Stocks Rise at Year-End as Inflation Data Temper Rate-Cut Expectations

What history tells us about bull markets after the 3-year mark 👇🏻

U.S. equities closed higher Thursday, December 18, extending a late-year rally as investors balanced cooling inflation data against signs the Federal Reserve remains wary of cutting interest rates too quickly.

The Dow Jones Industrial Average rose 65.88 points, or 0.14%, to 47,951.9. The S&P 500 added 53.33 points, or 0.79%, to 6,774.76, while the Nasdaq Composite climbed 313.04 points, or 1.38%, to 23,006.4. The Russell 2000 gained 0.59% to 248.69, reflecting modest strength in smaller-cap stocks.

Markets were supported by new inflation data showing price pressures continuing to ease. The Consumer Price Index for November increased 0.2% over the two-month period from September and was up 2.7% from a year earlier, the U.S. Bureau of Labor Statistics said. Core inflation, which excludes food and energy, rose 2.6% year over year, indicating a gradual slowdown in underlying price growth cpi. Energy prices remained a notable source of pressure, rising 4.2% over the past 12 months, while shelter costs increased 3.0%.

However, expectations for imminent rate cuts were tempered by a brighter economic outlook from the Federal Reserve. The central bank recently raised its median forecast for 2026 U.S. gross domestic product growth to 2.3%, up from 1.8% in September and 1.6% in June. That upgrade reflects economic activity rebounding after the federal government shutdown and stronger productivity as companies adopt artificial intelligence, according to Horizon. Additional support is expected from tax and capital-spending provisions in the One Big Beautiful Bill Act, which Horizon said could boost consumer spending and corporate investment New Article Build - Google Docs.

Horizon said stronger nominal and real growth would likely benefit cyclical sectors, whose earnings are more sensitive to economic activity. At the same time, firmer growth combined with inflation still above the Fed’s target could reduce the likelihood of further interest-rate cuts next year, even under a new Fed chair.

Other markets sent mixed signals. Crude oil futures edged up 0.14% to $55.89 a barrel, while gold futures slipped 0.27% to $4,362.30 an ounce. Bitcoin fell 1.24% to $84,894.05, lagging traditional risk assets. The Cboe Volatility Index dropped sharply, down 6.19% to 16.53, suggesting easing investor anxiety.

Overall, Thursday’s session reflected cautious optimism. With inflation moderating and growth expectations improving, investors appear increasingly focused on whether the coming year brings broader earnings growth rather than a rapid shift toward easier monetary policy.