years, Silver has found its footing. The precious metal remains a key focus after an incredible year that has seen it become one of 2025’s top-performing assets.
• Fed Chair Drama Continues: President Trump escalated his attacks on Fed Chair Jerome Powell, calling for him to resign and threatening to fire him, adding a layer of political uncertainty to the market. 
• Dollar Poised for Worst Year Since 2017: The U.S. Dollar Index (DXY) is on track to end 2025 down nearly 10%, its worst annual performance in eight years, as traders bet on a sustained Fed easing cycle in 2026.
• Bitcoin Slips as ETF Outflows Weigh: The crypto market remains under pressure, with Bitcoin falling back towards $87,000 as sustained outflows from U.S. spot ETFs signal waning institutional demand. 
• FOMC Minutes in Focus: The main event of the week is Tuesday’s release of the minutes from the Fed’s December policy meeting, which could offer fresh clues on the outlook for rate cuts in 2026. 
• Yen Weighed Down by Bearish Hedge Fund Positioning: The Japanese Yen is under pressure, with data showing hedge funds holding their second-largest net short position since 2024, a major headwind for the currency despite the BoJ’s hawkish tilt.
• The “Santa Claus Rally” in Focus: The market remains in the historically strong “Santa Claus Rally” period. While yesterday saw a slight dip, the seasonal tailwinds remain a supportive factor for equities.
• Oil Bounces: WTI Crude Oil is bouncing on renewed geopolitical tensions after Russia signaled a shift in its negotiating stance on Ukraine. 
• Bullish S&P 500 Targets for 2026 Emerge: Despite recent jitters, major Wall Street banks like Citi are rolling out bullish 2026 targets for the S&P 500, with some calling for a move to 7,700, citing strong AI-driven earnings growth.

Market Overview

Wall Street started the final, holiday-shortened trading week of the year with a whimper, not a bang. The final trading week of 2025 has kicked off with a clear risk-off tone, as the market’s recent bullish momentum has given way to profit-taking and defensive positioning. The selling pressure has been most acute in the technology sector, the market’s undisputed leader for most of the year. This suggests that as the year winds down, investors are becoming more cautious about stretched valuations and are opting to lock in some of their substantial gains. The dramatic reversal in precious metals, where both gold and silver plunged after hitting record highs, is another clear sign of this deleveraging and profit-taking dynamic. The macroeconomic and political backdrop is also contributing to the cautious mood. 

Index	Up/Down	%	Last
DJ Industrials	-249.04	-0.0051	48462
S&P 500	-24.19	-0.0035	6906
Nasdaq	-118.75	-0.005	23474
Russell 2000	-15.68	-0.0062	2519

President Trump’s escalating attacks on Fed Chair Jerome Powell, which now include threats of a lawsuit and calls for his resignation, are a source of significant uncertainty for a market that is already on edge about the future path of monetary policy. While the Fed delivered a dovish cut in December, the path forward in 2026 remains highly debated. The release of the December FOMC minutes on Tuesday will be the market’s next major clue. With the yield curve having now been positive for 15 months, a historical precursor to recessions, the market is caught between hopes for a soft landing and the lingering fear of a more significant economic downturn.

Economic Calendar 

With U.S. markets heading into a holiday-shortened week, today’s session is light on U.S. data. The focus is on the upcoming FOMC minutes. Data Released Yesterday / Overnight: 

• U.S. Pending Home Sales (Nov): Jumped +3.3% m/m, much stronger than the +0.92% forecast and the highest in 33 months, a positive sign for the housing market. 

Today’s Economic Calendar: 

• European Session: An extremely light calendar with no major data releases. 
• U.S. Session: The main event is the release of the FOMC December Meeting Minutes, which could offer insights into the Fed’s 2026 outlook. 
• U.S. Markets Close Early on Wednesday and are Closed on Thursday for New Year’s Day. 

