Weekly Wrap

The stock market closed the week with mixed results, driven by the Federal Reserve’s policy decision, commentary from Fed Chair Powell, and sharp swings in tech and AI-related stocks.

The S&P 500 (-0.6% WTD), DJIA (+1.1% WTD), and Nasdaq Composite (-1.6% WTD) reflected divergent trends across large-cap and growth-heavy indexes, while smaller-cap benchmarks continued to show relative strength: the Russell 2000 (+1.2% WTD) and S&P Mid Cap 400 (+0.9% WTD) both advanced over the week.

Investors digested a 25-basis-point rate cut from the FOMC on Wednesday, alongside a “hawkish cut” message in which the Fed signaled that additional easing would likely be gradual. Fed Chair Powell emphasized a meeting-by-meeting approach, noting that the Fed funds rate is now within a broad range of estimates of its neutral value. The combination of a rate reduction with cautious forward guidance provided a dovish tilt that supported cyclical, domestic-focused, and financial stocks.

The week’s sector performance highlighted both rotation and volatility. The cyclical financials (+2.3% WTD), materials (+2.4% WTD), and industrials (+1.4% WTD) sectors led the advance as investors responded to sectors that benefit from lower borrowing costs and improved macro projections.

The information technology (-2.3% WTD) and communication services (-3.2% WTD) sectors suffered as mega-cap AI and chip-related names retraced early-week gains.

Oracle (ORCL-7.8%) and Broadcom (AVGO -12.7%) exemplified the tech weakness, retreating sharply despite beating earnings and issuing positive guidance. The AI trade selloff weighed on both the PHLX Semiconductor Index (-3.6% WTD) and the Vanguard Mega Cap Growth ETF (-1.9% WTD), illustrating market sensitivity to growth expectations in its largest names.

Overall this week's action was a sharp contrast to the sideways drift that preceded the December FOMC meeting. The immediate reaction to that rate cut, and optimistic outlook from the Fed helped push the DJIA to record highs, with the S&P 500 also notching a record closing high on Thursday. However, sentiment-based double-digit selloffs to two prominent AI plays pushed the major averages from record highs and rekindle valuation concerns that have created choppy action across tech names in recent months.

• Russell 2000: +1.2% WTD
• DJIA: +1.1% YTD
• S&P Mid Cap 400: +0.9% WTD
• S&P 500: -0.6% WTD
• Nasdaq Composite: -1.6% WTD

Monday:

The stock market moved lower in the first session of a week that is likely to be defined by Wednesday's FOMC decision.

Stocks have seen some muted back-and-forth action leading up to this week's FOMC meeting, with the S&P 500 (-0.4%), Nasdaq Composite (-0.1%), and DJIA (-0.5%) all moving lower today as gains in the information technology sector (+1.0%) could not outweigh broader-market weakness. 

The other ten S&P 500 sectors finished with losses, the widest being that of the communication services sector (-1.8%). While the sector's underperformance is more easily attributed to weakness in its mega-cap components, Alphabet (GOOG 314.45, -7.64, -2.37%) and Meta Platforms (META 667.07, -6.35, -0.94%), new headlines around the takeover of Warner Bros. Discovery (WBD 27.23, +1.15, +4.41%) garnered the lion's share of media coverage today. 

Paramount Skydance's (PSKY 14.57, +1.20, +9.02%) unsolicited $30-per-share all-cash offer for Warner Bros. Discovery marks a new escalation in the takeover fight, directly challenging WBD's earlier cash-and-stock agreement with Netflix (NFLX 96.82, -3.42, -3.41%). According to The New York Post, WBD CEO David Zaslav has told associates he believes the Ellison family could raise its bid high enough to cover Netflix's breakup fee.

Netflix faced additional pressure after being downgraded to Neutral from Buy at Rosenblatt.

Tesla (TSLA 439.58, -15.42, -3.39%) also moved lower following a downgrade today, with Morgan Stanley downgrading the stock to Equal Weight from Overweight, citing valuation concerns.

The consumer discretionary sector (-1.5%) finished near the bottom of today's leaderboard as a result. Weakness in homebuilder names sent the iShares U.S. Home Construction ETF 2.1% lower.

Mega-cap weakness saw the Vanguard Mega Cap Growth ETF finish 0.2% lower, though soft participation across the broader market still saw the market-weighted S&P 500 (-0.4%) slightly outperform the S&P 500 Equal Weighted Index (-0.6%). 

Decliners outpaced advancers by a nearly 2-to-1 ratio on the NYSE and a roughly 5-to-4 clip on the Nasdaq, putting pressure on high-beta-heavy and defensive sectors alike. Six S&P 500 sectors faced a retreat of 1.0% or wider.

