Stocks Hold Ground as Yields Retreat
Markets posted modest gains last week as the S&P 500 rose 0.2%, the NASDAQ added 0.7%, and the Dow slipped slightly. With recent gains, the S&P 500 has now advanced in six of the past seven weeks.
A key driver of recent sentiment has been the sharp pullback in yields. The 10-year Treasury yield fell to 4.22%, its lowest level since September, as expectations grew that the Federal Reserve may keep rates steady well into 2026.
Jobless Claims Tick Up, Inflation Trends Improve
Initial jobless claims increased to their highest level since August, offering further evidence of a cooling labor market. At the same time, the core PCE deflator — the Fed’s preferred inflation gauge — showed a 3.5% year-over-year increase, consistent with a gradual disinflation trend.
With inflation easing and labor data softening, investors are beginning to price in a longer rate pause and potential cuts in the first half of 2026.
Sector Moves Reflect Rate Sensitivity
Utilities and real estate sectors outperformed, benefiting from falling yields. Energy stocks declined, dragged down by a sharp drop in oil prices to their lowest levels since early summer. Small caps and technology shares were mixed following strong performance in prior weeks.
International equity markets also advanced, particularly in developed markets where inflation continues to ease and currencies have stabilized.
Alphastar CIO Tony Parish noted:
“Investors are focused on disinflation and softer labor trends as signs the Fed’s pause may extend,”
Here are three key takeaways for investors:
-
Labor Market Cooling May Support Policy Patience
A slower labor market can relieve inflationary pressure, giving the Fed more room to maintain its current rate stance without further tightening.
-
Yield Declines Benefit Rate-Sensitive Assets
With bond yields falling, interest-rate-sensitive sectors such as utilities and real estate may remain relatively strong through year-end.
-
Energy Weakness Adds New Layer to Sector Dynamics
Falling oil prices are adding pressure to energy equities, which may continue to underperform if commodity volatility persists.
Final Thoughts
The market’s tone remains constructive as inflation indicators continue to moderate and Treasury yields decline. While risks remain, investors appear increasingly focused on whether the Fed’s current pause will hold into 2026.
As Tony Parish shared:
“The combination of rising jobless claims and steady disinflation has shifted expectations — markets now anticipate more patience from policymakers.”
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Disclosure:
This blog post is for informational purposes only and should not be considered investment advice. Past performance does not guarantee future results. All data is as of December 8, 2025. Please consult with a qualified financial professional for personalized advice.
Equities Edge Higher on Slower Inflation and Labor Cooling: Week of December 8, 2025
Stocks Hold Ground as Yields Retreat
Markets posted modest gains last week as the S&P 500 rose 0.2%, the NASDAQ added 0.7%, and the Dow slipped slightly. With recent gains, the S&P 500 has now advanced in six of the past seven weeks.
A key driver of recent sentiment has been the sharp pullback in yields. The 10-year Treasury yield fell to 4.22%, its lowest level since September, as expectations grew that the Federal Reserve may keep rates steady well into 2026.
Jobless Claims Tick Up, Inflation Trends Improve
Initial jobless claims increased to their highest level since August, offering further evidence of a cooling labor market. At the same time, the core PCE deflator — the Fed’s preferred inflation gauge — showed a 3.5% year-over-year increase, consistent with a gradual disinflation trend.
With inflation easing and labor data softening, investors are beginning to price in a longer rate pause and potential cuts in the first half of 2026.
Sector Moves Reflect Rate Sensitivity
Utilities and real estate sectors outperformed, benefiting from falling yields. Energy stocks declined, dragged down by a sharp drop in oil prices to their lowest levels since early summer. Small caps and technology shares were mixed following strong performance in prior weeks.
International equity markets also advanced, particularly in developed markets where inflation continues to ease and currencies have stabilized.
Alphastar CIO Tony Parish noted:
Here are three key takeaways for investors:
Labor Market Cooling May Support Policy Patience
A slower labor market can relieve inflationary pressure, giving the Fed more room to maintain its current rate stance without further tightening.
Yield Declines Benefit Rate-Sensitive Assets
With bond yields falling, interest-rate-sensitive sectors such as utilities and real estate may remain relatively strong through year-end.
Energy Weakness Adds New Layer to Sector Dynamics
Falling oil prices are adding pressure to energy equities, which may continue to underperform if commodity volatility persists.
Final Thoughts
The market’s tone remains constructive as inflation indicators continue to moderate and Treasury yields decline. While risks remain, investors appear increasingly focused on whether the Fed’s current pause will hold into 2026.
As Tony Parish shared:
READ THE FULL REPORT
Disclosure:
This blog post is for informational purposes only and should not be considered investment advice. Past performance does not guarantee future results. All data is as of December 8, 2025. Please consult with a qualified financial professional for personalized advice.