Steeper Curve, Stronger Trade Balance: Markets Find Year-End Footing

The shortened holiday week has unfolded with a quietly constructive tone as markets leaned into year-end positioning amid a supportive macro mix and a noticeable broadening of leadership. With holiday-thinned volumes, price action carried more signal than noise. Financials and materials led, select megacaps regained momentum, commodities sent mixed but informative signals, and volatility remained subdued, suggesting investors are comfortable carrying risk into year-end.

Recent economic data helped anchor that confidence. The second revision to 3Q GDP showed the U.S. economy entered the final stretch of the year with more resilience than feared, even as higher long term interest rates continued to reshape where growth is coming from. Real GDP was revised modestly higher, but the composition told the more important story. Fixed investment continued to rise, albeit at a slower pace, 1.0% versus 4.4% previously, reflecting tighter financial conditions. 

Within that, equipment investment remained strong at 5.4%, and intellectual property products also grew 5.4%, underscoring continued corporate spending on productivity, software, and automation. By contrast, rate-sensitive areas remained under pressure. Structures investment fell 6.3%, and residential investment declined 5.1%, highlighting the ongoing drag from elevated mortgage rates and tighter credit on housing activity.

The external sector provided a meaningful offset. Exports rebounded sharply, rising 8.8% after a prior contraction, led by capital goods and nondurable products, while imports declined a further 4.7%, extending a trend of softer inbound demand. The combination significantly improved the trade balance, reducing the net-export drag on GDP. While part of the import decline reflects slower domestic demand, higher tariffs and shifting supply chains are modestly reducing net imports, providing a tailwind to headline growth at the margin.

The Treasury curve has continued to steepen modestly, with short-term yields anchored by expectations of policy accommodation and longer-dated yields drifting higher on improved risk sentiment, and demand for nonresidential fixed investment spending. This widening between short and long rates proved especially supportive for financials, which emerged as one of the S&P 500’s top-performing sectors in 2025. Banks and diversified financials benefited from improved net-interest-margin dynamics and reduced fears of funding stress, helping support the Dow and stabilize broader indices even as technology leadership remained selective.

Within megacap growth, the tape showed rotation rather than retreat. Shares of Tesla (TSLA) ticked higher during the week, benefiting from renewed interest in differentiated growth stories after consolidation in AI infrastructure names. Amazon (AMZN) also found a bid, supported by confidence in consumer resilience and cloud demand heading into 2026. These gains helped offset lingering softness in semiconductors and reinforced the view that capital is rotating within large-cap growth rather than exiting it outright.

The commodity complex added another layer to the narrative. Precious and industrial metals strengthened, while energy lagged. Gold and silver both advanced as real yields stayed contained and investors continued to hedge policy and geopolitical risk into year-end. Copper extended its rally on optimism tied to infrastructure, electrification, and stabilization in global manufacturing activity. That strength flowed directly into equity performance, making materials one of the strongest S&P sectors this week.

Base-metal equities stood out. Freeport-McMoRan (FCX) rallied alongside copper prices, while Alcoa (AA) benefited from firmer aluminum pricing and improving sentiment around industrial demand. Materials’ leadership contrasted with energy, where crude oil prices drifted lower on surplus concerns and uneven global demand signals. Weakness in oil weighed on energy equities but did little to derail broader confidence given the metals-led cyclical bid.

The market’s posture looks balanced and deliberate as the week draws to a close. Financials were benefiting from a steeper curve, materials were riding a metals-driven upswing, select mega caps were regaining traction, and volatility remained calm. With growth holding up through business investment and exports, housing still constrained by higher rates, and the trade balance improving at the margin, markets appear positioned for a selective but constructive start to 2026.

This material is intended for informational purposes only and should not be considered a personalized recommendation or investment advice. Investors should review investment strategies for their own particular situations before making any decisions.

Schwab Network is brought to you by Charles Schwab Media Productions Company (“CSMPC”). CSMPC is a subsidiary of The Charles Schwab Corporation and is not a financial advisor, registered investment advisor, broker-dealer, or futures commission merchant.

Charles Schwab Media Productions Company and all third parties mentioned are separate and unaffiliated, and are not responsible for one another's policies, services or opinions.

Data contained herein is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. All events and times listed are subject to change without notice.