The information technology sector (+1.0%) was the lone bright spot, with some particularly strong performances across the sector's largest names. 

NVIDIA (NVDA 185.57, +3.16, +1.73%) and Broadcom (AVGO 401.10, +10.86, +2.78%) contributed to a 1.1% gain in the PHLX Semiconductor Index, with Broadcom trading higher after reports that Microsoft (MSFT 491.02, +7.86, +1.63%) is interested in shifting its custom chips business to the company. 

Meanwhile, Oracle (ORCL 220.56, +2.98, +1.37%) traded higher ahead of its earnings release Wednesday after the close. 

While the major averages did not successfully push toward record highs today, the technology sector's leadership kept the major averages at or above their unchanged levels for the month of December. The sector holds a 2.3% month-to-date gain for December, while the S&P 500 is flat over the same time period. 

Looking ahead, market participants continue to lean on expectations that the Fed will deliver a 25-basis-point rate cut on Wednesday, though sentiment has increasingly shifted toward the idea of a "hawkish" cut—one in which the Fed eases policy this week but signals that additional reductions may be slow to follow.

U.S. Treasuries saw some modest selling interest in the overnight trade, tried to recover early in the cash session, but then came under renewed selling pressure that pushed yields higher across the curve despite some otherwise decent results for the $58 billion 3-year note auction. The 2-year note yield settled up two basis points to 3.58%, and the 10-year note yield settled up three basis points to 4.17%.

There were no economic data releases of note today. 

Tuesday:

The stock market registered its second consecutive session of muted action this week as investors await the results of tomorrow's FOMC decision, which is widely expected to produce a 25-basis point rate cut along with guidance that the Fed is unlikely to ease again in the near term. 

The S&P 500 (-0.1%), Nasdaq Composite (+0.1%), and DJIA (-0.4%) spent the entirety of the session in a tight range near their unchanged levels, while the Russell 2000 (+0.2%) furthered its stretch of outperformance in December. 

Advancers outpaced decliners by a roughly 5-to-4 clip on the NYSE and Nasdaq, an improvement from yesterday's negative breadth figures that reflects the subdued back-and-forth action that has defined the market over the past several sessions. 

Five S&P 500 sectors finished higher, which was also an improvement from yesterday's action that saw only the information technology sector notch a gain. However, relatively subdued performances across the market's largest names limited the size of gains today. 

The information technology sector (+0.2%) managed a more modest gain today, shaking off an opening loss. NVIDIA (NVDA 184.92, -0.64, -0.34%) traded lower despite President Trump stating via Truth Social that the company will be allowed to sell its advanced H200 chips in China, though the U.S. government will take 25% of the profits. 

The consumer discretionary sector (+0.2%) also shook off an early loss, supported by Tesla (TSLA 445.18, +5.60, +1.27%) taking back some of yesterday's 3.4% slide. The stock was a standout across a quiet day for the mega-caps that saw the Vanguard Mega Cap Growth ETF finish flat.

The sector is also home to today's worst-performing S&P 500 name, AutoZone (AZO 3493.36, -273.60, -7.26%). The stock moved sharply lower after posting its sixth consecutive EPS miss.

Meanwhile, the energy sector (+0.7%) captured the widest gain despite crude oil futures settling today's session $0.58 lower (-1.0%) at $58.26 per barrel. Exxon Mobil (XOM 118.23, +2.25, +1.94%) captured a solid gain after updating its 2030 outlook, now targeting $25 billion of earnings growth and $35 billion of cash flow growth.

As for today's retreating sectors, losses were relatively modest, with only the health care sector (-1.0%) closing with a loss of 1.0% or wider. A majority of the sector's components traded lower, though CVS Health (CVS 78.22, +1.69, +2.21%) notched a nice gain after raising its FY25 outlook. 

While the financials sector (-0.3%) did not finish with one of the widest losses, it was subject to one of the more notable intraday swings, moving lower after JPMorgan Chase (JPM 300.47, -14.74, -4.68%) disclosed projected 2026 firmwide expenses of approximately $105 billion. That figure represents roughly 11% growth over the projected 2025 expense base of about $95 billion and lands about 3.6% above current Wall Street expectations for 2026.

While today's action featured some notable stock-specific moves in reaction to earnings and guidance, things remained relatively quiet at the index level as the market awaits tomorrow's FOMC meeting. Several recent sessions of similar narratives leave the major averages mixed for the month of December, with all three indices within 1.0% of their unchanged month-to-date levels, reflecting a market in search of new catalysts heading into the end of the year. 

