The S&P 500 finished Wednesday’s session within a hair’s breadth of its all‑time high after the Federal Reserve delivered a widely expected quarter‑point rate cut and signaled it may now pause, capping one of the most closely watched trading days of 2025.
According to preliminary closing figures, the S&P 500 rose about 0.7% to 6,886.26, a gain of 46.30 points on the day. The Dow Jones Industrial Average jumped roughly 1.1% to around 48,061, while the Nasdaq Composite added about 0.3% to 23,654. [1]
An Associated Press market wrap noted that the S&P 500 “climbed 0.7% and ended just shy of its all‑time high set in October,” underscoring how close the benchmark now sits to its previous record closing level near 6,890. [2]
Year‑to‑date, the S&P 500 is up 17.21% on price and 18.48% including dividends as of today’s close, according to data from Slickcharts, placing 2025 solidly in “strong bull market” territory. [3]
Fed Delivers Third 2025 Cut — and Floats a “Wait and See” Pause
The centerpiece of the day was the December Federal Open Market Committee (FOMC) meeting. As markets had been pricing with high confidence, the Fed cut its benchmark federal funds rate by 25 basis points, bringing the target range down to 3.50%–3.75%, the third quarter‑point reduction since September. [4]
In its official statement, the Fed described economic growth as “moderate” and noted that job gains have slowed and unemployment has edged higher in recent months, while inflation has moved up and remains “somewhat elevated.” The Committee highlighted “elevated” uncertainty and said downside risks to employment have risen — language that helps justify the latest cut even as inflation is not yet back to the 2% target. [5]
Two officials dissented because they opposed any cut, while another dissented in favor of a larger 50‑basis‑point move, reflecting a committee still split on how urgent further easing is. [6]
The Fed’s updated Summary of Economic Projections reinforced the idea of a slower, more cautious cutting cycle from here:
- 2026 real GDP forecast raised to 2.3% (from 1.8% in September)
- Unemployment projected around 4.4%
- Core PCE inflation slightly lower at 2.5%
- Median path for rates: just one more 25 bp cut in 2026
Those figures imply a central bank that believes it can nudge rates lower without “racing” to ease policy. [7]
At his press conference, Fed Chair Jerome Powell emphasized that policy is “well positioned” and that the Fed can now “wait and see how the economy evolves” before acting again — and he reiterated that no one on the Committee currently has a rate hike as their base case. That combination of a rate cut plus an apparent cap on further hikes landed as a “Goldilocks” signal for equity investors. [8]
In the bond market, the 10‑year Treasury yield slipped from about 4.18% to 4.14%, and the 2‑year yield fell to roughly 3.54%, easing financial conditions at the margin and helping justify higher equity valuations. [9]
From “Wait-and-See” to Relief Rally: How the Day Unfolded
Heading into today, markets were on edge. On Tuesday, the S&P 500 had dipped 0.09% to 6,840.51 as investors braced for the Fed decision and a possible hawkish tone, with JPMorgan’s warning about higher 2026 expenses weighing on financials. [10]
Global markets overnight were similarly cautious: a Reuters wrap noted that major indexes slipped while Treasury yields and the dollar ticked higher, reflecting anxiety that rate cuts could be paired with tough talk about inflation. [11]
Intraday today, futures and cash markets traded in a narrow range ahead of the 2 p.m. ET announcement, with several intraday notes from Investopedia, Barchart and others describing major indexes as “near unchanged” while traders waited for Powell. [12]
The tone flipped immediately after the Fed’s move and Powell’s comments:
- Stocks surged as the Fed cut, and Powell downplayed the odds of future hikes. [13]
- The S&P 500 moved from flat to comfortably higher, then held most of its gains into the close, finishing just below an October record close around 6,890 that technicians have been watching as resistance. [14]
For context, research from MarketWatch/Morningstar on past December Fed days noted that over the last five such meetings, the S&P 500’s average one‑day move was only about ±0.14%. Today’s roughly +0.7% gain is about five times that typical Fed‑day swing, underscoring how much was riding on this meeting. [15]
Sector Snapshot: Industrials and “Real-World AI” Winners Take the Lead
While the headline is all about the index level, the underlying sector and stock moves tell a more nuanced story.
