Mid-Session US Market Update (Dec 18, 2025): CPI-Driven Rally Fades, Defensive Sector Rotation

The morning session (December 18, 2025) of the US stock market was shaped by a cooler-than-expected November CPI inflation report, released at 8:30 a.m. ET. The report showed headline CPI at 2.7% (vs. 3.1% forecast) and core CPI at 2.6% (vs. 3.0% forecast) [0], prompting investors to price in lower interest rate expectations for 2026. Major indices reacted positively initially: the S&P 500 rose ~1%, Nasdaq Composite jumped ~1.5%, and Dow Jones Industrial Average gained ~340 points (0.7%) [0].

However, the rally faded as the session progressed, with indices giving back most gains by the 12:00 EST mid-session mark. The S&P 500 traded near its opening level (6,778), Nasdaq was flat, and Dow was slightly lower [0]. Sector rotation was a defining feature: initial demand for cyclical sectors (tech, discretionary) shifted to defensive sectors (utilities, real estate) by mid-session. Utilities (~1% up) and real estate (~0.5% up) emerged as leaders, while energy (~1% down) and industrials (~0.3% down) lagged [0]. Market breadth turned mixed after initial advancers led, with decliners gaining ground later [0].

Volume patterns showed higher-than-average activity for SPY (108.7M shares) [0]. Technical levels for the S&P 500 were identified as support at 6,750 and resistance at 6,890–6,900 [0]; the index reached a morning high of 6,816 (below resistance) and a low of 6,758 (near support) [0]. No major Fed officials spoke during the morning session, and a released staff manual for bank supervision had minimal market impact [0]. Notable stock movers included Micron Technology (MU), up ~10% after reporting strong earnings and guidance, and Nvidia (NVDA), up ~4% on AI demand optimism [0].

1. The fading post-CPI rally indicates cautious investor sentiment, with profit-taking likely driving the pullback despite positive inflation data.
2. The shift from cyclical to defensive sector leadership suggests market participants are prioritizing stability amid potential volatility, rather than fully embracing rate-cut expectations.
3. High trading volume for SPY reflects significant market activity and investor engagement with the inflation news and subsequent rotation.
4. Strong performance from MU (earnings-driven) and NVDA (AI-themed) highlights the continued influence of company fundamentals and tech trends on individual stock movements.

• Risks:
  The afternoon session could see extended profit-taking, leading to increased volatility. Without immediate positive catalysts, indices may struggle to recapture morning highs.
• Opportunities:
  Defensive sectors (utilities, real estate) may continue to attract capital if cautious sentiment persists. Tech stocks with solid fundamentals (like MU) and AI exposure (like NVDA) could maintain upward momentum as investors focus on long-term growth drivers.

• November CPI: 2.7% (forecast 3.1%), core CPI: 2.6% (forecast 3.0%).
• Major indices: Initial gains (S&P 500 +1%, Nasdaq +1.5%, Dow +0.7%) faded by mid-session, with S&P near open, Nasdaq flat, Dow slightly lower.
• Sector leadership: Cyclicals (tech, discretionary) initially, then defensives (utilities, real estate) by mid-session.
• Volume: SPY traded 108.7M shares, above recent averages.
• S&P 500 technical levels: Support 6,750, resistance 6,890–6,900; morning high 6,816, low 6,758.
• Notable movers: MU (+10% earnings), NVDA (+4% AI optimism).
• Fed activity: No major speakers; bank supervision manual released (minimal impact).