S&P500 and Nasdaq Index: Year-End Pullback Hits US Stocks Today Despite Strong Year

• AI stocks dominated 2025 performance with Nvidia surging 39% to become the first $5 trillion company, while Alphabet gained 65% and tech hardware names like Micron tripled
• The expected 'Santa Claus rally' failed to materialize as tech and energy sectors weighed on indices, with Microsoft down 0.8% in light volume
• Market concentration in AI-driven gains raises concerns about broader participation needed for continued strength in 2026

S&P 500 and Nasdaq End 2025 with Pullback Despite Strong Annual Gains

US equity markets closed lower on the final trading day of 2025, with the S&P 500 falling 0.74% to 6,845.50, the Nasdaq Composite dropping 0.76% to 23,241.99, and the Dow Jones declining 0.63% to 48,063.29. The year-end selloff occurred amid thin holiday trading volumes, with tech and energy stocks leading declines.

Despite the weak finish, all three major indices posted strong double-digit gains for 2025, marking their third consecutive year of gains—a streak last achieved during 2019-2021. The anticipated Santa Claus rally failed to materialize, attributed more to light trading participation than negative sentiment.

Artificial intelligence remained the dominant market theme of 2025. Nvidia surged 39% year-to-date and became the first company to reach a $5 trillion valuation. Alphabet propelled the communication services sector to a 65% annual gain, while chip-related stocks like Micron, Western Digital, and Seagate tripled in value. Conversely, FMC Corp and Fiserv suffered steep declines of 71.5% and 67% respectively.

Microsoft fell 0.8% and EQT Corp dropped 1.9% in today's session, contributing to the broader market weakness. Nike bucked the trend, gaining 4% after its CEO disclosed a $1 million stock purchase.

Market participants now turn attention to early January economic data and Federal Reserve policy guidance. The key question for 2026 is whether sectors beyond technology can contribute meaningfully to market gains, as analysts express concern about the narrow concentration of returns in AI-related stocks.