Industrials were the standout winners and the best‑performing S&P 500 sector, boosted by a huge move in GE Vernova (GEV). Reuters and Kiplinger both highlighted GEV as the top S&P gainer after it raised its 2028 revenue outlook to about $52 billion (up from $45 billion), doubled its dividend and expanded its share buyback authorization to $10 billion. [16]
Kiplinger’s recap noted that GEV has already delivered more than 90% total return in 2025 and over 377% since its 2024 spin‑off, with analysts arguing that AI‑driven power demand and grid investments extend its growth runway well into the next decade. [17]
Other notable gainers included:
- Nike, Caterpillar, Johnson & Johnson, American Express – all up more than 3% in the Dow as cyclical and blue‑chip names responded to the prospect of lower borrowing costs and steady growth. [18]
- Palantir, up around 4–5% after winning a U.S. Navy AI contract worth roughly $448 million, underlining the theme that “applied AI” infrastructure remains a key bull story. [19]
- Cracker Barrel, rallying after an earnings beat despite a cautious revenue outlook. [20]
On the other side of the tape, there were pockets of profit‑taking in some mega‑cap tech names. Microsoft and Nvidia closed modestly lower, even as the broader tech sector finished in the green, suggesting investors were rotating toward laggards and cyclicals for this leg of the rally. [21]
Earnings Momentum: The Fundamental Engine Behind the Rally
Underneath the day‑to‑day Fed drama, the earnings picture for the S&P 500 has quietly turned into one of the strongest since the pandemic rebound.
A Barchart/Nasdaq summary of the quarter noted that with 495 of 500 index constituents having reported Q3 2025 results, roughly 83% beat analysts’ earnings estimates — on track for the highest beat rate since 2021. Q3 earnings grew 14.6% year‑over‑year, more than double the +7.2% growth analysts expected at the start of the season. [22]
That earnings strength helps justify at least some of the market’s multiple expansion. But it has not been a straight line:
- A late‑November market commentary from Farther highlighted that the S&P 500 ended November virtually flat, up just 0.01% for the month at 6,849.09, after enduring a mid‑month drawdown of about 4.4% amid worries over AI infrastructure financing needs, crowded positioning and shifting odds of a December Fed cut. [23]
- The rally into early December — culminating in today’s near‑record close — reflects the market’s increasing confidence in a “soft landing” narrative where robust AI‑driven earnings meet cautiously easier policy. [24]
Valuations: Near Dot-Com Extremes, But Wall Street Targets Keep Rising
Strong earnings have not stopped valuations from climbing into historically demanding territory.
A 2026 outlook from Kingsview, published today, pegs the S&P 500’s price‑to‑earnings ratio at roughly 22.5×, approaching the 24.5× peak reached during the dot‑com bubble. [25]
Despite that, strategists continue to ratchet up their price targets:
- LPL Financial’s chief technical strategist, cited in today’s Kiplinger recap, notes that the average year‑end 2026 Street target for the S&P 500 has recently risen from about 6,500 to 7,269. A bottom‑up aggregation of individual stock targets implies the index could reach 7,900 by the end of next year. [26]
- LPL’s own forecast sees the S&P 500 in a 7,300–7,400 range by the end of 2026, supported by double‑digit earnings growth, AI spending, easier monetary policy and a fiscal boost from the so‑called “One Big Beautiful Bill Act.” [27]
- Earlier this month, BNP Paribas told clients it expects the S&P 500 to end next year at 7,500, roughly 10% above where the index was trading around 6,829 at the time of that forecast. [28]
These targets lean heavily on consensus forecasts that S&P 500 earnings per share will reach about $309 in 2026, roughly 13.6% growth over 2025, according to FactSet data cited by LPL. [29]
Taken together, today’s near‑record close plus these forward‑looking numbers imply that much of the good news — from AI‑driven productivity to ongoing rate cuts — is already embedded in prices. That doesn’t mean the rally must end, but it does shrink the margin for error if growth or inflation disappoints.
Technical Picture: Support at 6,800, Bulls Eye 7,000
Technical analysts spent much of today mapping out key levels for the S&P 500 around the Fed meeting, and their frameworks help explain why the 6,800–6,900 range has become so important.
