Market Summary
Markets spent the week in a holding pattern - firm enough to show confidence, but hesitant ahead of the key Federal Reserve meeting on December 10th.
Despite early volatility, equities managed modest gains as strength in semiconductors, select mega-caps, and improving market breadth offset weakness in defensive sectors.
With rate expectations, global tensions, and shifting corporate narratives all competing for attention, investors navigated a choppy but ultimately constructive backdrop for the week.
The Economy
Economic data delivered a mixed but market-friendly tone. Manufacturing activity contracted, with ISM slipping to 48.2%, while ADP employment showed a 32,000 decline—both hinting at softening underlying momentum.
In contrast, jobless claims fell to a near two-year low (191K), pointing to ongoing labor-market resilience.
Inflation readings were broadly in line with expectations: the Fed's preferred gauge, core PCE, dipped to 2.8% in September, signaling ongoing disinflation progress without derailing consumption or employment. Notably, this data has been delayed by the government shutdown.
Core PCE September - 2.8%
The Fed
With the FOMC meeting approaching, investors focused on how the Fed will interpret the recent mix of cooling inflation and uneven economic data. Rate-cut expectations for December stayed largely intact, supported by softer labor metrics and stable long-term yields.
Several Fed officials maintained a balanced tone throughout the week, reinforcing the message that the path forward remains data-dependent but increasingly open to easing should inflation continue trending lower.
Geopolitics
Geopolitical news was light overall. Crypto volatility and shifting expectations around digital-asset regulation weighed on sentiment early in the week.
Renewed discussion around semiconductor export restrictions sparked a mid-week pullback in chip stocks—most notably Intel, which fell sharply on potential tightening of U.S.–China technology controls.
Energy markets responded to OPEC+ keeping output levels unchanged, helping the energy sector outperform.
Company Specific
Corporate news drove several notable moves. Boeing surged more than 10% after constructive commentary at a UBS conference. Intel rallied early alongside the broader semiconductor complex before reversing on trade headlines.
Mega-caps contributed meaningfully to index strength, with NVIDIA, Apple, Alphabet, and Meta experiencing a mix of strong sessions and brief pullbacks.
To close the week, Netflix announced plans to acquire Warner Bros. Discovery for $72 billion, boosting WBD and reshuffling expectations across the media landscape.
Week Ahead
This week, investor focus will be placed on the Fed's interest rate decision on Wednesday with most importance to be placed on subsequent commentary from Fed Chair Powell. Economic data will be relatively light with most reports likely to be overshadowed by the Fed meeting.
A handful of companies will report key earnings with interest being placed on hyper-retailer Costco Wholesale (COST) and semi-conductor stalwart, Broadcom (AVGO).
As always, please reach out with any questions and thank you for your trust.
Respectfully,
Michael Neill, CFA
Chart Sources: TradingEconomics