U.S. stocks end year lower

U.S. stocks closed the year lower as light year-end trading and profit-taking trimmed gains across major indexes, but the market still posted strong annual returns driven by enthusiasm for technology and easing inflation concerns. The Dow fell about 0.6%, while the S&P 500 and Nasdaq each slipped roughly 0.75% in the final session. Trading volumes were thin as many investors had already wrapped up activity, amplifying modest moves in large-cap names.

Despite the soft finish, 2025 was a banner year for equities: the Dow rose about 13%, the S&P 500 gained 16.4% and the Nasdaq jumped 20.4%, marking the third consecutive year of double-digit advances — a streak last seen from 2019 to 2021. Markets staged a notable recovery from April lows triggered by concerns over newly announced tariffs that unsettled global markets and clouded the interest-rate outlook.

A powerful rally in AI-related stocks underpinned much of the market’s strength, with chipmaker Nvidia surging 39% for the year and becoming the first publicly traded company to surpass a $5 trillion market valuation. The technology-led advance helped offset weakness in other sectors and lifted broader sentiment as investors increasingly priced in the possibility of lower interest rates ahead.

Active movers in the final session included Nike, which rose about 4% after an SEC filing showed CEO Elliott Hill purchased roughly $1 million in shares, and Vanda Pharmaceuticals, which jumped 25.5% following FDA approval of its drug to prevent motion-induced vomiting.

Some market professionals warned that parts of the rally showed signs of excess. Dennis Follmer, chief investment officer at Montis Financial, described the year as a “low quality rally” driven more by speculation than by consistent profitability and earnings, suggesting pockets of market euphoria that could persist for years but cautioning that current valuations imply muted expected returns over the next five to ten years.

Over the course of 2025, investors navigated competing forces: decelerating inflation, resilient economic growth and a Federal Reserve that signaled the end of its tightening cycle, fostering hopes for rate cuts in 2026. Those dynamics supported equity valuations in the back half of the year, though analysts noted elevated valuations in some sectors could prompt volatility ahead.

As the market turns the page, attention will focus on central bank policy, geopolitical developments and whether the technology sector can sustain its growth trajectory. The year-end pullback was viewed largely as routine rebalancing rather than a reversal of the broader gains that defined a strong year for U.S. stocks.