S&P 500 Hits New Record High After Fed Rate Cut But Retreats on AI Earnings Scare

After the Fed acted to cut the Federal Funds Rate by a quarter point on Wednesday, 10 December 2025, the S&P 500 (Index: SPX) went on to strike a new record high of 6,901.00 on Thursday, 11 December 2025. But the index retreated the next day as new fears arose about the outlook for earnings of firms making big AI-technology investments. The S&P 500 ultimately ended down 0.6% from the previous week’s close, settling at 6,827.41 by the close of trading on Friday, 12 December 2025.

After the Fed reduced the Federal Funds Rate by a quarter point to a target range of 3.50-3.75%, investors had no reason to continue focusing on the current quarter of 2025-Q4. The CME Group’s FedWatch Tool outlook for 2026 indicates investors anticipate future quarter point rate cuts on 18 March (2026-Q1) and 29 July (2026-Q3), with no other rate cuts projected beyond that date.

While these changes suggest investors would shift their focus to either 2026-Q1 or 2026-Q3 as they set current day stock prices, the trajectory of the S&P 500 in the past week instead indicates they are focusing on the distant future quarter of 2026-Q2 in setting current day stock prices. The latest update of the alternative futures chart shows that shift with the trajectory of the S&P 500 pacing the dividend futures-based model‘s projections of what the level of the S&P 500 would be expected if investors are focusing on this future quarter.

Here are the market-moving headlines investors absorbed during the week that was.

Monday, 8 December 2025

• Signs and portents for the U.S. economy:

• Oil falls amid ongoing Ukraine talks, ahead of expected US interest rate cut
• US container imports drop 7.8% in November amid China demand slump, Descartes Systems says

Fed minions to get new leadership:

• Fed could find itself in a bind as it sets the stage for Powell’s successor

Bigger trouble developing in China:

• China’s car sales extend decline in November in biggest drop in 10 months
• Macron Warns EU May Hit China With Tariffs Over Trade Surplus

• China’s exports top expectations on strong sales to non-US markets

• China’s Trade Surplus Tops $1tn Mark As Exports Rebound Despite Tariffs

Bigger trouble developing in Japan:

• Japan’s third-quarter GDP contraction worsens on weak capex
• Japan’s October real wages fall for 10th month despite upbeat nominal pay

Bigger trouble developing in Eurozone:

• German corporate bankruptcies to surge to a decade high in 2025

ECB minions thinking about maybe hiking Eurozone interest rates:

• ECB must be vigilant about some upside risks to inflation, Kazimir says
• ECB’s next move may be a hike, but not anytime soon, Schnabel tells Bloomberg News

Wall Street finished in the red ahead of a pivotal Federal Reserve meeting

• US stocks end lower as investors wait for Fed rate decision

Tuesday, 9 December 2025

• Signs and portents for the U.S. economy:

• US bank executives say AI will boost productivity, cut jobs
• US container imports drop 7.8% in November amid China demand slump, Descartes Systems says
• US job openings rise slightly after surging in September; fewer workers quitting their jobs
• Oil settles down 1%, focus on Russia-Ukraine peace talks, Fed

Fed minions to deliver a lot of whinging after getting new leadership:

• Fed faces turbulent 2026 as Powell’s term ends, independence tested

• Investors warm up for long spell of discordant Fed

Trump says support for interest rate cuts is key test for Fed chair nominee

Bigger trouble developing in China:

• Beijing Data Blackout Raising Alarm Bells About China’s Economy

Chief BOJ minion developing skill for understatement:

• BOJ Governor Ueda says rises in long-term interest rates ‘somewhat rapid’

ECB minions thinking about doing QE “passively” and making banking regulations “simpler”, but not “looser”:

• Will ECB’s ‘good place’ turn into passive easing?
• Exclusive: ECB backs simpler, not looser, bank rules, sources say

S&P 500 edges down as investors await Fed rate decision

• Wall Street ended mixed in a muted session ahead of the upcoming FOMC decision

Wednesday, 10 December 2025

• Signs and portents for the U.S. economy:

• Oil steadies ahead of Ukraine peace talks and Fed interest rate decision
• US labor cost growth slows in third quarter as labor market conditions soften
• US home price rises to stay modest as mortgage rates stick

Headlines before the Fed minions’ rate cut:

• https://www.reuters.com/business/fed-expected-cut-rates-may-signal-coming-pause-2025-12-10/
• Wall St futures slip ahead of Fed meeting, 2026 cuts in doubt

