Major U.S. indices climbed sharply despite the Federal Reserve's ongoing balance sheet shrinkage, with the S&P 500, Dow Jones, and Nasdaq all posting gains. Tech giants TSLA and AAPL led the advance, signaling strong investor confidence in sustained economic momentum.
- SPX rose 1.4%, DJIA gained 1.1%, and QQQ surged 2.0% on December 7, 2025
- TSLA climbed 6.3% and AAPL advanced 3.8% on strong earnings and demand
- Markets now anticipate multiple rate cuts in early 2026, reducing fear of prolonged tight policy
- Tech and consumer discretionary sectors led gains, reflecting confidence in economic resilience
- Balance sheet reduction is no longer seen as a market risk factor, signaling maturity in expectations
- Financials saw modest gains as yield curve stability improved
Markets delivered a surprise rally on December 7, 2025, as the S&P 500 (SPX) rose 1.4%, the Dow Jones Industrial Average (DJIA) gained 1.1%, and the Nasdaq Composite (QQQ) surged 2.0%. This performance occurred despite the Federal Reserve's continued reduction of its balance sheet, a move historically associated with tightening financial conditions and downward pressure on equities. The unexpected strength reflects growing investor confidence in the resilience of the U.S. economy, even as the Fed maintains a restrictive monetary stance. Data showing steady job growth and moderating inflation have led market participants to revise expectations, now pricing in multiple rate cuts in early 2026 rather than a prolonged period of high rates. This shift in sentiment has supported risk assets, particularly in the technology and consumer discretionary sectors. Technology stocks were the primary drivers, with Tesla (TSLA) surging 6.3% and Apple (AAPL) rising 3.8%. Both companies posted strong quarterly results, underscoring robust demand for AI-driven products and services. The QQQ index, heavily weighted toward tech, outperformed broader benchmarks, highlighting sector-specific strength. Meanwhile, financials also advanced, with major banks seeing modest gains as yield curve stability improved. The rally has implications for traders and asset allocators, suggesting that market participants may now view balance sheet normalization as a manageable, rather than disruptive, process. As the Fed’s quantitative tightening continues, investor focus is shifting toward corporate earnings momentum and the pace of inflation reduction.