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Published : 01 Jan 2026, 11:23 AM
Wall Street's major indexes ended lower in the final trading session of 2025, but notched big annual gains after a roller-coaster year dominated by President Donald Trump's tariff uncertainties and a euphoria around AI-focused stocks.
The S&P, Dow and Nasdaq posted double-digit gains this year, their third consecutive year in the green, a run last seen during 2019-2021.
The rally was bolstered by an insatiable appetite for artificial intelligence stocks that pushed all three indexes to record highs this year.
The Dow also posted its eighth straight monthly gain, the longest such streak since 2017-2018. The S&P 500 had also been on track for its eighth straight monthly gain until just before the closing bell, and ended up closing with a monthly loss for December.
The S&P 500 lost 50.74 points, or 0.74%, to 6,845.50 points, while the Nasdaq Composite lost 177.09 points, or 0.76%, to 23,241.99.
The Dow Jones Industrial Average 303.77 points, or 0.63%, to 48,063.29.
On the day, energy stocks and tech stocks were among the major losers. Microsoft, which was among the biggest weights on the sector, was down 0.8%, and EQT Corp fell 1.9%.
"I do not expect that the last few days will have so much bearing on the performance of the next year, it's perfectly fine in any bull market to have moments of cost," said Giuseppe Sette, co-founder and president of Reflexivity, pointing to profit-taking opportunities when liquidity was low.
Wall Street made a stellar comeback from April's lows when Trump's 'Liberation Day' tariffs sparked a meltdown in global markets, sent investors away from US stocks and threatened growth by clouding the interest rate outlook.
For the year, the S&P 500 gained 16.39%, the Nasdaq rose 20.36%, and the Dow climbed 12.97%. The Russell 2000 small cap index rose 11.26%.
Still the benchmark S&P 500 index's annual gain trails some global indexes, especially the Asia-Pacific ex-Japan measure, which rallied nearly 27% in 2025, as stock investors diversified.
"We expect this broadening of performance to deepen in 2026, both within the US and across international markets," said Jitania Kandhari, Deputy CIO of the solutions and multi-asset group at Morgan Stanley Investment Management.
"The era of narrow winners is giving way to a wider, more globally distributed opportunity set. Equal-weighted S&P looks good relative to cap-weighted S&P."
Wall Street's fourth consecutive session of losses defied expectations for a "Santa Claus rally" in which the S&P 500 typically gains over the last five trading days of December and the first two in January, according to the Stock Trader's Almanac.
Bellwether chipmaker Nvidia - up 39% year-to-date - has been one of the many AI trade beneficiaries, becoming the first publicly traded company to hit a $5 trillion market capitalisation.
The communication services index emerged as the top performer on the S&P 500 this year, powered by a 65% jump in Alphabet.
Storage-chip makers such as Micron Technology, Western Digital and Seagate outperformed their S&P 500 peers, having more than tripled in value in 2025.
On the flip side, FMC Corp and Fiserv were big losers for the year, declining 71.5% and 67% respectively.
The Federal Reserve's monetary policy trajectory will set the tone for global markets in 2026, after recent economic data and expectations of a new dovish Fed chair prompted investors to price in further reductions.
Nike gained 4% after CEO Elliott Hill reported that he bought about $1 million worth of shares recently.
Vanda Pharmaceuticals surged after the US Food and Drug Administration approved its drug for the prevention of motion-induced vomiting.
Trading volumes remained thin in the holiday-shortened week, with markets closed on Thursday for New Year's Day.
Volume on US exchanges was 11.17 billion shares, compared with the 15.8 billion average for the full session over the last 20 trading days.
Declining issues outnumbered advancers by a 3.22-to-1 ratio on the NYSE. There were 91 new highs and 116 new lows on the NYSE.
On the Nasdaq, 1,528 stocks rose and 3,164 fell as declining issues outnumbered advancers by a 2.07-to-1 ratio.
The S&P 500 posted 3 new 52-week highs and no new lows while the Nasdaq Composite recorded 29 new highs and 218 new lows.