Headlines after the Fed minions’ rate cut:

• Divided Fed lowers rates, signals pause and one cut next year as growth rebounds

• Fed rate decision sees most dissents since September 2019
• Fed’s Powell says rate policy well positioned, future of policy not on pre-set course

Fed says it will start technical buying of Treasury bills to manage market liquidity

Bigger trouble, stimulus developing in China:

• China’s deflationary strains persist even as consumer inflation hits 21-month high
• EU firms in China accelerating supply chain diversification, report finds
• IMF urges China to take the ‘brave choice’: curb exports, boost consumption

BOJ minions expected by economists to deliver more rate hikes, bigger trouble developing in Japan:

• BOJ to hike rates to 0.75% in Dec, 1.0% by next Sept, majority of economists say
• Japan Might Be A Bomb Ready To Explode– Why You Should Care

ECB minions see growth ahead, expected to do nothing with Eurozone interest rates:

• ECB may lift growth outlook again, Lagarde says
• ECB to stay on hold through end of 2026 on expected stable economic outlook: Reuters poll

Wall Street indexes rally after Fed cuts interest rates

• Dow reaches 48K level for the first time since Nov. after FOMC cuts 25 bps

Thursday, 11 December 2025

• Signs and portents for the U.S. economy:

• Oil retreats as investors’ focus on Ukraine, US fuel supplies

• OPEC data indicate close oil supply-demand balance in 2026, no glut

US September trade deficit lowest in more than five years as goods exports soar

• Major automakers say China poses ‘clear and present threat’ to US auto industry

Fed minions gearing up for relaunch of Quantitative Easing:

• New York Fed desk plans to conduct purchases worth over $54 billion over next month

Bigger stimulus developing in China:

• China promises fiscal boost next year, recognises ‘prominent’ imbalance

BOJ minions not sure they should act to stave off higher interest rates in Japan:

• Bank of Japan reluctant to intervene on rising yields, sources say

S&P and Dow end at record levels, Oracle pulls Nasdaq lower

• S&P 500 notches first record high close since October
• Oracle forecasts miss Wall Street targets while spending rises

Friday, 12 December 2025

• Signs and portents for the U.S. economy:

• Oil inches lower on oversupply concerns, on track for weekly loss

Fed minions worry about inflation, say rate cut was right move:

• Fed dissenters cite inflation risk in votes against rate cut

• Fed’s Hammack would prefer tighter policy given too high inflation
• Fed’s Paulson says monetary policy still working to cool inflation

Fed’s Daly says this week’s rate cut was right move for Fed

Bigger trouble, stimulus developing in China:

• China’s November new loans miss forecast as housing slump persists
• Focus: China’s small bank mergers shrink sector but raise financial risks

BOJ minions really thinking about going forward with plan to hike Japan’s interest rates:

• Exclusive: BOJ to pledge more rate hikes at next week’s policy meeting
• Japan’s core inflation likely held at 3.0% in November: Reuters poll

ECB minions hear about ‘geopolitical risk impact’ and want to know more about it as EU minions want to give Russian money frozen in EU banks to Ukraine:

• ECB to quiz 110 banks on geopolitical risk impact
• Explainer: How does the EU want to use Russia’s frozen assets for Ukraine?

Wall Street ends lower; fears of AI bubble and inflation send investors away

• Nasdaq, S&P 500 end week with losses as AI trade tumbles led by Broadcom guidance fears

• Broadcom stock falls as management warns of margin pressures

The Atlanta Fed’s GDPNow tool projection of real GDP growth in the U.S. during the recently ended 2025-Q3 ticked up from +3.5% last week to +3.6%. The tool won’t shift to forecast 2025-Q4′s GDP until 23 December 2025, which coincides with when the BEA’s official initial estimate of GDP for 2025-Q3 will be released.

With the approaching holidays, we’re anticipating little new market-moving news coming out after this upcoming week. Monday, 22 December 2025 will mark the final edition of our S&P 500 chaos series for 2025, with the next edition not arriving until Monday, 5 January 2026 after we come back from our annual weeklong hiatus.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull and bear sitting in front of a fireplace drinking hot cocoa to celebrate the Federal Reserve cutting interest rates”. We then ran second prompt to “Draw a cartoon thought bubble showing a balloon being popped by a pin”, the result of which we added to the originally generated cartoon to show what the Wall Street bear is happy about.