Wall Street heads into a busy penultimate trading week of the year, with eyes firmly fixed on the Federal Reserve’s final interest rate decision of 2025 and hopes for a year-end Santa Claus rally.
Investors are also digesting the fallout from blockbuster deals, including Netflix Inc (NASDAQ:NFLX, XETRA:NFC)'s planned acquisition of Warner Bros Discovery Inc (NASDAQ:WBD, XETRA:J5A) and a potential record-setting leveraged buyout of Electronic Arts Inc (NASDAQ:EA, XETRA:ERT).
Traders widely expect the Fed to deliver a 25-basis-point rate cut on Wednesday, marking the third straight reduction this year. December rate-cut odds have fluctuated in recent weeks, but “recent economic data has reinforced the chances,” said Kathleen Brooks, research director at XTB. The central bank will get one last major labor market update in the form of the delayed October JOLTS report on Tuesday.
Markets are also watching Netflix, where President Donald Trump’s comments on potential regulatory scrutiny have added uncertainty. Polymarket now assigns a 20% probability that the deal closes by next December, down from 60% prior to the comments. Brooks noted, “This could weigh on Netflix’s share price, and it may also boost Paramount Skydance, one of Netflix’s biggest rivals.” Paramount, in fact, was the weakest performer in the S&P 500 last week, falling more than 16% as investors fretted about Netflix becoming a content colossus.
Despite some volatility, US equities have maintained momentum. The S&P 500 eked out a 0.3% gain last week, while the Nasdaq rose 0.9%. Broader market strength is evident, with the equal-weighted S&P 500 climbing faster than its cap-weighted counterpart. The Philadelphia Semiconductor Index jumped more than 3%, while banking and oil stocks also performed strongly.
Investors appear to be positioning for an economic rebound. The Russell 2000, for example, closed at a record, reflecting optimism for growth in the months ahead. “A pick-up in growth is good news for cyclical stocks,” analysts at Deutsche Bank said, noting that two further rate cuts are currently expected over the next year.
The week’s economic calendar is packed. Besides the Fed meeting, investors will monitor US job openings, employment cost data, and the University of Michigan consumer sentiment index.
Tech and AI-linked stocks remain under scrutiny. Broadcom Inc (NASDAQ:AVGO, XETRA:1YD) reports Thursday, benefiting from rising demand for Google’s TPUs and recent supply deals with Meta. Ipek Ozkardeskaya, senior analyst at Swissquote, said, “Broadcom continues to benefit from Google’s accelerating deployment of TPUs… Rising TPU demand therefore translates into meaningful revenue for Broadcom.”
Oracle Corp (NYSE:ORCL, XETRA:ORC)'s earnings, however, could be more complicated. With heavy debt funding its AI and cloud expansion, analysts are watching closely for margin pressures. Ozkardeskaya warned, “If cloud-backlog conversion slows or margins disappoint, heavy spending combined with high debt could squeeze cash flow at the wrong time. The bull case requires very strong execution.”
As the final weeks of 2025 tick down, investors will be watching whether the S&P 500 can finally breach its record high of 6,920. With the Fed expected to cut rates, solid economic data, and seasonal tailwinds, Wall Street may have the pieces in place for a year-end push, but hurdles remain, from regulatory scrutiny of mega-deals to inflation and the Fed’s next moves.