Markets Digest Record Highs as AI Enthusiasm Reignites
U.S. equities drifted steadily higher during the holiday-shortened Christmas week, pushing to fresh record highs as investors looked past rising geopolitical tensions and embraced a renewed wave of AI optimism into year-end. The S&P 500 gained 1.41% on the week, supported by strength in mega-cap technology and thin holiday trading conditions. Momentum was broad enough to lift headline indices, while the calm advance reflected a market increasingly comfortable with the underlying growth backdrop.
Early-week gains were sparked by news that NVIDIA plans to begin shipping its H200 chips to select Chinese customers in early 2026, alongside a court decision favorable to Tesla, which reignited interest across AI-linked mega-cap names. Positive macro data further bolstered sentiment, as a stronger-than-expected final Q3 GDP print and solid durable goods data helped ease lingering recession concerns. Trading volumes remained light ahead of the midweek holiday, allowing bullish momentum to persist with little resistance.
By week’s end, markets reached new all-time highs again following news of a licensing agreement between NVIDIA and AI startup Groq during an otherwise quiet session. Overall, price action reflected steady accumulation rather than speculation, with investors leaning into AI exposure while remaining comfortable with the broader economic outlook.
Rates, Dollar & Commodities
Treasury yields edged slightly lower last week, with the 10-year yield slipping a few basis points following a strong 7-year auction rather than any deterioration in economic data. Despite robust GDP growth, yields remain anchored in the low-4% range, a level that reflects solid growth without signaling inflation stress. The U.S. Dollar Index weakened modestly amid year-end positioning and quieter currency markets.
The softer dollar provided a strong tailwind for commodities, with both industrial and precious metals posting outsized gains. Copper surged to new record highs, supported by renewed AI-driven demand expectations and thin holiday liquidity. Gold and silver also broke decisively higher, with silver dramatically outperforming as dovish policy expectations and lingering macro uncertainty drove defensive and speculative inflows alike.
Energy lagged relative to metals, as crude oil gains earlier in the week were erased by renewed 2026 supply surplus concerns and easing geopolitical risks tied to Russia-Ukraine ceasefire discussions. WTI finished the week only modestly higher and remains near multi-year lows, with technical and fundamental pressures still skewed to the downside.
Takeaway
Last week’s market action reinforced the narrative of steady economic resilience paired with selective enthusiasm rather than broad-based speculation. Strong growth data continues to validate the soft-landing thesis, while the labor market remains firmly in a “no hire, no fire” equilibrium that supports stability rather than overheating.
AI remains a central driver of upside momentum, though leadership has narrowed back toward high-quality, well-capitalized firms rather than indiscriminate exposure. Meanwhile, strength in metals and stability in rates and currencies suggest capital is rotating constructively rather than positioning defensively.
With yields and the dollar holding in neutral ranges, financial conditions remain supportive as markets close out the year on solid footing.
Source: stockcharts.com
This Week – What Matters for Markets
This week is another quiet one from an economic standpoint, and barring any major surprises, data releases are unlikely to materially alter the current outlook as markets transition into the new year. The key focus will be Wednesday’s weekly jobless claims report, released a day early due to the holiday schedule.
Markets will be watching for continued stability in initial claims to confirm the ongoing “no hire, no fire” labor environment. Ideally, a modest improvement in continuing claims would further reinforce labor market health as we begin 2026.
Beyond labor data, housing-related reports—including Pending Home Sales and home price metrics from Case-Shiller and FHFA—will be in focus. Continued moderation in housing inflation remains an important ingredient for keeping broader inflation pressures contained and preserving the possibility of future rate cuts in 2026.
Broad Overview
Markets are entering the final days of the year with confidence in economic resilience firmly intact. Growth remains solid, consumer spending continues to hold up, and inflation pressures appear manageable, even as expectations for near-term Fed easing remain tempered.
AI-driven growth has regained momentum after a brief cooling period, supported by tangible developments in semiconductor production, licensing agreements, and global demand indicators. While questions around long-term capital efficiency persist, investor appetite for AI leadership has clearly reasserted itself into year-end.
The bond market continues to signal cooling without contraction, while the dollar’s neutral trading range suggests limited macro friction ahead. As 2026 approaches, the backdrop remains constructive for equities, supported by steady growth, stable policy expectations, and improving clarity around leadership trends.
We’ll continue to monitor these dynamics closely. If you have any questions about your portfolio or the markets, please contact your CIAS Investment Adviser Representative.
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