Reviewed by Gotrade Internal Analyst
Jakarta, Gotrade News - Wall Street closed Tuesday (Dec 30) with a slight correction amidst thin trading volume ahead of the New Year. This drop signals a pause in the year-end momentum—often called the Santa Rally—forcing investors to re-evaluate their positions as they face monetary policy uncertainty heading into 2026.
Key Takeaways
- Major US indices dipped slightly, with the S&P 500 down 0.14% and Nasdaq 100 down 0.25%.
- Fed minutes revealed a split opinion among central bankers regarding further rate cuts.
- The Energy sector pumped, contrasting with Pharma and Tech which weighed the market down.
Read also: The Fed is Split, Here’s the Signal for US Interest Rates
Market movements this time were driven by year-end liquidation and reactions to the latest economic data. The SPDR S&P 500 ETF Trust (SPY) recorded a 0.14% slide, while the tech-heavy Invesco QQQ Trust (QQQ) dropped 0.25%.
This correction was amplified by the release of the December Federal Open Market Committee (FOMC) minutes, which sounded slightly hawkish. The document revealed that policymakers are still split on whether inflation is controlled enough to justify aggressive rate cuts.
According to a report from TipRanks, the odds of a 25 basis point rate cut at the January meeting have now dropped to around 15%. This is happening because some Fed officials are worried that lowering rates while inflation sits above the 2% target could be misinterpreted as a weakening commitment.
Beyond monetary factors, market sentiment was also disturbed by political tension between the government and the central bank. President Trump's comments implying dissatisfaction with Fed Chair Jerome Powell's performance added some volatility to both bond and equity markets.
The impact was visible in sector rotation, where defensive stocks and commodities became the safe play amidst uncertainty. The Energy sector led the gains, driven by Occidental Petroleum Corporation (OXY) rising over 2% and Diamondback Energy, Inc. (FANG) strengthening by more than 1%.
Conversely, selling pressure hit the already high-valuation Health and Tech sectors. Big pharma names like Gilead Sciences, Inc. (GILD) and Vertex Pharmaceuticals Incorporated (VRTX) closed down over 1%, acting as a drag on the index.
On the flip side, US economic data actually showed solid resilience. The S&P Case-Shiller home price index recorded a 1.3% annual increase, while manufacturing activity in Chicago jumped way past analysts' expectations.
Despite the positive economic data, investors seem to prefer a "wait and see" approach until the 2026 policy direction becomes clearer. Citigroup Inc. (C) was also in the spotlight after announcing potential post-tax losses from the sale of its business in Russia, pushing its stock price down 0.82%.
Historically, the end of December often brings gains for the stock market, but this year investors are facing the reality of rising bond yields. With just two trading days left in 2025, market focus is now shifting entirely to the jobless claims data coming out this Wednesday.
Read also: Gold ETFs Skyrocketed 200% in 2025, Is the Rally Here to Stay?
Reference:
- Barchart, Stocks Fall Slightly in Thin Holiday Trade. Accessed on December 31, 2025
- AP News, Stocks slip on Wall Street as 2025 winds down. Accessed on December 31, 2025
- TipRanks, Stock Market News Review: SPY, QQQ Tick Lower as Fed Minutes Suppress Rate Cut Odds. Accessed on December 31, 2025
- Featured Image: Shutterstock
Disclaimer
Gotrade is the trading name of Gotrade Securities Inc., registered with and supervised by the Labuan Financial Services Authority (LFSA). This content is for educational purposes only and does not constitute financial advice. Always do your own research (DYOR) before investing.