U.S. Treasuries were lacking buyers today, who exercised restraint in front of the FOMC decision tomorrow. The 2-year note yield settled up three basis points to 3.61%, and the 10-year note yield settled up one basis point to 4.18%. 

Reviewing today's data:

• The October JOLTS report showed 7.670 million job openings versus estimates that were closer to 7.200 million. Job openings in the year-ago period were 7.615 million. Job openings for September were estimated to be 7.658 million based on partial data for businesses that self-reported during the government shutdown and data collected in November after the shutdown.
• The September Leading Economic Index registered a 0.3% decline following an upwardly revised 0.3% decline (from -0.5%) for August.

The stock market captured solid broad-based gains this afternoon following the FOMC's decision to reduce the federal funds rate by 25 basis points, snapping a streak of muted sessions and moving the S&P 500 (+0.7%), Nasdaq Composite (+0.3%), and DJIA (+1.1%) within close proximity of their all-time highs. The Russell 2000 (+1.3%) captured record highs of its own as small-cap stocks, with their increased domestic presence and sensitivity to borrowing costs, surged in reaction to today's FOMC decision.

The market was largely expecting the FOMC to deliver a "hawkish cut" at today's meeting, meaning that a rate reduction was anticipated alongside commentary that would dampen expectations of further easing. 

Indeed, the Summary of Economic Projections (SEP) showed a median expectation of just one rate cut in 2026, unchanged from the September SEP. However, the SEP also showed an upward revision in the median estimate for the change in real GDP to 2.3% from 1.8%. Meanwhile, the median estimate for the unemployment rate held steady at 4.4%, as the outlook for PCE inflation was revised down to 2.4% from 2.6%.

While the FOMC may now embrace a "wait-and-see" approach, as noted by Fed Chair Powell's comment, "the Fed funds rate is now within a broad range of estimates of its neutral value," optimistic revisions to the economic outlook, in tandem with an expressed willingness to make policy decisions on a meeting-by-meeting basis, invite questions as to just how hawkish today's meeting truly was. 

Today's decision also featured an announcement that the Fed will begin purchasing Treasury bills, starting December 12, to the tune of $40 billion per month before likely being "significantly reduced" after a few months, noting that reserve balances have declined to ample levels.

The stock market certainly benefitted from the more dovish than expected tilt, with the major averages capturing solid gains after a morning spent in a mixed fashion near their unchanged levels. 

Nine S&P 500 sectors finished higher, with six notching gains of 1.0% or wider. A smattering of corporate news items contributed strength to several of the top-performing sectors. 

The industrials sector (+1.8%) finished at the top of the leaderboard, supported by shares of GE Vernova (GEV 722.97, +97.67, +15.62%) rallying after the company issued upbeat guidance and provided an optimistic long-term financial outlook.

The consumer discretionary sector (+1.5%) was another top mover, garnering the bulk of today's mega-cap strength due to solid gains in Amazon (AMZN 231.78, +3.86, +1.69%) and Tesla (TSLA 451.44, +6.27, +1.41%). 

Homebuilder names, which are sensitive to borrowing costs, added support, with the iShares U.S. Home Construction ETF gaining 3.2% today. 

Banking names lifted the financials sector (+1.1%) to a nice gain, with JPMorgan Chase (JPM 310.17, +9.66, +3.21%) mounting a solid rebound from yesterday's 4.6% slide. 

Elsewhere, the materials (+1.8%), health care (+1.5%), and energy (+1.1%) sectors round out today's top performers. 

While losses in Microsoft (MSFT 478.76, -13.26, -2.70%) and NVIDIA (NVDA 183.74, -1.23, -0.66%) limited gains in the information technology sector (+0.1%), solid participation across a majority of its components helped the sector recover from a loss of nearly 1.0% this morning. Oracle (ORCL 223.30, +1.78, +0.80%) ended with a modest gain ahead of its earnings release this afternoon despite spending the bulk of the session in negative territory.

Only the defensive utilities (-0.1%) and consumer staples (flat) sectors failed to notch a gain today. 

All told, today's FOMC decision delivered on the promise of a rate cut, while Fed Chair Powell's emphasis on a meeting-by-meeting approach and his comment that a rate hike is not in anyone's base case conveyed a surprisingly dovish tone that helped lift risk sentiment and support solid growth across stocks today. Still, investors will have plenty to monitor on the policy front going forward, as today's decision featured two dissenters (Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid), while a new Fed Chair, likely one with an initiative to lower interest rates, will take the helm in May.

