Last Week
A deal to end the longest U.S. government shutdown in history on Monday got the week off to a strong start, propelling the Dow Jones Industrial Average to a new record on Tuesday, with the index closing above 48,000. Then the mood shifted over concerns about whether AI spending will lead to a boom or bust, as well as whether the Fed will continue to lower interest rates. All that uncertainty led to a bumpy finish in the week on Wall Street, with declining issues outnumbering advancing issues by a factor of 5-4. It was particularly challenging for small caps and mid-caps, resulting in 1.8% and 1.2% losses, respectively. The Nasdaq Composite slid 0.5%, while the S&P 500 managed to break even, following the previous week’s selloff. As we approach Thanksgiving, the turkeys are gobbling and the market has been wobbling, which is undoubtedly better than sinking.
The AI narrative came under pressure, following cautious comments from data-center owner Core Weave. The Global X Artificial Intelligence & Technology ETF has declined 5% over the last two weeks as concerns over stretched valuations and unsustainable capital spending have mounted, with more naysayers joining the “bubble” camp. If it bursts, there is certainly significant downside ahead.
The stiffest headwind came from Fed policymakers cautioning against further interest rate cuts amid the lack of economic data. The odds of a December rate cut are now down to a coin flip, but we believe that with the softness in the labor market and weak consumer sentiment, a rate cut is indeed warranted.
On a positive note, President Donald Trump exempted certain food products from his reciprocal tariffs amid growing consumer angst over high grocery prices. We look forward to the Supreme Court’s ruling on the legality of the administration’s use of tariffs, hopefully ending this whipsaw.
On the Chicago Sports Scene, another thrilling last-minute victory for the Bears, this time over the Vikings, is igniting Super Bowl ambitions for the Monsters of the Midway fans! Meanwhile, the news is less upbeat for the Bulls, who have now dropped six of their last seven games. The Blackhawks, on the other hand, are off to a solid start. It still could be a great winter
This Week
The Federal Open Market Committee will release the minutes from its last meeting. Traders will look for any new clues ahead of the December 10th interest rate decision.
Also on Wednesday, the AI boom-or-bust debate will intensify when Nvidia reports its third-quarter results.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.