Fixed Income & Equities Markets Week in Review

The equities market moved into a “risk off” mode this week as investors pondered some high-profile events:

October Federal Open Market Committee (FOMC) meeting minutes. Hope for another interest rate cut by the Federal Reserve (Fed) in December was dampened on Wednesday. The release of the October meeting minutes showed a divide within the Fed. It was noted that “many” participants suggested it would be appropriate to keep rates unchanged for the rest of the year. Recall that at the meeting (in which there was a 0.25% cut), there had been a hawkish dissent from Fed President Schmid and a dovish dissent from Fed Governor Miran. At the October post-meeting press conference, Fed Chair Powell had commented that a December cut is not a foregone conclusion, particularly given “strongly differing views” among members. More recent “FedSpeak” has also highlighted the divide and uncertainty on a December rate cut, particularly given delayed government data.

Shutdown-delayed September employment report. With the recent reopening of the government, economic and labor market data collection is slowly starting back up. Because the September employment data had already been collected prior to the shutdown, the data was prepared and released on Thursday. The Bureau of Labor Statistics’ (BLS) non farm payrolls report showed that 119,000 jobs were added in September—much better than the expectation for an addition of 50,000. However, the prior two months were revised down by 33,000, including an August revision that resulted in a 4,000 contraction for the month. The unemployment rate ticked up to 4.4%, the highest since October, 2021. Also of note, the BLS announced Wednesday afternoon that the October non farm payrolls report will not be released and that November's has been rescheduled to December 16th, and which is after the Fed’s December 9th-10th FOMC meeting. The Fed will mostly be still flying blind on its “data dependence” at the upcoming meeting –which adds to the uncertainty of whether they cut rates.

Earnings release from NVIDIA (NVDA). There has been a recent momentum unwind around artificial intelligence (AI) related stocks, particularly due to rising concern about how huge cap ex spending budgets will be monetized and whether or not there is a “bubble” forming (and questions about whether outsized growth will continue). So, this week’s earnings report by the leader in AI chips, NVDA, has been a focal event. On Wednesday after the market close, the company reported stellar 3rd quarter results, beating revenue and earnings expectations significantly. Company management also guided 4th quarter revenue expectations nearly $3 billion higher than the current consensus estimate. Data center revenue growth, hyperscaler demand, and rising margins were bright spots. In addition, there is already a $500 billion backlog in Blackwell and Rubin orders through 2026, with the Blackwell ramp fully underway and Rubin on track to launch in 2H 2026. While NVDA and the market rallied initially on this news, NVDA, other AI-related stocks, and the overall market fell as Thursday wore on. Skepticism about a possible bubble continues to grip market psychology.

There are still plenty of positives for investors to ponder, including the outlook for double-digit earnings growth in 2026, a stable macro backdrop, significant fiscal stimulus on the horizon, and the potential for further rate cuts in 2026. Seasonality is also a potential catalyst. Despite the negative performance thus far in November (see the table below), it has historically been the best month for stocks.

Market psychology is currently focused on the momentum unwind, AI bubble skepticism, dampened Fed easing expectations, concerns about a possible labor market softening and a more cautious consumer. Nevertheless, if some of these concerns ease, seasonality could act as a tailwind for market performance.