U.S. Treasuries climbed on Wednesday, snapping a four-day skid in the 10-year note and shorter tenors. The 2-year note yield settled down four basis points to 3.57%, and the 10-year note yield settled down two basis points to 4.16%

Reviewing today's data:

• Compensation costs for civilian workers increased 0.8% (Briefing.com consensus: 0.9%), seasonally adjusted, for the 3-month period ending in September 2025. That was a moderation from the 0.9% increase registered in the second quarter.
  • The key takeaway from the report is that it was an inflation-friendly report, evidenced by wages and salaries decelerating on a year-over-year basis for civilian workers (3.5% vs 3.9% a year ago), private industry (3.6% vs 3.8% a year ago), and state and local government workers (3.5% vs 4.6% a year ago).
• The U.S. Treasury reported a $173.0 bln deficit for November (Briefing.com consensus -$223.4 bln) after a deficit of $284.0 bln in October.
• The weekly MBA Mortgage Index rose 4.8% to follow last week's 1.4% decrease. The Refinance Index jumped 14.3% while the Purchase Index was down 2.4%.

Thursday:

The stock market delivered an eventful session, with cyclical and defensive names extending yesterday's rate-cut momentum to lift the DJIA (+1.3%) to a record high. At the same time, weakness in tech and other mega-cap names following Oracle's (ORCL 198.64, -24.37, -10.93%) disappointing results kept the S&P 500 (+0.2%) and Nasdaq Composite (-0.3%) subdued, though the S&P 500 still managed to log a record close. 

The smaller-cap Russell 2000 (+1.2%) and S&P Mid Cap 400 (+1.0%) continued on their run of recent outperformance as the Fed's rate cut and softer policy tone encouraged renewed interest in domestically focused, rate-sensitive names.

The information technology sector (-0.6%) spent the majority of the session as the biggest laggard, as Oracle's revenue miss and lighter-than-expected free cash flow weighed on other mega-cap names across the AI trade. 

NVIDIA (NVDA 180.96, -2.82, -1.53%) finished lower, with the broader PHLX Semiconductor Index closing with a 0.8% loss. Broadcom (AVGO 406.96, -6.01, -1.46%) also traded lower ahead of its earnings report this afternoon, which investors will look to for a boost in AI sentiment. 

While big tech certainly limited gains at the index level, it is worth noting that the information technology sector mounted an impressive intraday move after trading over 2.0% lower this morning, a move that was pivotal in getting the S&P 500 across its flatline and notching a record close. 

The communication services sector (-1.0%) finished with the widest loss, as Alphabet (GOOG 313.75, -7.25, -2.26%) was burdened by today's mega-cap weakness, without a comeback effort this afternoon.

Dow component Walt Disney (DIS 111.48, +2.64, +2.43%) still notched a solid gain after news that the company struck a licensing deal with OpenAI that will allow some 200 Disney characters to be used in the company's short-form generative AI video platform, Sora. As part of the agreement, Disney will also be investing $1 billion in OpenAI. 

The Vanguard Mega Cap Growth ETF finished 0.3% lower, contributing to the underperformance of the market-weighted S&P 500 (+0.2%) relative to the S&P 500 Equal Weighted Index (+0.8%).

Meanwhile, the energy sector (-0.4%) finished with a more modest loss as crude oil futures settled today's session $0.92 lower (-1.6%) at $57.61 per barrel.

While weakness in mega-cap tech names certainly stifled growth in the S&P 500 and Nasdaq Composite, the broader market put up another solid performance in the wake of yesterday's FOMC meeting. 

Cyclical sectors, such as the materials (+2.2%) and financials (+1.8%) sectors, outperformed again as investors rotated into sectors that benefit from a more accommodative monetary policy backdrop.

Mosaic (MOS 25.20, +1.44, +6.08%) captured one of the widest gains across S&P 500 names after reports that a Ukrainian drone strike caused a large fire at a prominent Russian mineral fertilizer plant. 

Visa (V 345.65, +19.92, +6.12%) notched a similar gain, catching an upgrade from Bank of America Securities to Buy from Neutral this morning. 

The defensive health care (+1.0%), utilities (+0.7%), and consumer staples (+0.7%) sectors also caught a solid rotational bid today amid the weakness in tech names. 

Managed care names such as Elevance Health (ELV 360.18, +19.14, +5.61%), Centene (CNC 40.47, +1.80, +4.65%), and Molina Healthcare (MOH 166.94, +6.42, +4.00%) traded sharply higher following headlines that a Republican-backed healthcare plan to redirect Affordable Care Act subsidies from insurance companies to Americans failed by a Senate vote of 51-48.

Eli Lilly (LLY 1009.14, +15.50, +1.56%) also notched a solid gain after announcing positive topline results from its Phase 3 TRIUMPH-4 clinical trial evaluating the weight-loss effects of retatrutide, its investigational "triple G" agonist.

