Both the S&P 500 ETF (SPY) and the Nasdaq 100 ETF (QQQ) closed lower on Monday in a rough start to the new month.
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Seasonality favors the S&P 500 (SPX) in December, as it is the month most likely to post a positive return, ending with a gain 73.3% of the time since 1950, according to Carson Investment Research. In addition, December has historically posted an average return of 1.4%.
Economic data for the month started off on the wrong foot, with the ISM Purchasing Managers’ Index (PMI) for November falling to 48.2 from 48.7 and below the consensus estimate of 49.0. The PMI measures the health of the manufacturing sector based on factors such as new orders, employment, and inventory levels. Furthermore, the index has now been in contraction, as indicated by a reading below 50, for nine consecutive months. New orders and employment fell to 47.4 and 44.0, respectively, while prices paid rose to 58.5 from 58.0.
Over the weekend, President Trump said that he had selected his candidate to replace Fed Chair Jerome Powell, whose term expires in May 2026, without specifying a name. However, prediction markets largely favor National Economic Council Director Kevin Hassett as Trump’s pick. Hassett is viewed as aligning with Trump’s stance of aggressively lowering interest rates. Last week, Treasury Secretary Scott Bessent said that Trump could announce his decision as soon as Christmas.
“So, I think that the market expects that there’s going to be a new person at the Fed, and they expect that President Trump’s going to pick a new one. And if he picks me, I’d be happy to serve,” Hassett said on “Fox and Friends Weekend.”
Meanwhile, the odds of a 25 bps rate cut at the December 9-10 Federal Open Market Committee (FOMC) meeting remain at an elevated 85.4% on CME’s FedWatch tool, up from 63% a month ago.
Finally, RBC Capital Markets set its 12-month target for the S&P 500 to 7,750, citing falling rates and strong earnings growth. RBC Head of U.S. Equity Lori Calvasina noted that the index has historically returned an average of 13.3% one year after the Fed cuts by 1% or less over a 12-month period. RBC joined a chorus of Wall Street firms with bullish prospects for 2026, led by Deutsche Bank with a price target of 8,000.
The S&P 500 (SPX) closed with a 0.53% loss, while the Nasdaq 100 (NDX) fell by 0.36%.
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