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

The big story in commodities is the massive wave of profit-taking in precious metals or forced liquidation. After a spectacular rally, precious metals experienced a brutal reversal. Gold plunged 4.6% and silver crashed 14.3% as a CME margin hike triggered a wave of forced liquidations and profit-taking. Despite the sharp pullback, both metals are still on track for their best year since 1979. In contrast, crude oil prices rallied over 2% on renewed geopolitical tensions after Russia accused Ukraine of an attack near one of President Putin’s residences. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	1.34	0.0236	58.08
Gold	-209.1	-0.0459	4343.6
EUR/USD	-0.0003	-0.0003	1.1774
USD/JPY	-0.499	-0.0032	156.059
Bitcoin	-2000	-0.025	87458
10-Year Note Yield	-0.02	-0.0048	0.04116

The U.S. dollar is ending the year on a weak note, headed for its worst annual performance in eight years as dovish Fed bets weigh on the currency. 

• Broad U.S. Dollar (DXY): The dollar index is heading for a yearly loss of nearly 10%. The narrative is being driven by the Fed’s pivot to easing, with futures pricing in at least two more cuts in 2026. MUFG forecasts another 5% decline for the DXY next year.
• EUR/USD: The pair is holding steady near 1.1770 as traders await the FOMC minutes. The euro is benefiting from broad dollar weakness and a stable ECB outlook. EUR/USD is on track for their best year against the dollar since 2017, up 13.7%.
• GBP/USD: The pound is consolidating near the 1.3500 handle. While dovish Fed expectations are supportive, the market is also pricing in a gradual easing cycle from the Bank of England, which could cap the cable’s gains. GBP/USD is on track for their best year against the dollar since 2017, up approximately 8%..
• USD/JPY: The yen is under pressure as hedge funds have built up their largest net short position since July 2024. However, the risk of a “yentervention” from the Bank of Japan remains a significant risk for short sellers. The Yen is under extreme pressure from a fundamental and positioning standpoint. Leveraged funds hold a massive net short position of ~85,000 contracts, the second-largest since 2024. This is being fueled by a huge ~3.0 percentage point interest rate differential

Cryptocurrencies: The crypto market remains under heavy pressure. Bitcoin fell back towards the $87,000 level as thin holiday volumes and continued outflows from U.S. spot ETFs weighed on sentiment. The market is struggling to find a bottom after a brutal Q4 sell-off. Treasuries: U.S. Treasury yields were slightly lower as investors sought the safety of government bonds amidst the equity market sell-off. The benchmark 10-year yield fell, reflecting ongoing uncertainty about the Fed’s future policy path. 

Looking Ahead 

Today’s trading will be dominated by the release of the December FOMC meeting minutes. While somewhat dated, the minutes could provide insight into the committee’s thinking and the degree of division regarding the path of rate cuts in 2026. However, with liquidity extremely thin and many traders still on holiday, the market reaction may be exaggerated. The main focus for investors will be on closing out the year and positioning for 2026, where the debate between a soft landing and a potential recession is likely to intensify.

What to Watch Today

• FOMC Minutes Deep Dive: This is the main event. While the Fed delivered a dovish cut at the meeting, the market will scour the text for any details on the committee’s debate regarding the 2026 “dot plot” and the threshold for a potential pause in the easing cycle. 
• The “Santa Claus Rally” Fades: The market has now seen two straight days of declines, and the “Santa Claus Rally” narrative is being tested. With thin liquidity, the risk of further exaggerated moves is high. 
• The Precious Metals Unwind: The sharp, violent correction in Gold and Silver is a major technical event. Traders will be watching to see if dip-buyers emerge to defend key levels or if the unwinding of leveraged positions leads to a deeper correction. 
• The Yen’s Short-Squeeze Risk: The extreme short positioning in the Yen is a major vulnerability. Any catalyst—such as a hawkish BoJ surprise or a “risk-off” shock—could trigger a massive and violent short-covering rally.
• Trump vs. Powell: President Trump’s public attacks on the Fed Chair are a significant source of political uncertainty. His threat to fire Powell and the impending announcement of a new Fed Chair in January will be a major focus for the market.