A note from IG, published this morning, described the index as “range trading” after a sharp rally, with: [30]
- Support near Monday’s low around 6,827, with potential retest of the 6,800 level if that breaks
- Resistance around last week’s 6,895 high, effectively overlapping with the late‑October record close
- A short‑ and medium‑term bullish outlook while the index holds above 6,800, with a technical target near 7,000
Separately, a recent Schaeffer’s Research piece pointed to the lower boundary of a rising bull channel that will sit around 6,895 by the end of this week, almost exactly where the old October closing high (~6,890) lies. [31]
Today’s close at 6,886 leaves the S&P 500:
- Still clearly above support (6,800 zone)
- Just below a confluence of resistance (the channel boundary and prior record)
A decisive break above that confluence with strong breadth would strengthen the bullish technical case; a failure there, especially if paired with renewed rate‑hike fears or weak data, could set up another bout of consolidation or a pullback.
How Unusual Is This “Cut but Cautious” Moment?
Several analyses published today argue that what makes this Fed day unusual isn’t just that the Fed cut rates — it’s the combination of:
- Rate cuts with no imminent recession in the forecast
- AI‑driven earnings growth running well ahead of expectations
- High valuations and growing political uncertainty around the Fed’s leadership
Kiplinger, for example, quoted strategist Louis Navellier arguing that today’s cut could “determine how the year will close out,” and speculating that a Trump‑appointed Fed chair in 2026 might push for further, faster easing — a scenario markets have not fully priced. [32]
At the same time, Reuters and AP reporting highlight ongoing splits inside the Fed: some policymakers still see inflation as the main threat, others worry more about weakening employment. [33]
Add in global dynamics — with other central banks like the Reserve Bank of Australia hinting at a more hawkish stance if inflation re‑accelerates, and markets repricing 2026 rate paths for Canada and the euro area — and it becomes clear that today’s relief rally exists in a still‑fragile macro environment. [34]
Bottom Line: What Today’s Close Tells Us About the S&P 500
After the bell on December 10, 2025, the S&P 500 is telling a simple but powerful story:
- Macro backdrop: A Fed that is cutting, but cautiously; inflation still above target; growth downgraded from “booming” to “moderate,” yet still solid. [35]
- Fundamentals: One of the strongest earnings seasons in years, with beat rates above 80% and double‑digit EPS growth. [36]
- Valuations: Near the upper edge of historical ranges, approaching dot‑com levels on some metrics. [37]
- Technicals: An index in a clear uptrend, sitting just below long‑watched resistance and eyeing the psychologically important 7,000 level, but with 6,800 as a crucial line in the sand. [38]
For long‑term investors, today’s move is another data point in a year where AI, earnings resilience and measured rate cuts have combined to support a powerful bull market — one that increasingly depends on the Fed threading a very narrow needle.
For shorter‑term traders, the message is more tactical: 6,800–6,900 remains the battlefield, and whether the S&P 500 can convert “near record” into “new record” without sparking a valuation hangover is likely to define the final stretch of 2025 and the tone heading into 2026.
References
1. www.reuters.com, 2. www.wral.com, 3. www.slickcharts.com, 4. www.kiplinger.com, 5. www.federalreserve.gov, 6. www.wral.com, 7. www.federalreserve.gov, 8. www.kiplinger.com, 9. www.wral.com, 10. www.reuters.com, 11. www.reuters.com, 12. www.investopedia.com, 13. www.investopedia.com, 14. www.schaeffersresearch.com, 15. www.morningstar.com, 16. www.reuters.com, 17. www.kiplinger.com, 18. www.kiplinger.com, 19. www.wral.com, 20. www.wral.com, 21. www.kiplinger.com, 22. www.nasdaq.com, 23. www.farther.com, 24. www.nasdaq.com, 25. www.kingsview.com, 26. www.kiplinger.com, 27. www.kiplinger.com, 28. www.reuters.com, 29. www.kiplinger.com, 30. www.ig.com, 31. www.schaeffersresearch.com, 32. www.kiplinger.com, 33. www.reuters.com, 34. www.reuters.com, 35. www.federalreserve.gov, 36. www.nasdaq.com, 37. www.kingsview.com, 38. www.ig.com
