S&P 500 See-Saws with Mixed AI News and Inflation Data

The S&P 500 (Index: SPX) sank in the early part of the third week of December 2025 as fears of whether the returns on investments being placed on AI-technology can overcome the debt that several high-profile firms like Oracle (NASDAQ: ORCL) are taking on to make them.

While the index bottomed at 6,721.43 at the close of trading on Wednesday, 17 December 2025, it went on to recover strongly by the end of the week. The index reached 6,834.50 by the close of trading on Friday, 19 December 2025.

That recovery in the latter part of the week came thanks in no small part to computer chipmaker Micron Technology (NASDAQ: MU) boosting its outlook on the strength of its AI-related order book and because the shutdown-delayed inflation data for November 2025 came in much lower than expected. The news about inflation would seem to clear a path for the Federal Reserve to continue reducing the Federal Funds Rate in 2026.

But that’s in question. Because the Senate Democrats’ shutdown fiasco affected the collection of a good portion of data for the November consumer price index report, there are questions about how well the Bureau of Labor Statistics was able to capture how prices changed.

If there’s one thing Wall Street’s bulls and bears can agree on, is that they want better quality data on which to stake their investments. If that’s not already on their 2026 wish list for Santa Claus, it should be. 2025 has been a year in which the shortcomings of how government agencies collect and report economic data have been laid bare with much needing to be fixed.

That’s enough editorializing! Here’s the latest update to the alternative futures chart, in which we’ve added a new redzone forecast range to project the most likely trajectory stock prices will take through the end of 2025.

We add redzone forecast ranges to the alternative futures chart when we know in advance the dividend futures-based model‘s projections will be affected by the echoes of past volatility in stock prices. This is a forecasting challenge that arises because the model incorporates historic stock prices as the base reference points from which it projects the potential futures.

The new redzone forecast range bridges across the period in which past volatility in stock prices will cause the model to undershoot the path the S&P 500 will most likely take. One end of the forecast range is anchored on 18 December 2025, while the other will float based on the projections for 23 January 2026. We assume investors will focus their forward-looking attention on 2026-Q2 during this time.

That’s because of the how the expectations for how the Fed will set the Federal Funds Rate in 2026 are changing. The timing of the next expected rate cut has been fluctuating in recent weeks and although the CME Group’s FedWatch Tool anticipates quarter point rate cuts on 18 March (2026-Q1) and 29 July (2026-Q3), with no other rate cuts projected in 2026, that first rate cut has the potential to slide into 2026-Q2.

How far investors are looking into the future as they make their current day investing decisions can have a large effect on stock prices and often depends on the random onset of new information. Speaking of which, here are the market-moving headlines that influenced those decisions during the third week of December 2025.

Monday, 15 December 2025

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

• Oil prices fall as supply outlook offsets disruptions in Venezuelan flows

• An ounce of silver now buys you a barrel of oil

Favorites emerging to be next Fed boss:

• Trump says he is leaning toward Warsh or Hassett to lead the Fed, WSJ reports

• JPMorgan’s Dimon signals support for Kevin Warsh as Fed chair, FT reports

Fed minions satisfied after solving all of nation’s economic problems with perfect monetary policy execution:

• Williams says Fed policy in good position, sees inflation moderation in 2026
• Fed’s Collins says supported rate cut but it was a ‘close call’
• Fed’s Miran: Current inflation not reflective of supply and demand in the economy

• Fed decisions distorted by ‘phantom inflation’, says Stephen Miran

Bigger trouble developing in China:

• China’s Economy Is Deteriorating on Several Fronts
• China’s economy stalls in November as calls grow for reform
• Xi Blasts “Reckless” Projects Exaggerating Growth After China Reveals Dismal Macro Data For November

EU minions back off plan to ban fossil fuel-powered cars in 2035:

• EU yields to pressure from automakers as it rethinks 2035 combustion car ban

Wall Street ended lower as investors eye a busy week of economic data

• Wall St closes lower as investors position for busy week of data
• Exclusive: Nasdaq seeks to extend trading hours, as Wall Street gears up for 24/7 move

Tuesday, 16 December 2025

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

• US unemployment rate hits four-year high of 4.6%

• US job growth snaps back in November; shutdown distorts unemployment rate
• US rate futures briefly raise odds of January rate cut after jobs data
• US jobless rate for Blacks and teens surges in November

U.S. business activity growth hits 6-month low in December

Oil slips below $60 on Russia-Ukraine talks, weak China data

Fed minions worried more rate cuts might boost inflation, think their favorite monetary policy tool is becoming ineffective:

• More rate cuts could reignite inflation, hurt Fed credibility, Bostic says
• Dallas Fed paper argues federal funds rate transmission effectiveness waning

Bigger trouble, but no stimulus developing in China:

• China data dives, but Beijing balks at fiscal splurge
• China accelerates crude stockpiling amid weaker oil price trend

