Stock Focus Report – Market Analysis for December 31, 2025

The final trading session of 2025 ended with a thud as all three major indexes slipped into the red. The S&P 500 shed 50.74 points (-0.74%) to close at 6,845.50, while the Nasdaq dropped 177.09 points (-0.76%) to 23,241.99. The Dow Jones wasn’t spared either, falling 303.77 points (-0.63%) to 48,063.29 as investors closed their books on what’s been a remarkable year.

Behind the scenes, banks were scrambling for year-end liquidity. Financial firms borrowed a record amount from the Federal Reserve Bank of New York’s Standing Repo Facility on Wednesday, highlighting the technical pressures that come with closing out annual balance sheets. Meanwhile, Treasury yields crept higher across the board, with the 10-year adding 3 basis points to 4.16%.

The dollar flexed its muscles to close the year, with the DXY gaining 0.12 to 98.23, while Bitcoin slipped 0.37% to $87,593. It wasn’t the fireworks ending bulls were hoping for, but hey, we can’t all be Disney.

Speaking of the Mouse House, DIS provided one of today’s bright spots after announcing that “Zootopia 2” just became Disney Animation’s highest-grossing film ever, dethroning 2019’s “Frozen 2.” The milestone offers a rare win for Disney after a challenging stretch at the box office.

The semiconductor sector delivered mixed signals to close the year. Taiwan Semiconductor (TSM, +$4.34) rallied after securing annual U.S. approval to import chip-making equipment to its Nanjing facilities, easing some China exposure concerns. But the good vibes were tempered by news that federal prosecutors dismantled a smuggling network that illegally exported $160 million worth of Nvidia (NVDA) H100 and H200 GPUs to China between October and December.

Pharma stocks faced headwinds after drugmakers announced price increases on over 350 branded U.S. medications, including COVID, RSV, and shingles vaccines, plus cancer treatments. Companies like GSK, LLY, and NVS are pushing through the hikes despite political pressure, setting up a potential 2026 battle over drug pricing. In other biotech action, Axsome Therapeutics (AXSM) surged $33.85, while Corcept Therapeutics (CORT) cratered $35.40 in dramatic moves.

The year-end mood felt more like a collective exhale than a celebration. Sure, the S&P 500 closed 2025 well above 6,800, but the Wednesday selloff reminded everyone that gravity still exists. The record borrowing at the Fed’s repo facility underscores how tight year-end funding conditions got, even as markets sit near all-time highs.

Investors got a small gift in the form of better-than-expected jobless claims, which fell by 16,000 to 199,000 for the week ending December 27. That’s three consecutive weeks of declines, suggesting the labor market remains stable heading into 2026. It’s the kind of Goldilocks data that normally fuels rallies, but traders were too busy squaring positions to care.

The semiconductor narrative continues to dominate investor psychology. TSM’s license approval and Nvidia’s smuggling bust illustrate the tightrope chip companies walk between accessing Chinese markets and navigating U.S. export controls. Meanwhile, Michael Burry felt compelled to publicly deny shorting Tesla (TSLA) after speculation swirled about his positioning. When the Big Short guy has to issue clarifications, you know sentiment is touchy.

As the confetti settles on 2025, investors are left digesting a year that delivered both spectacular gains and persistent crosscurrents. The fact that markets ended the year with banks needing record repo facility access while the S&P sits above 6,800 perfectly captures the strange mix of strength and fragility defining current conditions.

Looking ahead to 2026, several themes from today’s action will carry forward. The chip war between the U.S. and China isn’t going anywhere, as evidenced by both TSM’s license dance and Nvidia’s smuggling headaches. Drug pricing will likely heat up as a political issue now that pharma companies have fired the opening salvo with 350+ price hikes. And those jobless claims suggest the economy might enter the new year with more resilience than bears expected.

For now, the playbook seems clear: watch how the semiconductor sector navigates geopolitical tensions, monitor whether pharma price hikes stick or face regulatory backlash, and keep an eye on that labor market data. The party’s over for 2025, but 2026 is already knocking at the door with plenty of plot twists queued up.