Stock Market Today – Wall Street retreats from record as investors book profits
U.S. stocks began December 2025 on a somewhat shaky note, following an impressive rally. The S&P 500 ended at 6,735.11, down 0.28%, while the Nasdaq Composite dipped 0.08% to 23,024.62. The Dow Jones Industrial Average fell 0.52% to 46,358.42. This decline followed profit-taking across sectors after five consecutive days of gains and new all-time peaks. Meanwhile, gold prices, which had recently soared past $4,000 per ounce, retreated for the first time to $3,945, as traders began securing profits amid ongoing uncertainty due to the U.S. government shutdown and growing speculation about potential interest rate cuts by the Federal Reserve before year’s end.
Nasdaq and S&P 500 trade just below all-time highs
Even with this pause in momentum, both major indices remain close to their record highs. The S&P 500 is just 1% shy of its pinnacle at 6,800, and the Nasdaq Composite is merely 3% away from reaching 23,720. The tech-heavy Nasdaq showed signs of waning, as investors took a closer look at AI developments after a turbulent November. Nvidia closed Friday at $123.70, having decreased by 8% over the month, amid worries about AI chip oversupply and competition. In contrast, Alphabet surged almost 20% to $318.47 after unveiling its Gemini 3 AI model and a major AI chip partnership with Meta, while Meta slipped 13% to $395.25, reflecting some short-term AI exhaustion. Oracle also saw notable declines, closing near $97.40, down nearly 30% as cloud growth decelerated.
Fed policy and leadership changes ahead of December meeting
Currently, there’s an 86.9% chance projected for a 25 basis points rate cut in the December 9-10 FOMC meeting, with the federal funds rate anticipated between 4.75% and 5.00%. The Federal Reserve has entered a pre-meeting blackout period, implying a quieter phase before major policy announcements. Speculation is swirling around potential leadership changes within the Fed, with Kevin Hassett emerging as a leading candidate to succeed Jerome Powell as Chairman. A lengthy government shutdown has stalled key data releases related to inflation, leaving investors uncertain as interest rate decisions loom.
Earnings to watch: Salesforce, CrowdStrike, Dollar Tree, discount retailers
Investors are also focused on upcoming corporate earnings. Salesforce is currently trading at $271.60, while CrowdStrike is at $333.10. Discount retailers Dollar Tree and Dollar General are priced at $132.40 and $141.20, respectively, and Five Below is at $197.65. The reported earnings are expected to shed light on consumer spending patterns, especially following record trading volumes during Black Friday and Cyber Monday, albeit with decreasing profit margins. In the third quarter, S&P 500 earnings rose by 13.4% compared to last year, with average profit margins exceeding 11.5%, indicating resilience in company fundamentals despite slowing retail growth.
Wall Street’s 2026 target reflects confidence in extended rally
Deutsche Bank has raised its 2026 price target for the S&P 500 to 8,000, suggesting about a 17% upside from current levels, attributed to increased share buybacks and consistent earnings growth. Morgan Stanley anticipates a target of 7,800, confirming the onset of a new bull market. Both HSBC and JP Morgan foresee targets around 7,500 and also note interest in reaching 8,000 if inflation cools further and the Fed remains accommodating. Wells Fargo predicts a two-phase rally, starting with a “reflation trade” in early 2026, followed by an AI-led expansion in the second half of the year—targeting 7,800. There’s a consensus among financial institutions indicating double-digit stock returns for next year, backed by strong liquidity and capital inflows.
AI sector volatility and valuation stress
Profitability in the AI sector remains a pressing concern. Nvidia has seen its market cap drop to approximately $3.1 trillion as it went from $134 to $123 amid doubts regarding the monetization pace from hyperscale data centers. Conversely, Alphabet experienced a notable surge from $265 to $318, partly driven by early praise for its Gemini 3 platform, which elevated its valuation to $4 trillion. Meanwhile, Meta faced a significant devaluation, losing around $60 billion as reports of growth in AI spending emerged. The AI sector has made up almost 70% of the Nasdaq’s year-to-date gains, but early signs of a shift are evident as traders pivot towards cyclicals and small-cap stocks.
Gold price falls from record high amid profit-taking selling
Gold prices fell 1.6% to $3,950 after peaking over $4,015 per ounce, coinciding with rising government bond yields of 4.42% for 10-year bonds. The recent drop followed heightened demand for safe assets during the government shutdown and increased risk aversion. Gold has seen a substantial increase of 32% this year. The U.S. dollar index went down 2.1% in November, closing at 101.8. The technical support is around $3,880, while resistance is evident at $4,050. A decisive break at this point could steer the market in 2026.
Sector rotation and market breadth expansion
Last week, small-cap and interest-rate sensitive sectors outperformed as investors shifted focus away from large-cap tech stocks. The Russell 2000 Index rose 2.1% to 2,210, exceeding both the S&P 500 and Nasdaq’s performance. Meanwhile, Bitcoin has dropped sharply from earlier highs, falling to $89,340. This stark contrast between cryptocurrencies and stocks indicates that traders are reallocating to more defensive sectors, such as financials and industrials, in anticipation of a Fed rate cut.
Market direction and tactical stance
Markets are still on an upward trajectory, bolstered by strong liquidity and robust returns. The S&P 500 faces immediate resistance at 6,870, with psychological support nearby at 6,650. A Fed rate cut in December could lead to a year-end target of 7,000. The Nasdaq Composite may retest 23,800, while the Dow Jones looks towards 48,000 as a potential ceiling. Sector rotation is expected to intensify as investors explore previously lagging sectors. The short-term outlook remains Bullish — buy on the rebound, as companies exhibit sustained free cash flow, suggesting selective accumulation in undervalued cyclicals, banks, and quality tech firms.
