Margo, Jessica, and Jack raced to the docks as James and Marshall faced off. James relayed to Marshall the name and location of his daughter before shooting him in the head. Margo and Jack arrested James as Jessica accompanied Marshall to the hospital, where Ben was slated to perform his surgery.

A suspicious Craig found Carly and Mike in an embrace. Alone with Carly, Craig accused her of stealing money from Monte Carlo to cover up her affair with Mike. Craig stormed out urging Carly to warn Mike that Craig might go to see him. Craig paid Mike and Molly a visit but didn't spill the beans. Later, Craig informed Carly that he had not sold her out.

Molly was upset to find out that Mike had not told her about his loan from Lucinda. Later, Mike covered with Molly when he and Craig argued. Molly questioned Mike, but he insisted on delaying the conversation.

Katie sold her doll collection to buy Simon his family's sheep farm in Australia, only to discover that Simon had built a case for her dolls as a Christmas gift. Simon was touched by Katie's gift but hesitant to visit the farm right away. Later, Katie and Simon celebrated a romantic Christmas Eve.

Hope assured Luke that she knew they were going to have a baby sister because she had wished for it, though he was counting on a brother. When Bob arrived with the others, singing Christmas carols, Lily went into labor and delivered a healthy baby girl, Natalie, much to Hope's delight.

Lucy became frustrated when her memory seemed to be returning only in patches. John warned Lucinda about pushing the patient's memory too much, for fear of discouraging her and setting her back further. When Aaron called to wish Lucy a merry Christmas, Lucinda wouldn't allow him to talk to her. Lucy recalled going to see The Nutcracker, which encouraged her and her mother.

When Aaron arrived with news about Lily and Holden's special Christmas present, Lucinda and Sierra headed to the Snyder house while Aaron spent time with Lucy. She remembered kissing him.

Jack found Carly at the Monte Carlo offices and took her to celebrate with Molly and Mike. She was surprised to learn that Jack had asked Molly to buy presents for Jackie Jr., since he hadn't been sure if Carly would want to. Carly pleased Jack when she revealed a present she had for his baby.

Jessica sat with an unconscious Marshall as he waited for surgery, encouraging him to get well for his daughter's sake. John made the holiday special for Kim when he helped Denice and Andy send their daughter to her for a Christmas visit.

Due to the Christmas holiday, As The World Turns did not air an original episode this day. Instead, an episode from 1985, in which Holden was thwarted by Dusty in his attempt to give Lily a gift, aired.

The show resumed Thursday, December 26, where Tuesday's show concluded.

Carly was left with two cranky kids after Jack canceled their plans to oversee James's prison transfer. Craig showed up and pacified the kids then unloaded his hurt on Carly's claim that he had never loved her. Emma urged Rosanna to let Craig help her through her surgery.

Later, Rosanna called Craig but hung up when she heard Carly and a crying J.J. in the background. Rosanna confronted Carly and Craig before leaving to tell Jack that Carly had slept with Mike. Mike apologized to Molly about evading her questions about his loan from Lucinda. Molly asked for an explanation for the loan and Mike's dispute with Craig. Mike lied that the loan was to cover old debts and that Rosanna had sparked Craig's jealousy of Mike's past with her. Later, a suspicious Molly wondered if Carly was somehow involved.

Jessica took Marshall's father, Oliver, to see him. Meanwhile, Ben convinced Bob that his feelings for Marshall would not affect his work. Later, Ben began Marshall's surgery. Barbara presented James with divorce papers before his transfer to prison. James needled Paul and vowed that he would return. Later, Barbara was grateful when Paul said that he forgave her.

Molly wanted to know the secret about Mike's business deal with Lucinda, but he said it was a private matter. That was not good enough for Molly, so she walked out. Mike ran after her and found her on the porch. Molly said she couldn't help but feel that there was something more going on with Mike and Carly.

Mike relented and said he had something to tell Molly. He told her a little bit about his past with Carly, and Molly didn't press him any further. She gave him a hug and thanked him for being so honest with her. Molly wanted to talk things through with Carly, but Mike discouraged her. Mike agreed to take Parker and J.J. from Jack and Carly for the afternoon so they could have some alone time.

Alison and Aaron were at the hospital. Aaron wanted Alison to visit Lucy to help jog Lucy's memory. Aaron told Alison that he'd kissed Lucy in the hope that she might start to remember their relationship. Alison discouraged him from trying anything like that in the future. Aaron ran off to see Lucy. Alison talked to herself. She thought it was time to tell Craig about Lucy's history. Aaron visited Lucy and told her Alison was a great friend, even though she hadn't stopped by for a visit.

Emily got home and found Hal on the phone. Hal tried to apologize for running away, but Emily was furious. Will walked downstairs and asked where Daniel's things had gone. Emily said she'd moved a few things out until some issues were settled. Later, when they were alone, Emily lit into Hal. "Don't you get it? You are perfect!" she said. Hal said, "I was so scared of the truth, all I could do was run from it."

Margo stopped by with a social worker, who wanted to know why she should let Hal keep Will. She gave Hal a warrant to have Will stay at a hospital for a mandatory 30-day evaluation. The social worker gave Hal 48 hours to comply then she and Margo left. Hal told Emily he wouldn't subject Will to those tests.

Later, at dinner, Will yelled at his father because he'd thought his dad could fix all the problems. He ran upstairs. Emily told Hal they would hire a lawyer to help them out of the jam. Emily told Hal she would move back into his home.

Jack arrived at home with a bad mood. A kiss from Carly helped to turn things around. They both agreed to shut the world out for the rest of the day. Jack said he had to make one phone call then they could get busy.

Craig tried to throw Rosanna off track by confessing that he was the one who had slept with Carly. Rosanna didn't buy it, demanding, "Do you think I left my brain completely at the door?" Craig sold his story, leaving Rosanna in tears. Rosanna's phone rang, and she saw it was Jack calling.

Craig snatched the phone away from Rosanna and said they wouldn't be interrupted until she'd heard everything he had to say. He threw the phone into a glass of water. Craig begged to put all the drama behind them. Rosanna said that since he'd freely admitted that he'd violated the Carly clause in the contract, full ownership reverted to Rosanna, and he needed to clear out his desk and tell her "slut of a sister" that she needed to clean out her designs before Rosanna changed the locks.

Rosanna denied that she was still in love with Craig but demanded to know why Craig said that he loved her. Craig said that compared to all the women he'd been with, they "matter[ed]" to each other. Rosanna's phone rang, even in the water. It was her doctor, but she declined to take the call. She tearfully told Craig goodbye and walked toward the door. Craig asked her not to leave town. She said, "I'm not leaving town. I'm just leaving you."

Jack returned downstairs after making his phone call and found that J.J. had a 102-degree temperature. They rushed off to the emergency room. Later, at the hospital, Susan told Jack that J.J. had a minor temperature and that it was really nothing to worry about. But she also said that J.J. had a small curvature in his spine that would need to be monitored over time. She and Dr. John said that most of the time, the condition worked itself out. Susan told John in J.J.'s room that she'd checked into the medical histories of both Julia and Jack, and neither had a history of infantile scoliosis. They both suspected the baby wasn't Jack's.

Craig met up with Carly at the hospital. She was desperate to know if Craig had gotten Rosanna to keep her mouth shut. He said it was complicated. Carly said, "There isn't anything complicated about duct tape." Craig told Carly that in order to cover Carly's secret, he'd confessed that he was the one who had slept with Carly the night before the wedding.