Wall Street closed out 2025 with a downbeat finish, extending a losing streak. S&P 500 fell 0.7%, Dow Jones 0.6%, Nasdaq 0.8%. Market’s optimism around artificial intelligence drove gains, despite turbulence from tariffs and interest rate uncertainty. S&P 500 closed 16.4% higher for the year, Nasdaq up 20.4%, Dow up 13%.

Despite a post-Christmas pullback, major U.S. stock indexes finished with strong gains for the year. The S&P 500 closed 16.4% higher, the third double-digit annual gain in a row. Nasdaq gained 20.4%, Dow finished 13% higher. Investors embraced the optimism around artificial intelligence and its potential for boosting profits across various sectors.

Wall Street’s 2025 gains were driven by optimism surrounding artificial intelligence’s potential for boosting profits. However, concerns emerged about whether AI technology could generate enough profits to justify investments. Stocks, including AI stocks like Nvidia and Broadcom, may face pressure due to worries about profitability. Stocks are still considered expensive after climbing faster than profits.

The ongoing U.S.-led trade war may add fuel to inflation in the U.S., despite the Fed’s three interest rate cuts. Inflation remains above the central bank’s 2% target. Wall Street is betting on the Fed holding interest rates steady at its next meeting in January. Stock market remains cautious amid concerns of overvaluation and inflationary pressures.

Traders received an update on the job market with fewer Americans applying for unemployment benefits last week. Layoffs remained low despite a weakening labor market. All sectors in the S&P 500 closed in the red, with technology stocks weighing the most. Western Digital and Micron Technology, among the biggest gainers this year, fell.

Read more at Yahoo Finance: Wall Street falls in light trading on the final day of 2025, another banner year for markets