Weekly Market Commentary December 29th 2025 to January 2nd 2026
On a holiday-shortened week, there were only a couple noteworthy economic data releases to close 2025 and start the new year.
Mortgage rates declining in October led to pending home sales coming in above the forecast in November, increasing 3.3% from the prior month and 2.6% year over year in all four regions according to the National Association of Realtors. Improving housing affordability is attributable to lower mortgage rates and wage growth increasing at a faster rate than home prices, as well as more inventory compared to last year which is attracting buyers to the market.
The most significant news came on New Year’s Eve when the FOMC released the minutes from the December meeting. The decision to cut the overnight rate to 3.50% – 3.75% was even closer than initially thought with three officials dissenting, the most in three years, as officials had a variety of opinions regarding future cuts. Overall, the balance of a slowing labor market and inflation that remains above its target remain at the forefront. The government shutdown has led to a lack of fresh data and uncertainty with many officials thinking it was best to wait for forthcoming data before deciding on additional cuts.
In a shortened trading week and lighter volume, the equity markets declined on each of the final days with the S&P 500 closing at 6,845 up 16% for the year, while Friday’s first trading day of 2026 closed slightly up at 6,858.
The U.S. Treasury yield curve continued its “Bull Steepener”, with the 2-Year closing at 3.48% and the 10-Year closing at 4.19%, resulting in the 2/10 spread of 72bps to start the year and just off a 4-year high.
Next week is full of important economic data market participants will be watching, including the December reports for non-farm payrolls and manufacturing and services data.
