Wall Street closed out another banner year for stocks Wednesday with a downbeat finish that extended the market’s recent losing streak to a fourth day.
The S&P 500 gave up 0.7%, the Dow Jones Industrial Average fell 0.6% and the Nasdaq composite closed 0.8% lower. Trading volume was very thin ahead of the New Year’s Day holiday, when markets will be closed, as most big investors have already closed out their positions for the year.
Even with their mini post-Christmas pullback, the major U.S. stock indexes finished with strong gains for the year.
The S&P 500, which set 39 record highs in 2025, closed 16.4% higher for the year, it’s third straight double-digit annual gain. The Nasdaq gained 20.4% and the Dow finished 13% higher.
Wall Street’s 2025 gains came as investors embraced the optimism surrounding artificial intelligence and its potential for boosting profits across almost all sectors. But the market had no shortage of turbulence along the way amid President Donald Trump’s on-again, off-again tariffs on imported goods worldwide and uncertainty over the trajectory of interest rates.
The S&P 500 plunged nearly 5% on April 3, it’s worst day since the 2020 COVID crash. It fell another 6% a day later, after China’s response raised fears of an escalating trade war. Worries also gripped the U.S. Treasury market.
Trump eventually put most of his tariffs on pause and negotiated agreements with countries to lower his proposed tariff rates on their imports, helping calm investors’ nerves.
“Once the market realized that no, these tariffs are on again, off again, and probably will not result in a recession, it was amazing how quickly it got back to breakeven,” said Sam Stovall, chief investment strategist at CFRA.
Strong profit reports from companies and three cuts to interest rates by the Federal Reserve also helped drive markets higher.
“You could say that it’s the long-term AI optimism combined with the continuously improving earnings growth outlook for this year and the coming two years, as well as the Fed easing interest rates, that’s kept optimism alive,” Stovall said.
Still, the AI frenzy that drove markets in 2025 did not come without concerns. Chief among them is the worry that artificial intelligence technology may not produce enough profits and productivity to make all the investment worth it. That could keep the pressure on AI stocks like Nvidia and Broadcom, which were responsible for much of the market’s gains this year.
And it’s not just AI stocks that critics say are too pricey. Stocks across the market still look expensive after their prices climbed faster than profits.