Attention now shifts to Broadcom's earnings, which could influence the tone around chipmakers and AI, while the post-FOMC rotation into cyclicals and defensives continues to shape the market's underlying strength.

U.S. Treasuries extended their midweek bounce on Thursday, though the advance found some intraday resistance, which left yields on 5-year and longer tenors above their opening levels. The 2-year note yield settled down four basis points to 3.53%, and the 10-year note yield settled down two basis points to 4.14%.

Reviewing today's data:

• Weekly Initial Claims 236K; Prior was revised to 192K from 191K, Weekly Continuing Claims 1.838 mln; Prior was revised to 1.937 mln from 1.939 mln
  • The key takeaway from the report is that, on balance, it doesn't point to a material weakening in the labor market.
• September Trade Balance -$52.8 bln (Briefing.com consensus -$61.7 bln); Prior was revised to -$59.3 bln from -$59.6 bln
  • The key takeaway from the report is that the narrower deficit was the byproduct of exports being $8.4 billion more than August exports and imports being $1.9 billion more than August imports.
• September Wholesale Inventories 0.5% (Briefing.com consensus -0.2%); Prior -0.1%

Friday:

The stock market retreated as the AI trade faced renewed pressure, with yesterday's broader market rotational strength notably slimmer in today's trade. The DJIA (-0.5%) notched a record intraday high early in the session before retreating, while the S&P 500 (-1.1%) and Nasdaq Composite (-1.7%) faced wider losses. 

A double-digit loss in Broadcom (AVGO 359.90, -46.48, -11.44%), despite an earnings beat and upside guidance for the next quarter, highlighted the concerns that many of the mega-cap tech names are priced for perfection, making them susceptible to outsized downswings in the absence of an aggressive growth outlook.

Oracle (ORCL 189.59, -9.26, -4.66%) faced a similar sentiment-based retreat yesterday, which largely spurred the broader pullback across tech names this week. 

The information technology sector (-2.9%) ceded its week-to-date gains with today's loss. Broadcom, NVIDIA (NVDA 175.08, -5.85, -3.23%), and other chipmakers contributed to a 5.1% slide in the PHLX Semiconductor Index. 

While six sectors finished lower, the technology sector was the only sector with a loss of 1.0% or wider.

The communication services (-0.7%) was a laggard as a result of weakness in its own mega-cap components, Alphabet (GOOG 310.56, -3.14, -1.00%) and Meta Platforms (META 644.27, -8.44, -1.29%). The Vanguard Mega Growth ETF closed with a 1.5% loss.

As a result, the market-weighted S&P 500 lagged the equal-weight index (-0.7%), with both finishing below their baselines, even as the DJIA briefly hit another record high before tech-led losses broadened out.

While not as strong as yesterday's action, several sectors still managed gains as the tech sell-off has spurred some rotational action into cyclical and defensive sectors. 

The consumer staples sector (+0.9%) was the top advancer by a relatively wide margin. Walmart (WMT 116.65, +1.13, +0.98%) notched a record high, while Costco (COST 884.49, +0.01, +0.00%) finished flat after beating top-and-bottom line estimates. 

lululemon athletica (LULU 205.08, +18.08, +9.67%) was the top gainer in the S&P 500 today after a solid earnings report of its own. Notably, the company's CEO will step down effective January 31. 

Lulu's rally helped the consumer discretionary sector (+0.1%) scratch out a slight gain, while the health care (+0.3%), materials (+0.2%), and financials (+0.1%) sectors also finished modestly higher. 

Outside of the S&P 500, the smaller-cap Russell 2000 (-1.5%) and S&P Mid Cap 400 (-1.3%) finally ran into some resistance after outperforming this week, reflecting the overall weaker sentiment in today's trade. 

On the policy front, Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid offered insight into their decision to dissent from the FOMC's decision to deliver a 25-basis point rate cut at Wednesday's meeting in favor of keeping the Fed funds rate unchanged. Mr. Schmid cited inflationary risks, while Mr. Goolsbee stated he did not want to frontload too many cuts but has a dovish outlook for 2026, though neither will be a voting member next year. 

Looking ahead, investors will focus on Tuesday's jobs report and Thursday's CPI release, with both key readings likely to influence Fed expectations amid the market's rotational disposition.

U.S. Treasuries ended the week with losses in most tenors while the 2-year note resisted the pressure, locking in a modest gain for the week. The 2-year note yield finished unchanged at 3.53% (-3 basis points this week) and the 10-year note yield settled up five basis points to 4.19% (+5 basis points this week).