Wall Street closed out another banner year for stocks on Wednesday, but the final session of 2025 ended with a downbeat finish that carried the market’s recent slide to a fourth consecutive day. Trading remained thin as investors wound down ahead of New Year’s Day, when markets would be closed, and many large holders had already closed their positions for the year.
Even with the day’s retreat, the major U.S. indexes ended 2025 higher. The S&P 500 finished the year up 16.4%, the Nasdaq composite gained 20.4% and the Dow Jones Industrial Average rose 13%, building on gains that came despite sharp swings during the year.
Some of the volatility reflected shifting expectations for economic policy. The AP reported that investors navigated turbulence tied to President Donald Trump’s tariffs on imported goods, which were described as on-again, off-again, alongside uncertainty about the path of interest rates. The market also faced jolts tied to trade concerns, including a slide in early April after China’s response raised fears of an escalating trade war, and worries that extended into the U.S. Treasury market.
As the year progressed, a combination of negotiated tariff steps and changing rate expectations helped stabilize sentiment. The market’s losses reversed after Trump put most of his tariffs on pause and negotiated agreements that lowered proposed tariff rates on imports, which the AP said helped calm investors’ nerves. Sam Stovall, chief investment strategist at CFRA, said: “Once the market realized that no, these tariffs are on again, off again, and probably will not result in a recession, it was amazing how quickly it got back to breakeven.”
Stovall tied the broader market rise to ongoing earnings optimism and Federal Reserve policy. He said, “You could say that it’s the long-term AI optimism combined with the continuously improving earnings growth outlook for this year and the coming two years, as well as the Fed easing interest rates, that’s kept optimism alive,” as the AP described strong profit reports and three interest-rate cuts by the Federal Reserve as support for markets.
Still, concerns lingered even as the year’s rally unfolded. Chief among them was the risk that artificial intelligence may not generate enough profits and productivity to justify investment levels, a worry that the AP said could keep pressure on AI-focused stocks such as Nvidia and Broadcom. The AP also noted criticism that stocks across the market still looked expensive after prices climbed faster than profits.
The final stretch of the year also highlighted that inflation remained a key constraint even as rates were cut. The AP said the wide-ranging impact of a U.S.-led trade war could add fuel to inflation and that inflation remained above the Federal Reserve’s 2% target, despite the Fed cutting rates amid concerns about the labor market. Wall Street, the AP added, was betting the Fed would hold interest rates steady at its next meeting in January.
Traders also received an update on the job market late in the week. The Labor Department reported that fewer Americans applied for unemployment benefits in the week, with the AP saying layoffs stayed low even as the labor market weakened.
On Wednesday’s session, all sectors of the S&P 500 closed lower, with technology stocks described as the biggest drag. The AP cited moves including a 2.2% drop in Western Digital and a 2.5% decline in Micron Technology, both stocks that had been among the bigger gainers earlier in 2025.
Beyond equities, the AP reported that Treasury yields mostly rose. It said the 10-year Treasury yield increased to 4.17% from 4.13% late Tuesday, while the two-year Treasury yield rose to 3.48% from 3.45%. Precious metals remained volatile, with the AP saying silver gave back 9.4% after Tuesday’s rise of more than 10%, while gold fell 1% but ended the year up 63.7%.
Energy markets ended the year lower as well. The AP said U.S. benchmark crude slipped 0.9% to $57.42 per barrel, while Brent crude fell 0.8% to $60.85 per barrel. Global trading was mixed as markets in Germany, Japan and South Korea were closed for New Year’s holidays.