Dow Jones Down 0.7%, S&P 500 Slips 1.4% on Renewed AI Angst. Will Seasonality Come to the Rescue?

Most Read: Santa Claus Rally Strategy: How to Trade the S&P 500's Most Reliable Seasonal Pattern

Wall Street Indexes and more specifically the S&P 500 and the Nasdaq, experienced a decline on Friday. This downward pressure was largely caused by Broadcom's recent financial results, which added to worries that the current high valuations around Artificial Intelligence (AI) technology might be creating a market bubble.

This negative sentiment reduced the optimism that had been generated the previous day by the Federal Reserve's less aggressive signals about potential interest rate cuts in 2026.Shares of the chipmaker Broadcom dropped 8.4% after the company warned that its future profits on AI systems would be lower, even though it predicted strong sales.

This forecast fueled concerns about how profitable the massive investments in AI technology will actually be.

Other chip-related stocks also fell, with Advanced Micro Devices (AMD) losing 1% and the overall chip index dropping 1.5%.

The cloud company Oracle also saw its shares fall 5%, following a massive drop in the previous session after it released a weak forecast. This was further exacerbated by reports that some of their data centers for OpenAI have been delayed from 2027 to 2028.

S&P 500 Heatmap

Adding to the woes for Wall Street Indexes as well as risk sentiment has been comments from Federal Reserve policymakers.

The two policymakers who dissented against a rate cut at the December 10 meeting this week, Schmid and Goolsbee both gave hawkish comments during the course of the day.

Fed's Schmid says he dissented because inflation is too hot, policy should be modestly restrictive. Fed member Goolsbee, the President of the Chicago Fed, who was one of the officials who voted against the recent 25 bps rate cut, spent the morning giving several interviews.

He strongly warned against the Federal Reserve cutting rates too quickly and too soon, a concept often called "Front-Loaded" cuts. His reasoning is because he fears this could cause damage to the economy, particularly by stalling progress on inflation, echoing concerns by Schmid.

He explained that he preferred to wait until early next year to get more complete economic data, especially concerning inflation, as he believes the labor market is only cooling slowly and waiting poses little risk.

Comments from voting members immediately after an FOMC meeting are always important because they give traders and investors deeper insight into the disagreements and reasons behind the final policy decision.

For more on the comments and the immediate reaction to the comments, read Markets Flash Red After Fed's Goolsbee: Was the Post-Cut Rally a Trap?

Market participants still hoping for a bullish end to the year will be looking toward things like seasonality and a potential Santa Rally to finish the year strong.

Yesterday it seemed as though the 9000 break for the S&P 500 was only a matter of time, but following today's selloff market participants may be less confident.

There is a positive thought in that historically the S&P 500 has performed admirably in the second half of December ranking as the fourth‑best half‑month period of the year going back to 1950.

This coupled with the usual santa rally expectations may give bulls some optimism as we head into next week and the last jobs report of 2025. Will the unconventional NFP release be the catalyst needed for a final bullish push of the year?

Let us take a look at the technical picture heading into next week.

From a technical perspective, The Dow Jones Index four-hour chart and the price action remains bullish.

However, the current four-hour candle is threatening to break structure with a candle close below 6831 likely to bring bears to the table with more conviction.

The entire zone between the 6800-6850 zone is a confluence area which make the next few hours crucial and could set the tone for early week price action for the S&P 500.

The price of the S&P is currently stuck between the 50 and 100-day EMAs with the 200-day EMA resting on the 6800 handle.

A break of the 6800 handle could bring the swing high at 6756 into focus before support at 6700.

A move higher here faces immediate resistance around 6884 before the 6900 and YTD at 6929 comes into focus.

S&P 500 Four-Hour Chart, December 12, 2025

Safe Trades and Happy Weekend.

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