Markets enter the final full week of 2025 with a significantly abbreviated trading schedule as the Christmas holiday brings early closures and reduced participation that will likely result in light volume and muted price action. 

Wednesday features an early 1:00pm close for Christmas Eve, followed by markets closed Thursday for Christmas Day, before normal trading hours resume on Friday.

Despite the holiday-shortened schedule, the week delivers several important economic releases including Monday's Core PCE Price Index, Tuesday's Q3 GDP revision and consumer confidence data, and Wednesday morning's durable goods orders and initial jobless claims before the early close.

The light earnings calendar and reduced institutional participation create an environment where technical factors and year-end positioning adjustments may drive price action more than fundamental developments. 

Markets will be digesting last week's economic data deluge that included mixed employment numbers, stubborn inflation readings, and earnings from Micron (MU), FedEx (FDX), and Nike (NKE) as participants look ahead to final 2025 positioning and early 2026 outlook development.

Here are 5 things to watch this week in the Market.

Core PCE and Final Inflation Assessment

Monday's Core PCE Price Index at 10:00am represents the Federal Reserve's preferred inflation measure and serves as a final comprehensive inflation checkpoint before year-end, following last week's concerning CPI data that showed persistent price pressures. Both month-over-month and year-over-year readings will be analyzed for evidence supporting or contradicting the sticky inflation narrative that has complicated the Fed's policy outlook heading into 2026. The PCE report often provides different perspectives than CPI due to methodological differences in weighting and components, making the comparison between the two measures particularly important for understanding complete inflation dynamics. Any significant upside surprise could reinforce concerns that the Fed may need to pause its cutting cycle earlier than previously expected, while benign readings could provide some relief heading into the new year. The timing on the Monday before Christmas creates potential for muted market reactions given reduced participation, though any major deviation from expectations could still trigger positioning adjustments in rate-sensitive sectors before the holiday break.

Economic Growth and Consumer Sentiment Convergence

Tuesday delivers a dual snapshot of economic fundamentals through the Q3 GDP revision at 8:30am and consumer confidence report at 10:00am that together will provide final perspectives on growth momentum and household sentiment heading into 2026. The GDP revision will offer updated insights into third-quarter economic expansion, with particular focus on consumer spending, business investment, and net export contributions that determine underlying economic health. Any significant revisions to previous estimates could influence perceptions about economic trajectory and the appropriate policy response. Tuesday's consumer confidence data will be crucial for assessing household optimism about current conditions and future expectations as the year draws to close. The confidence reading takes on added importance given questions about consumer spending sustainability following last week's retail sales data and mixed holiday shopping season signals. Tuesday afternoon's new home sales data will provide additional housing market context about residential construction activity. The convergence of growth and sentiment data on the final meaningful trading day before Christmas creates potential for year-end reassessments of economic outlook.

Holiday Week Trading Dynamics and Liquidity

The compressed trading schedule creates unique market dynamics where reduced liquidity can amplify price movements in either direction while simultaneously making those moves less representative of broader institutional sentiment. Wednesday's early 1:00pm close and Thursday's full market closure for Christmas Day means meaningful price discovery will be concentrated into Monday and Tuesday sessions. Historical patterns suggest holiday weeks often see reduced volatility and range-bound trading as major institutional participants step away, though unexpected news or data surprises can trigger outsized moves given thin order books. Tax-loss harvesting activity typically winds down by this point in December, while year-end portfolio window-dressing by fund managers may create technical demand or supply in specific stocks. The light volume environment makes technical levels less reliable while creating potential for momentum continuation in either direction with limited resistance. Investors should expect choppy, directionless trading punctuated by potential sharp but ultimately meaningless intraday moves that reverse quickly as liquidity returns in the final week of December.

Manufacturing Activity and Labor Market Signals

Wednesday morning's durable goods orders at 8:30am before the early Christmas Eve close will provide insights into business investment intentions and manufacturing demand heading into 2026. The report offers perspectives on capital equipment spending, defense orders, and transportation equipment that serve as leading indicators for industrial production and business confidence. Core capital goods orders excluding aircraft and defense will be particularly important for assessing underlying business investment trends. Wednesday's initial jobless claims will provide the latest labor market snapshot, helping investors assess whether employment conditions remain stable or are showing signs of deterioration that could influence early 2026 Fed policy considerations. The timing of these releases on Christmas Eve morning creates challenges for market digestion given the 1:00pm close, though any significant surprises could still influence positioning in the final hours before the holiday break. These economic indicators will help establish baseline expectations for economic momentum entering the new year.

Year-End Reflection and 2026 Setup

The Christmas week provides natural opportunity for investors to step back and assess 2025's market performance while establishing frameworks for 2026 positioning. The year has been characterized by AI infrastructure investment narratives, Federal Reserve policy shifts from hiking to cutting, persistent inflation concerns, and questions about soft landing viability. Technology stocks, particularly AI-related names, have driven much of the market's gains despite recent volatility following Oracle and Broadcom earnings that raised sustainability questions. The Fed's December meeting established a more cautious 2026 outlook with fewer expected rate cuts than markets had hoped, creating headwinds for rate-sensitive sectors entering the new year. Key questions facing investors include whether AI capital expenditures can maintain momentum, if inflation will finally moderate sufficiently for continued Fed accommodation, and whether consumer spending can remain resilient amid economic uncertainties. The final week of December following Christmas will likely see continued light volume as participants extend holiday breaks, with meaningful market direction unlikely to establish until early January when institutional participation returns and 2026 earnings season begins.

Best of luck this week and don't forget to check out my daily options article.

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