NEW YORK, Dec. 27, 2025, 12:56 p.m. ET — Market Closed
Communication Services stocks are heading into the final three U.S. equity sessions of 2025 with two forces pulling in opposite directions: bullish year-end momentum that has kept major indexes near record territory, and a fresh wave of regulatory scrutiny aimed at social media features that critics say drive compulsive use.
With the New York Stock Exchange closed for the weekend, investors are using the pause to reassess what’s been a standout year for the sector—powered by Big Tech advertising platforms and streaming leaders—while mapping out catalysts that could shape the first trading days of 2026.
Where the market left off: quiet Friday, big year for the sector
Friday’s post-holiday session was subdued, with all three major U.S. indexes edging slightly lower and snapping a five-session winning streak, though they still logged weekly gains. The Dow slipped 0.04%, the S&P 500 fell 0.03%, and the Nasdaq ended down 0.09%, according to Reuters. [1]
Even after the brief dip, investors remain focused on the seasonal “Santa Claus rally” window—typically the last five trading days of the year and the first two of the next. Ryan Detrick, chief market strategist at Carson Group, told Reuters the market may simply be “catching our breath” after a strong run and suggested there could still be an upward bias during the remainder of the period. [2]
Importantly for sector watchers, Reuters noted that Communication Services is among the year’s best-performing S&P 500 sectors alongside technology and industrials—an outperformance that has kept mega-cap platforms at the center of portfolio positioning into year-end. [3]
Friday’s sector snapshot: Netflix up, Meta down, Alphabet slightly lower
In late-Friday sector action highlighted by Dow Jones Newswires, Communication Services slipped in thin trading between Christmas and the weekend. Netflix edged higher (+0.89%), Meta Platforms fell (-0.64%), and Alphabet dipped (-0.18%), according to the sector roundup carried by MarketScreener. [4]
For ETF-focused investors, the Communication Services Select Sector SPDR Fund (XLC) hovered near flat on Friday, reflecting the market’s overall “pause” after the holiday rally. [5]
The biggest fresh headline risk: New York mandates warning labels for “addictive” social media features
A major piece of sector news in the past 24–48 hours is regulatory—and it directly targets business models that depend on engagement and time spent.
New York Governor Kathy Hochul announced and signed legislation requiring warning labels on social media platforms that feature “addictive feeds,” autoplay, or infinite scroll, framing the move as part of a broader push to address youth mental health concerns. [6]
Reuters reported the new law applies to platforms with infinite scrolling, autoplay and algorithmic feeds and allows New York’s attorney general to seek civil penalties of up to $5,000 per violation. The story listed Alphabet, Meta, and Snap among the companies most closely associated with the affected product features, while noting that spokespeople for several major platforms did not immediately respond to comment requests. [7]
Hochul’s office said the warnings must appear when a young user initially uses the covered feature and “periodically thereafter,” and that users will not be able to bypass or click through the warnings. [8]
TechCrunch, reporting early Saturday, underscored the policy scope by pointing to the bill’s language defining an “addictive social media platform” and reiterating that the warnings are intended to appear before younger users encounter features such as autoplay and infinite scrolling. [9]
Why it matters for Communication Services stocks:
- Product design risk: If large platforms must alter default settings or UX flows to comply, engagement metrics—closely watched by advertisers and analysts—could come under pressure.
- Patchwork compliance costs: State-by-state rules can add complexity, particularly for platforms with national user bases and rapid feature iteration cycles.
- Regulatory narrative: The sector’s 2025 outperformance means valuations and expectations may be less forgiving if investors start pricing in greater policy friction around engagement-driven growth.
Analyst outlook: RBC turns constructive on Communication Services into 2026
On the forecast side, one of the more notable “year-ahead” sector calls came from RBC Capital Markets.
In a December 24 sector outlook, RBC’s Lori Calvasina—Head of U.S. Equity Strategy—said the firm upgraded Communication Services to overweight, citing improved analyst views, neutral valuation perceptions, and strong demand assessments from its survey work. Calvasina also pointed to positive earnings and revenue revisions, attractive valuations, and fund flows that “beginning to recover after recent weakness.” [10]
That matters because many investors use year-end research resets to decide whether to rebalance sector exposures—especially in a market where mega-cap weights can dominate performance.
