U.S. equities enter the final month of 2025 with renewed momentum, as major indices drift back toward historic highs following a volatile November marked by sharp swings in tech sentiment and shifting expectations for Federal Reserve policy. Investors are now assessing whether December can deliver a smoother trajectory, with the S&P 500 sitting less than 1% below its all-time peak and the Nasdaq Composite within 3% of its record despite a choppy month that broke a seven-month winning streak.

Friday’s shortened post-Thanksgiving session brought a fifth consecutive day of gains, helping stabilize the broader market after weeks of AI-related valuation fears weighed on mega-cap technology names. The Dow also continues to trade just shy of record territory, adding to optimism that markets may regain momentum heading into the final Federal Reserve meeting of the year.

Tech Divergence and the Market’s Search for Direction

November showcased pronounced dispersion within the tech sector. Meta and Nvidia both endured significant pullbacks, slipping 13% and 8%, respectively, amid intensifying debate over whether the AI trade has become overheated. Oracle’s nearly 30% monthly slide underscored the fragility of sentiment surrounding premium-valued tech companies.

By contrast, Alphabet emerged as the standout winner of the month. The stock rallied nearly 20%, supported by robust earnings, positive reaction to its Gemini 3 AI model, and reports of a major AI chip partnership with Meta. The divergence illustrates a market recalibrating its tech exposure, differentiating between firms with clear AI execution pathways and those facing operational or competitive uncertainties.

Investors will be watching whether Alphabet’s leadership becomes a template for the next phase of the AI cycle or if the sector continues to experience sharp internal bifurcation.

Rate-Cut Bets, Fed Uncertainty, and Policy Sensitivity

Macroeconomic expectations remain a driving force as traders price in an 86.9% probability of a quarter-point rate cut at the December Fed meeting. The central bank’s blackout period, which began Saturday, ensures a quiet stretch before the December 9–10 gathering. This comes as reports signal the administration is nearing a decision on a successor to Jerome Powell, with National Economic Council Director Kevin Hassett seen as a leading contender.

President Trump fueled speculation further by confirming he has chosen a nominee—one he expects to deliver rate cuts—though he withheld the name. Markets will closely track whether the political dimension surrounding the next Fed chair injects additional volatility into rate expectations.

Earnings, Economic Data, and a Market Looking to 2026

This week brings a slate of U.S. economic releases—including manufacturing, services, payrolls, and inflation-related indicators—helping normalize data flow after the prolonged government shutdown disrupted reporting earlier this year. Retailers such as Dollar Tree, Dollar General, and Five Below headline corporate earnings, along with tech names Salesforce, CrowdStrike, and Snowflake.

Meanwhile, Wall Street strategists remain broadly bullish for 2026. JPMorgan, HSBC, and Deutsche Bank all project the S&P 500 to reach between 7,500 and 8,000, anchored by expectations of continued AI-driven capital expenditure, earnings growth, and a resilient U.S. economy. Yet they caution that volatility will remain elevated as markets toggle between optimism about long-term AI productivity gains and persistent macroeconomic uncertainty.

Looking Ahead

As December begins, investors will weigh whether improving sentiment, moderating inflation expectations, and strong year-end positioning can carry markets to new highs. The interplay between Fed policy, sector-specific dynamics in technology, and the holiday-season consumption outlook will shape trading conditions in the weeks ahead. With volatility still a defining feature of the 2025 market narrative, the path to further gains may be uneven—but the bullish long-term outlook continues to anchor investor confidence.