What Happened Last Week
- Volatile Trading: Despite a great report, Nvidia shares reversed over 6% and led the market lower as technical selling continued.
- Solid Labor Data: While not timely, the September labor report was stronger than expected.
- Improving Breadth: Friday’s recovery rally featured very strong breadth, underscoring the current rotation out of the Mag-7.
What We’re Watching This Week
- Fed Speakers: With the December meeting still a coin-toss, focus will be on Fed speakers this week before the blackout period.
- Price Action: Investors will continue to dissect price action for clues on the strength of nascent trends or capitulation.
- Consumer Sentiment: This week’s Conference Board sentiment report’s views on the labor market will be watched as a proxy for economic data.
Investment Management Team’s Views
Last week, positioning and the calendar drove the story for equity markets—not fundamentals.” Despite more strong earnings, including a blowout print and solid guidance from Nvidia, the stock finished down over 4% last week. Volumes were heavy, and trading activity was volatile, but the trends we have seen over the last few weeks continued. Investors are getting out of hyperscalers and other growth stocks and moving into the rest of the market. The equally weighted version of the S&P 500 outperformed the headline index by the widest margin in three months, as investors rotated into the rest of the market. Small-caps outperformed, and some early cyclicals, such as regional banks and homebuilders, were actually green on the week. The lack of contagion into rates and credit was an encouraging sign that, after this event, equity markets will continue their upward trend.
Last week’s macro news had a positive skew. The very late, but nonetheless helpful, September non-farm payrolls report was stronger than expected. Walmart’s earnings provided a reassuring update on consumer spending, and the purchasing manager surveys of future business intentions showed encouraging signs for greater activity in 2026. While this data and some hawkish Fed commentary led the market to further price out a Fed cut in December, John Williams, the head of the New York Fed and an influential board member, offered a more dovish outlook for the rest of the year. Expectations for a December cut moved back to near a coin toss, fueling Friday’s broad, pro-cyclical market recovery.
With earnings season winding down and the holiday this week, focus will likely be on price action rather than any new prints. Recent selling pressure has been highly technical, so investors will be looking for signs of capitulation. Despite the short week and limited government data, investors will get Tuesday’s Conference Board consumer sentiment report. With little else on the calendar, Fed member appearances ahead of next week’s blackout period may again drive markets as investors search for signs of a possible December cut.