BOJ minions expect to win game of ‘fiscal chicken’ with JapanGov minions as they gear up for next rate hike:

• The BOJ will win Takaichi’s game of fiscal chicken
• Bank of Japan to take interest rates to 30-year high

Bigger trouble developing in the Eurozone:

• Low growth is now Europe’s biggest financial-stability risk

Wall Street ended mixed after stronger jobs data and a drop in oil prices

• Wall St ends mixed, healthcare and energy stocks weigh on S&P

Wednesday, 17 December 2025

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

• Oil jumps 2% as Trump’s Venezuela blockade stokes uncertainty

• https://www.reuters.com/world/americas/trump-orders-blockade-sanctioned-oil-tankers-leaving-entering-venezuela-2025-12-16/

Fed minions grease financial wheels, say monetary policy is too restrictive:

• Fed liquidity measures calm year-end funding jitters
• Waller says Fed policy still in restrictive territory, sees room to cut rates

• Fed governor Waller says rates could be cut by as much as a full point
• Fed’s Waller says he ‘absolutely’ would defend US central bank’s independence

Growth signs developing in Japan:

• Japan’s exports to US post first rebound in 8 months as tariff pain eases
• Japan’s premier says country must pursue proactive spending for growth

Wall Street closed noticeably lower while oil prices popped

• Wall Street falls as AI funding jitters hit tech stocks
• Gold forecast to glitter again next year despite biggest gain since 1979

• US tech stocks slide as Oracle data centre setback reignites AI concerns

• Oracle slides on uncertainity over $10B Michigan data center financing

Gold forecast to glitter again next year despite biggest gain since 1979

Thursday, 18 December 2025

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

• Expectations before consumer price inflation data:

• US consumer prices likely posted largest annual increase in 1-1/2 years in November

Consumer price inflation lower than expectations:

• Consumer Price Index: Inflation Cools To 2.7% In November, Lower Than Expected

• US annual consumer inflation slows in November, but report distorted by missing data

• The pain points and bright spots in a patchy US inflation report

Oil prices settle slightly higher as market assesses mounting supply risks

Fed minions surprised by lower-than-expected inflation, suggest more rate cuts may be coming:

• Fed’s Goolsbee in Fox Business interview welcomes latest inflation data, says more rate cuts may loom

BOJ minions get another high inflation reading before anticipated rate hike:

• Japan’s core inflation steady in November, stays above BOJ target

ECB minions say they’ve achieved perfection with Eurozone monetary policy:

• ECB upgrades growth outlook, closing door to more cuts

• ECB policymakers see steady rates next year but cut not off table, sources say
• Lagarde’s statement after ECB policy meeting

Wall St closes higher fueled by tech rally, soft inflation data

• Wall Street ended higher after trimming earlier gains as investors digest CPI data

Friday, 19 December 2025

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

• Oil prices climb as US blocks Venezuelan tankers, eyes on Russia-Ukraine talks

• Surging barrels at sea spook oil markets more than Russia or Venezuela

US existing home sales edge up in November as mortgage rates ease

Fed minions say they’re in no rush to cut interest rates again:

• Fed’s Williams tells CNBC there is no urgent need to cut rates again

Bigger stimulus surprisingly not developing in China:

• China set to keep rates steady for seventh month despite slowing economy

BOJ minions hike Japan’s interest rates, lose credibility?:

• Bank of Japan raises rates to 30-year high, signals more hikes

• BOJ Governor Ueda’s comments at news conference

Yen weakens across board after BOJ delivers rate hike

• Yen bears emboldened by no-surprises BOJ
• Loss Of Credibility: Yen Craters, Yields Surge After BOJ Hikes Rates To Highest Since 1999

ECB minions say they have Eurozone inflation right where they want it:

• ECB’s Santos Pereira: inflation at target, rate moves to hinge on economy
• ECB’s Escriva expects monetary policy to remain steady
• ECB’s growth, inflation risks are large but balanced, Sleijpen says

Eurozone’s biggest economy expected to recover slowly next year:

• German economic recovery to get a subdued start next year, Bundesbank says

Wall Street ended the week on a high note with back-to-back session gains

• Wall St climbs as tech rally continues, led by Micron

• Micron surges on AI demand, ‘memory supercycle’; analysts highlight historic margin guidance

The Atlanta Fed’s GDPNow tool projection of real GDP growth in the U.S. during the recently ended 2025-Q3 is unchanged at +3.5% this week. 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.

On a programming note, this is the last edition of the S&P 500 chaos series for 2025, we’ll be back with a new edition on Monday, 5 January 2026.

In between now and then, we’ll feature one of the best data visualizations we’ve seen during the year and will also present the biggest math story of 2025. We’ll officially return on Friday, 2 January 2026 with a new tool you can use to see what your paycheck will look like in 2026.

Image credit: Microsoft Copilot Designer. Prompt: “An editorial cartoon of a Wall Street bull and bear who are both asking for better quality data in 2026 from Santa Claus”