Fixed Income & Equities Markets Week in Review

After nice gains in the first half of December, stocks gave back ground this week on profit taking (particularly in large cap technology and AI-related stocks), some mixed corporate earnings news, and updated economic data. Although stocks rebounded late in the week on better inflation data and a rebound in technology stocks, the earlier declines kept indices in negative territory for the week (through Thursday’s market close).

Rising worries about significant artificial intelligence (AI) capital spending, margin and cash flow pressure, and funding challenges has fueled profit taking of late in some of the stocks, in particular technology and AI-related, that have provided strong performance this year. Last week’s earnings disappointment from Oracle (ORCL) was exacerbated earlier this week by reports that Blue Owl, ORCL’s largest data center partner, may not back a $10 billion deal for a Michigan data center facility that will serve OpenAI. Better headlines later in the week, however, prompted a bounce in technology and AI-related stock prices. Micron Technology (MU) delivered fiscal 1st quarter revenue and earnings that beat expectations, while it also raised fiscal 2nd quarter revenue guidance by more than 30% versus consensus due to elevated AI demand and pricing strength. In addition, the US government reportedly launched a formal review that could lead to the first shipments of NVIDIA’s (NVDA) H200 chips to China.

Investors also pondered some mixed earnings news. Nike (NKE) reported better than expected quarterly results. However, China revenues were down much more than anticipated (-16%) and continued China headwinds were flagged for the company’s softer than expected guidance for the current quarter’s revenue. Continued tariff, promotional, and inventory challenges were also cited as headwinds. Fed Ex’s (FDX) fiscal 2nd quarter results came in better than expected, but cost pressures were noted as an impediment to earnings for future quarters. Finally, continued housing market softness was in focus, with Lennar Corporation’s (LEN) and KB Home’s (KBH) stock prices both under pressure following weak guidance due to the ongoing affordability crisis, elevated interest rates, and supply shortages.

Economic data was also a focal point during the week. The key releases were:

• November nonfarm payrolls: came in better than expected, rising 64,000 versus an expected 50,000 gain. The unemployment rate rose to 4.6%, higher than the consensus estimate of 4.4% and the highest since September 2021. However, this rise was mostly attributed to the furloughing of government workers during the shutdown. The report was viewed as unlikely to materially sway the Federal Reserve (Fed) into raising rates early in 2026.
  
  
• November Consumer Price Index (CPI): surprised to the downside. Annualized November core CPI printed at a cooler than expected 2.6% (versus an expected 3.0%) and slowed to its lowest since March 2021. There was some commentary about potential inaccuracies due to the October government shutdown. Nevertheless, some economists noted that it signaled slowing inflation. After this report, the market continued to anticipate that the Fed would leave rates unchanged at its January policy meeting.