Weekly Market Recap: Markets Wobble as AI Volatility Returns and Fed Signals Drive Rate-Cut Hopes

Market Overview

Markets endured a choppy week as global equities declined under the weight of renewed AI-related volatility and a broad rotation out of mega-cap tech. NVIDIA’s highly anticipated earnings temporarily steadied sentiment—with CEO Jensen Huang citing relentless demand for AI chips—but the relief was short-lived. The S&P 500 fell 1.9% and broke below its 50-day moving average for the first time in 138 sessions.

U.S. equities fell across the board, led by sharp declines in growth and semiconductor names after downgrades of Microsoft and Amazon amplified existing momentum unwinds. Overseas markets followed suit: European equities softened on the back of modest macro data and AI-driven sentiment shockwaves, while Asian markets posted some of the steepest declines as Taiwan, South Korea, and Hong Kong faced outsized tech pressure. Geopolitical tensions between Japan and China added stress to an already fragile environment.

Risk-off positioning supported core bonds, and yields pulled back modestly across the curve. Meanwhile, commodities slipped, particularly crude oil, as easing geopolitical tensions lowered risk premiums. The U.S. dollar strengthened for a second week as global investors sought liquidity amid falling equity markets.

Federal Reserve Insights & Economic Roundup

The Federal Reserve’s October meeting minutes offered little clarity about a potential December rate cut, but revealed growing discussion around shortening the duration of the Fed’s balance sheet—an important shift that could create added volatility in longer-dated Treasuries once quantitative tightening ends on December 1.

Markets responded more to Fed Governor John Williams’ Friday comments, which reopened the door to a December cut and pushed rate-cut probabilities back above 60%.

Economic data was plentiful as agencies resumed operations following the government re-opening. September payrolls bounced back more than expected, though prior months were revised downward and continuing claims climbed to their highest level since 2021—a sign the labor market is gradually cooling. Wage growth moderated, and unemployment ticked slightly higher.

Consumer sentiment slipped again, with the University of Michigan index falling near historic lows even as inflation expectations softened. Investors continue to balance signs of slowing demand with the Fed’s growing willingness to ease policy should conditions warrant.

The Week Ahead

Monday: Chicago Fed National Activity Index and Dallas Fed Manufacturing (Nov). Tuesday: Retail Sales, PPI (Sep), Home Price Indexes, Consumer Confidence, Business Inventories. Wednesday: Jobless Claims, Durable Goods Orders (prelim), Personal Income & Spending, Chicago PMI, Fed Beige Book. Thursday: Thanksgiving holiday — no releases. Friday: No major data scheduled.