Nasdaq and S&P500: US Indices Dip Today While Fed Minutes Reveal Deep Split

• The Fed's December rate cut vote of 9-3 exposed significant internal division, with some members suggesting rates should remain unchanged for an extended period after the latest reduction
• Wall Street strategists are split on 2026 outlook, with bulls citing AI, economic stimulus and earnings growth while bears warn about excessive optimism and predict a range-bound market
• Strong corporate earnings have been the primary driver sustaining the bull market through geopolitical turmoil, tariff concerns, and the historic government shutdown

Market Summary: US Indices Decline as Fed Minutes Reveal Division

US stock indices closed lower Tuesday in thin year-end holiday trading. The S&P 500 fell 0.14% to 6,896.24, the Nasdaq dropped 0.24% to 23,419.08, and the Dow Jones declined 0.20% to 48,367.06. Despite the day's losses, all three benchmarks are positioned for solid double-digit gains in 2025.

Strong corporate earnings have driven the bull market throughout the year, overcoming challenges including tariff fears, a 43-day government shutdown, and geopolitical pressures. Ryan Detrick of Carson Group remains optimistic for 2026, citing no major recession indicators and expectations for continued labor market improvement.

However, Wall Street strategists are divided on the 2026 outlook. Stifel's Barry Bannister warns of excessive optimism and forecasts a range-bound market, while Evercore ISI's Julian Emanuel projects a 12% S&P 500 gain but expresses concern about the absence of bearish calls. Emanuel identifies three key catalysts: artificial intelligence, economic stimulus, and earnings growth.

Fed minutes from the December 9-10 meeting revealed significant division among officials. The FOMC voted 9-3 to cut interest rates by 25 basis points to 3.5%-3.75%, marking the most dissents since 2019. Members debated balancing labor market support against inflation concerns, with some suggesting rates should remain unchanged following the December cut.

With markets at all-time highs and technology expected to play a reduced role in 2026, analysts advise caution heading into the new year. The minutes indicate uncertainty about the extent and timing of future rate adjustments as officials monitor inflation trends.