Last Week
Wall Street posted its worst week since early October, which would have been even worse had there not been a sharp rally on Friday. Once again, AI and the Fed dominated the narrative. Nvidia’s blowout quarterly results on Wednesday after the market close failed to lift the artificial intelligence trade out of its recent downtrend. Meanwhile, cautionary comments from Fed officials cast doubt on the likelihood of a rate cut at the upcoming FOMC meeting on December 9-10. Thursday’s trading session saw a historic reversal in sentiment as the Nasdaq Composite roared out of the gates at the open following Nvidia’s earnings, which easily beat all expectations, only to eventually slide deep into the red by the close.
The market bounced back sharply on Friday after New York Fed President John Williams suggested that there was room for additional rate cuts, and a story surfaced that the Trump administration was considering allowing Nvidia to sell H200 chips to China. Nevertheless, the S&P 500 still finished down 1.9%, while the Nasdaq Composite was 2.75% in the red, with a 0.8% drop in the Russell 2000. Every industry sector suffered losses, with declining issues doubling advancing issues. The Dollar inched higher, with Crude Oil sliding over 3%, and Gold holding steady. The yield on the 10-year Treasury slipped nine basis points to 4.06%, while short-term rates declined in a similar manner.
The Volatility Index spiked the most since April, rising over 30% during the week, before retreating on Friday. As we approach the holiday season, Fear has returned from an extended holiday. These spikes are usually short-lived, but with limited data and the tension over the Fed’s next meeting, it could be a bumpy ride for the next few weeks.
On the Chicago Sports Scene, the Bears secured their eighth victory in the last nine games, beating the Steelers 31-28 on a beautiful afternoon at Soldier Field. We recommend securing airfare and hotels for the Super Bowl host city of San Francisco on February 8 as soon as possible. Additionally, both the Bulls and Blackhawks are outperforming expectations.
This Week
As a result of the lengthy government shutdown, there will be a dearth of current economic data.
The remaining third-quarter earnings results will wrap up a strong reporting season. The growth in earnings, combined with steady and hopefully lower interest rates, is the foundation to support current extended valuations in the stock market. Small-cap valuations remained compressed, and estimates for 2026 earnings growth for the Russell 2000 are significantly higher than those for the broader market. If you are interested in learning more about our small-cap strategies, please contact us at info@nsinvest.com.
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.