U.S. Markets
U.S. stocks notched a solid gain in the fourth quarter as investors cheered lower interest rates and solid corporate profits while navigating limited economic updates due to the U.S. government shutdown.
The Standard & Poor’s 500 Index gained 2.35%, while the Nasdaq Composite added 2.57%. The Dow Jones Industrial Average advanced 3.59%. 1
October Shutdown
U.S. stocks rose for the sixth consecutive month in October as AI- and tech-led advances pushed major averages.2
Solid Q3 corporate results helped drive market momentum over a month that is notorious for declines. However, after the U.S. Senate failed to pass dueling funding bills that would have prevented the shutdown, sentiment began to shift negatively.2
Late-Month November Rally
Stocks then turned mixed in November as a late-month rally clawed back some losses from earlier in the month. After the U.S. federal government’s shutdown ended, investors’ focus shifted to the Federal Reserve as they kept an eye on big consumer-related stocks for insights into the economy, with few official monthly economic reports being issued.3,4
December Ends Quietly
U.S. stocks regained some momentum in December but faced pressure late in the month. A fresh CPI report showed inflation cooled in November, lifting stocks across the board. The Federal Reserve cut short-term rates, but the jobs market continued to give mixed signals, which created anxiety about how the Fed will guide rates in 2026.5,6,7
The Federal Reserve
The Federal Reserve convened two official meetings in the fourth quarter, during which officials delivered numerous speeches over a three-month period.
The Federal Open Market Committee (FOMC) cut interest rates by a quarter percentage point at its October meeting, a move widely expected. Federal Reserve Chair Jerome Powell said in his post-meeting press conference that another rate adjustment in December was “not a foregone conclusion,” due in part to the government shutdown making up-to-date economic data reports scarce, and the challenge of setting monetary policy without them.8
However, the FOMC ultimately cut rates by another quarter percentage point at its December meeting. At his post-meeting press conference, Fed Chair Powell said it would be a higher bar for further rate adjustments.9
Minutes from the December meeting, released on December 30, confirmed themes consistent with those presented in Powell’s December press conference. Members remain concerned about a wobbly labor market but remain focused on the Fed and big consumer-related stocks.10
The Federal Reserve’s first meeting of 2026 is January 27-28.
What Investors May Be Talking About in January
In the month ahead, federal workers will continue to work overtime to catch up on all the economic reports delayed by the shutdown.
While they have been making steady progress, five key reports remain delayed: Retail sales, industrial production, housing starts, new home sales, and durable goods.11
Fed officials believe they will be caught up by the end of January. Ironically, that’s when the temporary spending bill passed in November 2025, which ended the 43-day shutdown, will run out of funds.11
By month’s end, expect attention to focus on how Congress will structure a new spending bill.
- Finance.yahoo.com, December 31, 2025
- CNBC.com, October 31, 2025
- CNBC.com, November 14, 2025
- CNBC.com, November 28, 2025
- WSJ.com, December 10, 2025
- WSJ.com, December 18, 2025
- CNBC.com, December 31, 2025
- 8. WSJ.com, October 29, 2025
- 9. WSJ.com, December 10, 2025
- 10. CNBC.com, December 30, 2025
- Investopedia.com, December 12, 2025
- WSJ.com, December 23, 2025
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