It was a light weekend for disruptive news which included no progress whatsoever in a resolution of the government shutdown, now in its second month and set to become the longest in US history. It is starting to be acutely felt by millions of Americans with more missed paychecks, food aid broken, cuts to child care kicking in, turmoil at airports and health insurance premiums spiking. Every week that passes with Congress deadlocked is costing the US economy an estimated $10-$30 billion.

Amazon became the latest tech giant to hop on the OpenAI gravy train with a $38 billion cloud deal announcement as US markets opened on Monday and there were small green arrows for the indexes over the course of what was a rather dull first session of November, which is historically the best month of the year for stock prices.

As electors went to the polls to ultimately give Democrats thumping wins in “off-year” elections in New York, New Jersey, Virginia and elsewhere on Tuesday in something of a referendum on the Trump administration, Wall Street got a sudden AI nosebleed.

Traders’ bear market memory banks have been mostly erased lately but sentiment took an abrupt risk-off turn and stocks dumped decisively as sky-high AI valuations seemed to matter all of a sudden. The fact is that if you strip out the Big Tech/AI names that dominate the indexes, the broad stock market had been falling for a week or more. That safety net dramatically fell away on Tuesday.

A collapse in those recently high-flying AI names trashed the NASDAQ by more than 2% and Nvidia by over 4%. Bitcoin saw its entire summer rally wiped out in a matter of hours with a nearly 7% nosedive back to below $100k. Bonds were the main beneficiaries of the outflows and interest rates fell back.

Asian stocks took their lead from Wall Street’s tumble and took a drubbing of their own, but things had stabilized by the time the baton was passed back to New York on Wednesday with a sense of “Wait, was that it?” in relation to Tuesday’s setback.

The question for traders at the open was; are the dip buyers ready to pounce? The answer seemed to be yes, to a degree, as the indexes came back to recover about a quarter of Tuesday’s losses and the previous day’s sharp drop in interest rates reversed.

But Thursday saw a resumption of the sell-off as state-level data showed plans for the most monthly layoffs by US employers since 2003. The extent of air travel chaos resulting from the shutdown became evident with a report from the FAA detailing massive and rapidly growing levels of cancellations and delays. The Supreme Court appeared to be leaning towards declaring most of Trump’s tariffs to be illegal and possibly worthy of refunds to US businesses, which would cause pandemonium.

AI jitters crept back again following some rather cynical statements from a number of business leaders and the stock prices of the tech big dogs got whacked again. This pile-on of headaches killed off the brief recovery rally and pushed the indexes substantially lower for the second time in three days.

Fueled by another plunge in consumer sentiment to its lowest level in years, momentum from Thursday’s decline knocked stocks down again on Friday morning on what should have been a Jobs Report day.

The swoon continued into the early afternoon until Senate Minority Leader Schumer offered a glimmer of hope with a shutdown-ending proposal which turned markets around and the S&P 500 even managed to close slightly in the green for the day. Markets moving on the back of political negotiations could mean that we are entering a new phase, where the shutdown is beginning to finally really matter to financial markets.

It was a pretty miserable week for stocks in general, and this new concept of possible AI fatigue resulted in a 3% weekly drop in the NASDAQ index, its worst week since the tariff tantrums that accompanied so-called “Liberation Day” back in April.

Bigger-picture bullish momentum seems to be broadly still intact however and the earnings season is generally affirming the positive setup. But this market is clearly being increasingly driven by AI exuberance and, given the relentless nature of the advance over the last two or three years, it doesn’t take much to get traders to take some cash off the table, as last week reminded us.

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ARTICLE OF THE WEEK ..

Callie Cox is the best! How to invest without going insane including building a process and why the first investments that you make matter the most in your portfolio.

.. AND I QUOTE ..

“The crucial question is whether this rally has already gotten ahead of itself and if it can continue in the final months of the year. Just one unexpected event could knock stocks down from their highs amid poor market breadth, but that may be tough to do, given that traders are usually optimistic around the holidays.”

Ed Yardeni, founder, Yardeni Research (on Monday of last week)

LAST WEEK BY THE NUMBERS:

Last week’s market color courtesy of finviz.com

Last week’s best performing US sector: Energy (two biggest holdings: Exxon Mobil, Chevron) ⬆︎ 1.6% for the week

Last week’s worst performing US sector: Technology (two biggest holdings: Nvidia, Microsoft) ⬇︎ 4.2% for the week

* SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price fell 1.6% last week, is up 14.5% so far this year and ended the week 2.7% below its all-time record closing high (10/29/2025).

* IWM, a US Small Cap ETF, tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. Its price fell 1.9% last week, is up 9.4% so far this year and ended the week 4.4% below its all-time record closing high (10/15/2025).

* VXUS, a Global Non-US ETF, tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. Its price fell 0.6% last week, is up 25.9% so far this year and ended the week 2.1% below its all-time record closing high (10/27/2025).

INTEREST RATES:

* FED FUNDS * ⬌ 3.875% (unchanged from a week ago)

* PRIME RATE ** ⬌ 7.00% (unchanged from a week ago)

* 3 MONTH TREASURY ⬆︎ 3.92% (3.89% a week ago)

* 2 YEAR TREASURY ⬇︎ 3.55% (3.60% a week ago)

* 5 YEAR TREASURY ⬇︎ 3.67% (3.71% a week ago)

* 10 YEAR TREASURY *** ⬌ 4.11% (4.11% a week ago)

* 20 YEAR TREASURY ⬆︎ 4.68% (4.65% a week ago)

* 30 YEAR TREASURY ⬆︎ 4.70% (4.67% a week ago)

Data courtesy of the Federal Reserve and the Department of the Treasury as of the market close on Friday

* Decided upon by the Federal Reserve Open Market Committee at periodic meetings 8x a year. Used as a basis for overnight interbank loans and for determining high yield savings interest rates.

** Wall Street Journal Prime Rate as of Friday’s close. Used as a basis for determining many consumer loan interest rates such as credit cards, personal loans, home equity loans/lines of credit, securities-based lending and auto loans.

*** Used as a basis for determining mortgage interest rates and some business loans

AVERAGE 30-YEAR FIXED MORTGAGE RATE:

* ⬆︎ 6.22%

One week ago: 6.17%, one month ago: 6.32%, one year ago: 6.79%

Data courtesy of Freddie Mac Primary Mortgage Market Survey

INTEREST RATE EXPECTATIONS:

Where will the Fed Funds interest rate be after the final rate-setting meeting of the year on December 10th?

* Unchanged from now .. ⬇︎ 33% probability (37% a week ago)

* 0.25% lower than now .. ⬆︎ 67% probability (63% a week ago)

Data courtesy of CME FedWatch Tool

All data based on the Fed Funds interest rate (currently 3.875%). Calculated from Federal Funds futures prices as of the market close on Friday.

PERCENT OF S&P 500 STOCKS ABOVE THEIR OWN 200-DAY MOVING AVERAGE:

* ⬌ 54%

One week ago: 54%, one month ago: 64%, one year ago: 74%

Data courtesy of MacroMicro as of Friday’s market close

This widely-used technical measure of market breadth is considered to be a robust indicator of the overall health of the S&P 500 index.

A high percentage (above 70%) generally suggests broad market strength and a bullish trend, while a low percentage (below 30%) may indicate market weakness and a bearish trend.

FEAR & GREED INDEX:

“Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet.

Data courtesy of CNN Business as of Friday’s market close

The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand.

Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment.

Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal at some point.

A “sweet spot” is considered to be in the lower-to-mid “Greed” zone.

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