U.S. equity markets remained volatile for most of the week, but no more so than on Thursday. NVIDIA’s quarterly earnings report was initially received positively before an aggressive mid-week reversal saw the Nasdaq 100 fall nearly 5% from its mid-day peak. Long-awaited government labor market data didn’t help much with sentiment. Volatility levels are elevated again and investors seem knocked back on their heels by a lack of reassuring data.
Tip of the Week
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Market Moves
Weekly Market Snapshot:
- S&P 500: -1.9% – tech weakness continues to drag the major averages lower as investors shift defensively into value, low volatility and consumer staples.
- Nasdaq 100: -3.1% – investors are moving past the AI enthusiasm stage and moving towards seeking out verifiable results from AI investments.
- Russell 2000: -0.8% – outperformance of large-caps signals some market broadening; relative strength in cyclicals over the past month is helping.
- VIX: 23.6 – market volatility levels nearly touched their highest level since April suggesting that investors are growing more fearful here.
- Gold: -0.5% – precious metals provided some downside protection, but didn’t act as a counterbalance to equity losses.
- 10-Year Treasury Yield: 4.07% – Treasuries saw some safe haven demand, but a lack of recent inflation data is preventing yields from dipping too far.
Drivers:
The big sell-off in tech and bitcoin confirm that the bears are in control here. We’re continuing to see a defensive shift within equities, but investors have yet to really seek out safety in gold and Treasuries. Odds still slightly favor a rate cut in December, but the lack of recent data due to the government shutdown may push the Fed to wait until 2026 when they have more information to work with.
Economic Highlights
A couple of the notable themes that stood out this week:
Delayed Jobs Data Confirms a Cooling Labor Market
After more than a month’s delay, we finally got the September non-farm payroll report (although it still doesn’t get us up-to-date).1 The BLS reported that 119,000 jobs were added, but the unemployment rate rose to 4.4%, its highest reading since 2021. That means labor force participation is growing, which is a good thing, but it also indicates that overall labor demand is still shrinking. Some of this is being blamed on AI replacing humans, but a Challenger, Gray & Christmas report shows that the ratio of “AI blamed” job losses relative to total job cuts in 2025 is less than 10% (although that ratio is larger in recent months).2 Either way, the labor market is almost certainly slowing here and that’s likely to start impacting economic growth forecasts heading into the new year.
NVIDIA’s Pop Fades as AI Bubble Fears Take Over
The market initially popped following NVIDIA’s earnings report last week, not exactly a rarity in recent years, but the follow through was unusual.3 Market fears of an AI bubble slowly took over and sent shares sharply lower. Mega-cap tech companies have posted strong revenue and earnings growth over the past year from AI, but investors worry that 1) companies may not get a reasonable ROI on all that spending and 2) AI valuations have become overdone. CEO Jensen Huang tried to dispel the bubble talk, but ultimately the market didn’t listen.4
With NFP & CPI Reports Canceled, the Fed Faces a Blind December
The government cancelled the release of both the October non-farm payroll report and the October CPI report.5,6 Both are watched very closely by the Fed in helping to set monetary policy, but they won’t have either of them in time for their December meeting. There’s the thought that the lack of data may cause the Fed to pause in December and reconsider the next rate cut in January. So far, the Fed Funds futures market is still pricing in a 70% chance of a December cut.7
Walmart’s Strong Quarter Bucks Retail Caution Heading Into the Holidays
Some retailers have been striking a cautious tone about the holiday season, but Walmart isn’t one of them. Its Q3 earnings report last week showed a beat on both revenue & earnings as well as raising full-year guidance.8 This is a positive sign ahead of a holiday season with high affordability concerns and uncertainty about consumer resilience.
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The Week Ahead
A few themes to watch next week:
- A holiday-shortened week won’t produce a whole lot of headlines. We will get the release of some outdated government data, including manufacturing data and retail sales. The latter will probably be the most closely-watched, although it’s expected to show steady growth yet again. Watch Black Friday and Cyber Monday sales figures for signals.
-
Stocks staged a comeback on Friday, but investors clearly feel shaken. Holiday trading weeks tend to feature light volume, something which is generally helpful for risk assets. It would be a bad sign for longer-term sentiment if we see further declines in risk asset prices this coming week.
In Summary
Tech enthusiasm is wearing off and the major indices are taking a hit as a result of it. Defensive sectors like healthcare and consumer staples are holding up well and could benefit if investor optimism drops.
The word “bubble” is likely to be with us for a little while and that could put a cap on short-term tech upside here. Diversification should be a consideration in order to help shield from drawdown and concentration risk.
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