by Gavyn Jensen-Schneider, Research Associate

Market indices moved sideways this week as jitters about interest rates and AI spending offset the gains that came after the government reopened. The S&P 500 finished the week up +0.08%, while the Nasdaq fell -0.45%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.15%, up +6 basis points (bps) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, rose +5 bps to 3.83%.

After more than a month of deliberation and dysfunction, the longest government shutdown in US history ended late in the evening on Wednesday, November 12^th. The 43-day shutdown ended with 7 democrats and 1 independent crossing the isle to pass a “clean” continuing resolution (CR) that maintains government funding through January 30^th. Attached to this CR was legislation to reimburse states for federal expenses they covered during the shutdown (i.e. SNAP benefits), reverse mass layoffs that took place during the shutdown, and provide full year funding for: the Department of Agriculture, the Department of Veterans Affairs, the Supplemental Nutrition Assistance Program (SNAP), the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) and Congress itself. Senate majority leader Thune also promised a vote on the expiring affordable care act subsidies, the policy disagreement that led to the shutdown.

The continuation of “hawkish” commentary from Federal Open Market Committee (FOMC) members reversed the gains made by equities and fixed income preferreds by weeks end. This week’s “fedspeak” saw members Daly and Musalem outline the need for additional economic data before deciding where to set interest rates at the next meeting. A week ago, investors forecasted a 66% chance of a rate cut in December but, after this week’s commentary, that forecast has fallen to 50%.

Fears surrounding the AI-technology space also motivated negative market movement this week. Many of the stock market gains in the past few years have been attributed to AI-related development; since the launch of ChatGPT in 2022, AI-related stocks have accounted for roughly 75% of S&P 500 gains and nearly 90% of capital expenditures. AI-related stocks are valued at sizably higher price-to-earnings (P/E) multiple compared to non-technology stocks, 28x and 18x respectively. The valuations on AI technology—which is still growing and developing—have led to investor skepticism of technology companies, and the efficacy of their substantial capital investments for AI infrastructure. Next week’s earnings report from AI chip manufacturer Nvidia will be a bellwether for AI sector performance and could drive the directionality of investor sentiment.

With the shutdown over, investors are looking forward to government economic data which can “clear the fog” through which we have been viewing the macroeconomy for the past month and a half. Government economic data releases will resume in the upcoming week, beginning with September’s labor report, which includes nonfarm payrolls and the household employment survey on Thursday. The University of Michigan consumer sentiment for November on Friday will round out the week.

by Gavyn Jensen-Schneider, Research Associate

Uncertainty surrounding mixed economic data signals, “hawkish” commentary from Federal Open Market Committee (FOMC) members, and oral arguments at the Supreme Court over IEEPA tariffs led to a slight investor pullback this week. The S&P 500 finished the week down -1.63%, while the Nasdaq fell -3.04%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.09%, unchanged from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, fell -4 bps to 3.78%.

Economic data has been severely limited by the ongoing shutdown, leaving investors with a small pool of private data sources to utilize. ADP private payrolls suggest that private employers added 42k jobs in October, a rebound from the -29k drop a month prior. Though ADP signals some labor market strength, another private data provider – Challenger, Gray & Christmas – estimates that 153k jobs were cut in October, up 175% from last month. The macroeconomic uncertainty created by these conflicting private job reports accentuate the need for the “gold standard” Bureau of Labor Statistics data, which has gone unpublished due to the shutdown.

After last week’s FOMC meeting, many board members spoke to the press or at conferences about their views on the economy. This “Fedspeak” paints a picture of a conflicted board caught between the two goals of their mandate. Members Barr, Goolsbee and Hammack highlighted their worries about policy rate cuts leaving inflation above the 2% target, while Governors Miran and Waller reiterated their arguments for a rate cut in December to bolster the deteriorating labor market. The committee’s diverging opinions cast doubt on the path of future interest rate policy, increasing investor uncertainty.

Adding to this week’s uncertainty was Wednesday’s oral arguments for Learning Resources v. Trump, a Supreme Court case that centers on whether the President can use the International Emergency Economic Powers Act (IEEPA) to enact tariffs. By many analyst accounts, the high court seems skeptical of the Administration’s power to implement across-the-board emergency tariffs using this act. Though the court won’t give a ruling until December at the earliest, any action to strike down these tariffs would throw a wrench into the ongoing and tenuous trade negotiations underway with China, Canada, and many other nations.

Even with this week’s pullback, equity markets have fared quite well during the third quarter earnings season. 91% of S&P 500 companies have reported thus far. Of that group, 82% exceeded Wall Street expectations for earnings per share (EPS) and 77% exceeded expectations for revenue. Q3 earnings growth for the S&P is 13.1%, marking the fourth consecutive quarter of double-digit growth for the index.

Next week looks quiet from both an earnings and economic data standpoint. With the shutdown ongoing, data slated for next week like CPI and PPI inflation will go unreleased, with no private data sources to use as a substitute. Q3 earnings season continues to wind down next week, with lesser-known names like Applied Materials (AMAT) and Cisco Systems (CSCO) set to report. Stalwart Nvidia (NVDA) will report the following week.

by Gavyn Jensen-Schneider, Research Associate

Market indices rose again with positive trade news and strong earnings reports in the Tech sector. The S&P 500 finished the week up +0.71%, while the Nasdaq rose +2.24%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.09%, up +9 basis points (bps) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, rose +6 bps to 3.82%.

