Stocks Dip Into 2025 Close, Mortgage Rates Ease

U.S. stocks ended 2025 close to record territory but slipped on the final session. According to year-end closes, the S&P 500 finished at 6,845.50 after falling 0.74% on Wednesday. The Nasdaq ended at 23,241.99 after a 0.76% drop, while the Dow closed at 48,063.29, down 0.63%.

Zooming out, the run was still strong. CNBC’s scoreboard shows the S&P 500 up 16.39% in 2025 and the Nasdaq up 20.36%, marking the third straight year of double-digit gains. The setup matters because investors are now entering 2026 with elevated expectations and little room for disappointment.

What powered the year. It was the AI trade. The New York Times argued that A.I. held up Wall Street when other narratives wobbled. Yahoo Finance underscored how performance concentrated in big tech, with Alphabet up 65% and Nvidia up 39% in 2025 amid the “Magnificent Seven” dynamic and heavy capex spending for AI infrastructure (AI trade powers).

Likely next steps: Wall Street’s baseline is still bullish, but returns are expected to compress. CNN highlighted a wide strategist range with the S&P 500 at 6,845.5 into year-end and 2026 targets stretching from 7,100 to 8,000, with volatility along the way still considered normal (2026 targets).

Positioning for 2026 is less about chasing the last percent of a rally and more about stress-testing: can earnings and AI ROI justify today’s multiples if rate cuts slow or growth fragments further.

Mortgage rates ended 2025 with a small but meaningful tailwind for buyers. Freddie Mac reported the average 30-year fixed mortgage fell to 6.15% from 6.18% a week earlier, the lowest level of the year, versus 6.91% a year ago (lowest level in 2025). The 15-year fixed dropped to 5.44% from 5.50%, offering incremental relief for refinancers.

Where it’s happening and why now: the move tracks the bond market more than the Federal Reserve directly. The same update pegged the 10-year Treasury yield around 4.14%, slightly below last week’s 4.15%, which helps lenders price long-term loans a bit lower. Rates began easing earlier in the second half of 2025 as investors anticipated and then saw Fed cuts, though the Fed doesn’t set mortgage rates and the pass-through isn’t automatic.

Immediate impact: affordability improves at the margin, but it doesn’t fix housing math for most households. CBS noted that while listings are up and some sellers are cutting asking prices, affordability remains a major barrier for first-time buyers and uncertainty about the economy and jobs is still keeping people cautious (affordability remains). Existing-home sales rose in November versus the prior month, but through the first 11 months of 2025 sales were down 0.5% from the same period a year earlier, a reminder that lower rates alone haven’t reopened the market.

How this ties to the broader economy: it’s a classic “better, not good” signal. Fox Business pointed to CPI at 2.7% year over year in November and a weakening labor market backdrop as the Fed debates its next steps. It also cited a median existing-home price of $409,200, which keeps monthly payments high even if rates drift lower (median existing-home price).

If you’re making a 2026 housing decision, the key is timing and realism: small rate dips help, but prices, inventory, and job security will determine whether the market actually thaws.

• Track whether the AI narrative broadens beyond megacaps or stays concentrated in a few names.
• Watch S&P 500 levels around 6,845 and how often new highs are driven by the same leaders rather than broad participation.
• Monitor 30-year mortgage rates near 6.15% and the 10-year yield around 4.14% for signs housing demand can restart (10-year yield).
• Pay attention to consumer sentiment. A Fox News poll cited by Fox Business found 44% feel financially behind heading into 2026 (feel financially behind).
• Keep an eye on “recession vibes” versus data. A Harris poll reported more Americans see their financial security worsening (45%) than improving (20%) (financial security worsening).