Big-picture 2026 setup: AI spending, profits and the Fed still in the driver’s seat
Communication Services is not just a “social media” story—it’s also a proxy for digital advertising demand, streaming monetization, and (increasingly) AI-enabled product upgrades.
In a separate December 24 outlook piece, Reuters described 2026 market expectations as hinging on strong corporate earnings, continued AI investment, and a Federal Reserve that can keep easing without the economy slipping into recession. The story cited CFRA chief investment strategist Sam Stovall and also referenced projections from LSEG’s head of earnings research Tajinder Dhillon, who said S&P 500 earnings are projected to rise by more than 15% in 2026. [11]
For Communication Services specifically, the link is straightforward:
- A resilient consumer and stable labor market support ad spending and subscription retention.
- Lower rates can lift equity multiples—particularly for long-duration growth stories.
- AI spending and AI-driven product improvements can strengthen ad targeting, content recommendations, and customer service—while also raising questions about ROI and capital discipline.
What investors should know before the next session
U.S. equities reopen Monday, with the NYSE core trading session running 9:30 a.m. to 4:00 p.m. ET. [12]
Because liquidity can be thin at year-end, price moves in mega-cap Communication Services names can be amplified—especially around policy headlines and macro data.
1) Know the remaining holiday schedule
- Nasdaq’s published calendar confirms the early close already occurred on Dec. 24 and the market was closed on Dec. 25. [13]
- Investopedia notes the stock market is expected to have a full trading day on New Year’s Eve (Wednesday, Dec. 31), while markets are closed on New Year’s Day (Thursday, Jan. 1, 2026). [14]
2) Earnings are not the story next week—macro and positioning are
Kiplinger’s week-ahead earnings calendar says there are no noteworthy earnings reports scheduled for the week of Dec. 29 to Jan. 2, reinforcing that market direction will likely be driven by macro releases, rates, and year-end positioning rather than company prints. [15]
3) Watch Monday’s data calendar for rate-sensitive swings
Monday morning includes releases that can move yields—and by extension, growth-sensitive sectors like Communication Services:
- The National Association of REALTORS® lists the next Pending Home Sales release for Monday, Dec. 29, at 10 a.m. Eastern. [16]
- The Dallas Fed’s Texas Manufacturing Outlook Survey release process begins at 9:30 a.m. CT (10:30 a.m. ET), with the December release date listed as Monday, Dec. 29. [17]
- CME Group’s Econoday listing shows advance international trade in goods scheduled for Dec. 29 at 7:30 a.m. CT (8:30 a.m. ET). [18]
Bottom line for Communication Services stocks into Monday
Heading into the final three sessions of 2025, the Communication Services playbook looks like this:
- Momentum and mega-cap gravity still matter: The sector’s leadership and index concentration mean Meta and Alphabet can drive not only sector ETFs but also broader market direction. [19]
- Regulation is back on the front page: New York’s warning-label law adds a tangible policy variable that investors may need to model, especially for platforms built around algorithmic feeds, infinite scroll, and autoplay. [20]
- 2026 optimism isn’t guaranteed, but the ingredients are visible: Strategists and researchers cited by Reuters continue to point to earnings growth, AI spending, and Fed policy as key pillars for next year’s equity performance—conditions that historically feed directly into ad-driven and subscription-heavy Communication Services models. [21]
- Street research is leaning constructive: RBC’s Lori Calvasina has moved Communication Services back to overweight in her year-ahead sector outlook, citing revisions, valuations, and improving flow signals. [22]
With earnings quiet, investors should expect the next moves in Communication Services stocks to be dictated less by quarterly scorecards—and more by a mix of year-end rebalancing, interest-rate expectations, and the regulatory headlines that can shift sentiment in a sector where engagement is the product.
References
1. www.reuters.com, 2. www.reuters.com, 3. www.reuters.com, 4. www.marketscreener.com, 5. www.benzinga.com, 6. www.governor.ny.gov, 7. www.reuters.com, 8. www.governor.ny.gov, 9. techcrunch.com, 10. www.rbccm.com, 11. www.reuters.com, 12. www.nyse.com, 13. www.nasdaqtrader.com, 14. www.investopedia.com, 15. www.kiplinger.com, 16. www.nar.realtor, 17. www.dallasfed.org, 18. www.cmegroup.com, 19. www.reuters.com, 20. www.reuters.com, 21. www.reuters.com, 22. www.rbccm.com
