Published by Global Banking & Finance Review®
Posted on December 26, 2025
4 min readLast updated: January 20, 2026
Add as preferred source on GoogleU.S. stock indexes closed near record highs, while precious metals surged due to Federal Reserve rate cut expectations and geopolitical tensions.
By Isla Binnie and Ankur Banerjee
Dec 26 (Reuters) - Major U.S. stock indexes closed near record peaks on Friday, little changed from the start of a muted post-Christmas trading session, while expectations of Federal Reserve interest rate cuts and safe haven appeal pushed precious metals prices to all-time highs.
Public holidays kept markets closed in Australia, Hong Kong and most of Europe, but the bourses that were open pushed towards ending the year in positive territory, with Asian stocks rising to multi-week highs in their trading session earlier.
The benchmark S&P 500, ended 0.03% lower than the open in New York, while the blue-chip Dow Jones Industrial Average fell 0.04% and the Nasdaq Composite fell 0.09%. The small dips snapped a three-session rally but left all three higher on the week and still set for double-digit yearly percentage gains.
Megacap tech companies have driven the S&P 500 higher in 2025, and investors have been branching out to cyclical sectors including financials and materials, broadening the upswing and leaving the main U.S. indexes set for a third straight year of gains.
Data suggesting the U.S. economy is resilient, paired with the possibility that a new central bank chair to replace Jerome Powell could look to cut rates next year, is supporting markets. Recent pressure on AI stocks stemming from concerns over high valuations and profit-sapping capital expenditures has also lessened.
Traders watched for a "Santa Claus rally" which is declared if the S&P 500 advances through the last five trading days of the current year and the first two in January. This would be considered a good omen for stocks in 2026 after a volatile year.
Geopolitical tensions enhanced the safe-haven appeal of precious metals the day after the U.S. carried out airstrikes against Islamic State militants in northwest Nigeria. Silver hit an all-time high of $77.4 per ounce, on a 167% year-to-date surge, supported by supply deficits and the metal's designation as a U.S. critical mineral.
A weaker dollar further burnished dollar-denominated gold's appeal for overseas investors, helping to send the metal to a record $4,549 per ounce. The gold price eased slightly in later trading but stayed 1.08% higher.
Soojin Kim, commodities analyst at MUFG, said in a note the rally could continue, supported by "major banks forecasting further gains into 2026, the strength of physical demand and persistent geopolitical and monetary uncertainties".
Oil prices settled more than 2% lower, dragged down by the prospect of a global supply glut and possible progress on a Ukraine peace deal.
DOLLAR'S DECEMBER BLUES
Investors are preparing for 2026 focused on when the U.S. Federal Reserve might cut rates and by how much. Traders are pricing in at least two cuts over the year, but they do not expect the Fed to move before June.
The central bank has projected one more cut next year but divisions among decision makers has left investors on edge about the policy outlook.
Markets are also waiting for President Donald Trump to nominate a Fed chair to replace Powell, whose term ends in May. Any signal of what Trump will decide could sway markets in the coming week.
The U.S. dollar has been under pressure as a result, pushing the euro, sterling and the Swiss franc to highs. The dollar index, which measures the U.S. currency against six rivals, rose 0.08% to 98.03 on Friday.
The Japanese yen softened against the dollar as investors remained on watch for potential intervention to shore up the currency. Analysts say year-end trading, when volumes are thin, provides an opportunity for authorities to take action.
The yen has weakened despite the Bank of Japan delivering a well-telegraphed interest rate hike last week. Data on Friday showed that core consumer inflation in Japan's capital slowed in December but stayed above the central bank's 2% target, bolstering the case for further rate hikes.
(Reporting by Isla Binnie and Ankur Banerjee; Editing by Muralikumar Anantharaman, Hugh Lawson and Nick Zieminski)
A Federal Reserve interest rate cut is a reduction in the interest rate set by the central bank, aimed at stimulating economic activity by making borrowing cheaper.
Precious metals are rare, naturally occurring metallic elements of high economic value, including gold, silver, platinum, and palladium, often used as investments or in jewelry.
A Santa Claus rally refers to a phenomenon where stock prices rise in the last week of December and the first two trading days of January, often attributed to holiday optimism.
Safe-haven appeal refers to the tendency of investors to seek out assets that are expected to retain or increase in value during times of market volatility or economic downturns.
The S&P 500 index is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States, serving as a key indicator of U.S. equities.
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