Market Rally Powered by Fed Optimism and Earnings Surprises

December 11, 2025 marked a strong day for equities, with the Dow, S&P 500, and Russell 2000 all concluding at fresh record levels. The positive momentum stemmed from encouraging economic indicators and the Federal Reserve’s dovish tone regarding 2026 rate expectations.

Index Performance Breakdown

The Dow Jones Industrial Average surged 646 points, representing a 1.34% climb. Meanwhile, the S&P 500 ticked up 14 points (+0.21%), and Russell 2000 demonstrated notable traction with a +1.21% advance of 31 points. However, the Nasdaq posted a modest pullback of -60 points (-0.25%), snapping its three-year reign as the top-performing index.

This divergence tells an interesting story. The tech-centric Nasdaq, which has dominated returns for three consecutive years, stumbled slightly as investors reassessed valuations following Oracle’s underwhelming quarterly results. The report raised questions about whether the artificial intelligence boom — which has been the primary engine driving market gains over the past year — may be hitting a valuation ceiling for certain players.

Earnings Illuminate Market Divergence

Broadcom’s AI Momentum Accelerates

Semiconductor heavyweight Broadcom (AVGO) released fourth-quarter fiscal results after the market close that vindicated the AI thesis. The company posted earnings of $1.95 per share, surpassing the $1.87 consensus estimate and the $1.42 figure from the prior year. Revenue reached $18.02 billion, besting the $17.50 billion projection.

The standout metric: AI semiconductor revenue exploded 74% year-over-year. Looking forward, management raised fiscal Q1 revenue guidance to $19.1 billion — nearly $1 billion higher than prior expectations. The AI semiconductor segment alone is projected to contribute $8.2 billion in fiscal 2026, effectively doubling the year-ago period’s contribution. Shares climbed another 3% in after-hours trading, building on an impressive 75% year-to-date appreciation.

Costco Delivers Mixed Signals

Costco (COST) offered a more complicated narrative with its fiscal Q1report. Earnings reached $4.50 per share, handily beating the $4.26 consensus (aided by a 16-cent tax benefit versus last year’s 22-cent boost). However, revenue of $65.98 billion came up short of the $67.33 billion forecast. The stock barely budged on the news and remains down 3.5% for the year.

Lululemon Exits Strong Despite Leadership Transition

Lululemon (LULU) outshined expectations with third-quarter results announced after the close. The athletic apparel retailer’s stock surged over 10% following the earnings release, which carried the notable news that CEO Calvin McDonald will step down from his role effective January 31st. While a permanent successor hasn’t been identified, McDonald’s final quarter at the helm proved successful — earnings of $2.39 per share crushed the consensus by 16.7%, while $2.6 billion in revenue exceeded the $2.48 billion estimate.

The Broader Takeaway

Market breadth expanded Thursday as investors showed renewed appetite for both mega-cap value plays (evidenced by the Dow’s strength and Russell 2000’s traction) and selected growth opportunities. The AI trade remains influential but increasingly requires company-by-company execution validation. Thursday’s mixed results from major tech and consumer names underscore that not all valuations have been justified, creating differentiation between winners and laggards in the market’s extended bull run.