Weekly Capital Markets Watch

US stock markets finished the last full trading week of the year mixed. Smaller-company stocks (Russell 2000) fell the most, while the Nasdaq rose slightly. The S&P 500 and S&P Midcap 400 were mostly flat, and the Dow declined. Markets started the week weaker as investors remained cautious about high technology valuations, especially around artificial intelligence spending. Some mixed economic data also weighed on sentiment. Stocks recovered later in the week after a softer inflation report and strong earnings from Micron Technology helped improve confidence, particularly in AI-related stocks.

Economic data sent mixed signals. Job growth in November was stronger than expected, rebounding from October’s decline, but the unemployment rate rose to 4.6%, the highest level in over four years, suggesting the labor market is cooling. Inflation data were more encouraging: both headline and core consumer prices slowed more than expected, with housing inflation easing notably. These trends supported market expectations that the Federal Reserve can continue moving cautiously toward easier policy. Treasury yields fell, meaning bond prices rose, while municipal bonds lagged slightly and high yield sentiment improved after the inflation data.

European stocks rose broadly. The pan-European market benefited from steady economic growth and expectations for looser monetary policy. The European Central Bank kept interest rates unchanged and emphasized that future decisions will depend on incoming economic data, while still expecting inflation to return close to its 2% target over the medium term.