US – China trade tensions cooled after Thursday’s meeting between President Trump and Chinese President Xi Jinping. The two leaders agreed upon a one-year trade “truce” that de-escalated restrictive measures they’d each implemented earlier this year. China agreed to postpone export controls on rare earth metals as well as resume the purchase of US soybeans — 25 million metric tons a year — for the next three years. In exchange, the US cut fentanyl-linked tariffs in half to 10%. In addition, both countries delayed tit-for-tat tariffs on the shipping industry. A few key issues went unaddressed, such as the export of Nvidia’s Blackwell AI chips, the sale of TikTok by Chinese company ByteDance, China’s purchasing of Russian oil, and a formal trade agreement between the two nations. Nonetheless, President Trump announced plans to visit China next April, and Xi to visit the US sometime after that. Investors are hopeful those future meetings can sort out these unaddressed trade and geopolitical disagreements.

The Federal Open Market Committee (FOMC), which controls overnight interest rates in the US, decided to cut rates this week by 25 basis points, as was widely expected. The FOMC was somewhat “flying blind” during this meeting as the ongoing government shutdown has reduced the economic data available to them. The limited data makes the FOMC’s mission — to balance maximum employment and stable prices — all the more difficult, leading to a cautious outlook for the next meeting in December. Chair Powell analogized December’s policy rate decision to driving in the fog, saying “what do you do if you’re driving in the fog? You slow down.” Markets were predicting a 90% chance of a December rate cut prior to the Chair’s comments but this fell to a 63% chance by the end of the week.

Corporate earnings season continued in full swing, with 66% of S&P 500 companies having reported so far. Alphabet (Google’s parent company) reported an acceleration of their Google Cloud Services. Amazon had a similar acceleration in demand for their Amazon Web Services. Facebook and Instagram parent Meta increased their capital expenditure outlook for the year following substantial investment in data center capacity and AI development. And though they didn’t report earnings this week, Nvidia made headlines as the first company to reach a $5 trillion market capitalization.

The third quarter earnings season will continue to hum in the next week, with another 27% of S&P 500 companies set to report. Of particular note are financial services provider Block (XYZ) as well as AI chipmakers Qualcomm (QCOM) and Advanced Micro Devices (AMD). Economic data will be slim next week as the ongoing Federal government shutdown continues to delay major datapoints like the Job Openings and Labor Turnover Survey (JOLTS), US nonfarm payrolls, and the unemployment rate, which were all scheduled for release next week. Instead, markets will look to private data releases like the ADP employment report on Wednesday, and the University of Michigan consumer sentiment report on Friday.

by Gavyn Jensen-Schneider, Research Associate

Major market indices finished the week at new record highs, owing to positive corporate earnings and trade news. The S&P 500 finished the week up +1.92%, while the Nasdaq rose +2.31%. The 10-Year Treasury yield, an interest rate indicator, closed at 4.00%, down -1 basis point (bp) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, fell -4 bps to 3.76%.

The headline of the week came on Thursday as the White House confirmed a meeting between President Trump and Chinese President Xi Jinping, occurring on October 30^th. This will be the first meeting between the two leaders under this administration. Investors are hopeful that this meeting will begin the process of normalizing trade relations between the two nations, which have been upended by hostile economic and trade policies implemented by both sides. While talks with China seem to be progressing, ongoing trade negotiations between the US and Canada were terminated on Friday. The termination might make the renegotiation of the USMCA – the ongoing free trade agreement between the US, Canada, and Mexico – more difficult. That agreement, which covers around 85% of goods and services exchanged between the US and Canada, expires next summer.

Markets were bolstered by the September CPI inflation report, which came out Friday morning. Core CPI, which excludes volatile food and energy prices, grew 0.20% month-over-month, ten basis points less than anticipated. On a year-over-year basis, Core CPI grew 3.0%, or 0.1% less than expected.

The Federal Government shutdown became the second longest in US history this week, with no end in sight. Legislators on both sides continue to dig in, rearticulating their demands. The Senate has failed to pass either one of the competing Republican and Democratic continuing resolutions (CRs) twelve times over the past 24 days, while the House of Representatives has not been in session since September 19^th. The gridlock will likely continue into November until some bipartisan consensus can be reached.

The upcoming week is set to be an exciting one. The long slate of third quarter corporate earnings includes major names like Alphabet (Google’s parent company), Meta (Facebook’s parent company), Apple, United Healthcare, and Amazon. The Federal Open Market Committee (FOMC) is meeting Tuesday and Wednesday to discuss interest rate policy, with markets expecting another 25-bps cut to interest rates. Additionally, the highly anticipated meeting between Donald Trump and Xi Jinping comes on Thursday, when the two Presidents will negotiate a deal on rare earth minerals and soybeans. Finally, economic data rounds out the week, with the preliminary third quarter GDP on Thursday and Core PCE inflation on Friday.