Markets Mixed as Rate Cut Fuels Rotation Away from Technology
Week Ending December 12, 2025
Markets finished last week mixed as investors digested the Federal Reserve’s widely expected interest-rate cut and continued to rotate away from large technology stocks. More traditional sectors such as financials, healthcare, and industrials attracted fresh interest, helping the Dow reach new highs while technology-heavy indexes lagged.
The Dow Jones Industrial Average gained 1.05%, while the S&P 500 fell 0.63% and the Nasdaq declined 1.62%. International developed markets were higher, with the MSCI EAFE Index up 0.89%.
In Canada, the S&P/TSX Composite Index posted a modest gain, supported by strength in materials, financials, and energy stocks, leaving the index trading near record levels.
Market Overview
Weekly Market Performance (Dec 8 - Dec 12, 2025)
- S&P 500: -0.63%
- Nasdaq Composite: -1.62%
- Dow Jones Industrial Average: +1.05%
- MSCI EAFE (International Developed Markets): +0.89%
- S&P/TSX Composite Index (Canada): +0.69%
U.S. Markets: Fed Decision Triggers Sector Rotation
Markets spent much of the early week trading in a narrow range as investors waited for the Federal Reserve’s final interest-rate decision of the year.
Key highlights:
- Technology stocks started the week strong but gradually lost momentum.
- On Wednesday, markets rose after the Fed cut interest rates by 0.25%, a move that had already been priced in.
- Following the announcement, investors rotated out of technology and into more cyclical and value-oriented sectors.
- By week’s end, the Dow reached new record highs, while the Nasdaq finished lower.
- Small-cap stocks also participated in the rally, as investors positioned for a potential economic rebound in 2026.
Canada & the TSX
The Canadian market held up relatively well compared to U.S. technology-heavy indexes.
Sector Snapshot
- Financials: Benefited from rotation into value and higher longer-term yields
- Materials: Supported by firm commodity prices, including gold
- Energy: Helped by stable oil prices
- Technology: Lagged, mirroring weakness in U.S. tech stocks
Canada continues to benefit from its heavier exposure to value-oriented sectors such as financials, energy, and materials.
Canadian Headlines
Canadian inflation continues to trend lower, reinforcing expectations that the Bank of Canada may eventually follow the Fed with rate cuts, though likely at a measured pace.
The Canadian dollar strengthened for a third consecutive week against the U.S. dollar.
Gold-related and commodity stocks remained a source of strength for the TSX.
What’s Driving the Market
Fed Signals: No More Hikes, Fewer Cuts Ahead
While the Fed’s rate cut was widely expected, investors focused on the tone of the messaging:
- Fed Chair Jerome Powell indicated that rate hikes are off the table for the foreseeable future
- He also noted that additional rate cuts will require clearer evidence of slowing inflation and job growth
- The decision was not unanimous, highlighting ongoing debate within the Fed
This combination helped explain why markets rotated beneath the surface rather than moving higher across the board.
Why This Matters
Last week was a reminder that markets don’t always move in unison.
Key takeaways:
- Rate cuts don’t automatically lift all sectors
- Market leadership can shift quickly
- Canada’s value-heavy market provides diversification benefits
- Staying diversified remains critical during periods of rotation
Economic Snapshot
Federal Reserve Commentary:
The Fed remains firmly data-dependent, with inflation and employment trends guiding future policy decisions. Investors are now watching closely to see whether economic data supports further easing in 2026.
This Week: Key Economic Data
Monday, December 15
- Homebuilder Confidence Index
Tuesday, December 16
- Employment Reports (October – limited, November – full)
- Retail Sales
- Business Inventories
- Purchasing Managers Index (PMI) – Manufacturing & Services
Thursday, December 18
- Consumer Price Index (CPI)
- Weekly Jobless Claims
- Philadelphia Fed Manufacturing Survey
Friday, December 19
- Existing Home Sales
- Consumer Sentiment
This Week: Companies Reporting Earnings
Wednesday, December 17
- Micron Technology (MU)
Thursday, December 18
- Nike (NKE)
- Cintas (CTAS)
- FedEx (FDX)
Friday, December 19
- Paychex (PAYX)
"Careers aren’t defined by what you say yes to. They’re defined by what you say no to."
– Brenda Song
It usually loses a head by noon, but that same head often returns by midnight. What is it?
Last Week's Riddle: What 2 common English-language words both contain 2 Cs in a row, 2 Ss in a row and two Ls in a row?
Answer: Successfully and unsuccessfully.
Melissa's son, Marshall, in traditional Japanese armor living his best life in Japan.
Footnotes and Sources
1. WSJ.com, December 12, 2025
2. Investing.com, December 12, 2025
3. CNBC.com, December 8, 2025
4. CNBC.com, December 9, 2025
5. WSJ.com, December 10, 2025
6. CNBC.com, December 10, 2025
7. CNBC.com, December 11, 2025
8. CNBC.com, December 12, 2025
9. WSJ.com, December 10, 2025
10. WSJ.com, December 12, 2025
11. IRS.gov, June 6, 2025
12. ACoupleCooks.com, June 16, 2025
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