Weekly Recap:

by Eric Criscuolo & Michael Reinking, CFA

Published on 12/5/25

Last week was a very holiday-shortened one, with markets closed on Thursday for Thanksgiving and wrapping up early on Friday. The most important event took place on the trading floor. The incredible Connect 4 tournament was held during Kids Day, the Friday after Thanksgiving, in front of the NYSE MAC Desk. America’s future looks bright based on what we saw from those kids, and I’m relieved I aged out of the brackets because, like the Steelers, I would not have made it out of the first round (delete this if Tomlin becomes the next Giants coach).    

Besides Connect Four, technical milestones were a key theme last week. The S&P 500 finished up 4% as the 100 day moving average held as support. That allowed the index to regain its footing, reclaim the 50 day average and get back above 6800. Mid and small caps outperformed, adding 4-6%, and crypto bounced back after a rough sell-off. 

This week was kind of a weird one, sandwiched between the very short one last week and next week’s Fed rate decision and Oracle earnings. Once again though, the biggest event did not involve the Fed, earnings or options hedging. Thursday night was the 102nd Annual NYSE Tree Lighting. If you weren't here when we lit that baby up, come by Wall and Broad St. if you're around NYC for the holidays.

Since reclaiming 6800 the day before Thanksgiving, the S&P has drifted a little higher, trading in a range of 6800 to 6900. The all-time high is less than 1% above us. That’s coincided with a strong compression in volatility. The VIX has declined from around 26 on November 20, to below 16 currently, a very mild level.

Both the S&P 500 and the equal-weight index closed modestly higher this week. Friday's gain made it  eight of the last nine trading days for the S&P, but it was the small caps that led the way. After starting the week under pressure, they moved higher until cooling off on Friday. Narrative-driven and thematic baskets, like the quantum computer group we reference a lot, mainly saw strong gains. At least some of this is due to residual impact from recent executive orders like the AI-focused Genesis Mission, and related news that the administration will have a lot more to announce around robotics and AI in the near future. Small caps gained despite treasury yields moving higher, in line with global yields.

The resiliency of the US consumer has been debated for a while, with a lot of concern about a K-shaped economy. The focus is only increasing with the start of the holiday season. Mastercard’s latest SpendingPulse report showed the consumer remained resilient with Black Friday sales rising 4.1% y.y, e-commerce growing 10.4% and in-store +1.7%. Salesforce and Adobe (Cyber Monday +7.1% y.y) also noted strong spending. Retailers were some of the best performing stocks after positive reactions to earnings and sell-side conference presentations (Dollar General, Estee Lauder, Ulta, Dollar Tree). You could argue though that the strength from value-focused retailers may not be a positive signal for the economy.    

Performance was mixed across sectors with 6/11 finishing higher for the week. Energy led as it traded higher along with crude and gas. Tech was at the top as well, led by semis and not necessarily the typical names we hear; Microchip (MCHP) positively pre-announced and the more auto-focused names (NXP, ON) also saw strong gains. Salesforce led the software group on earnings strength. In Comm Services, Meta gained ~4% on the week on reports it was substantially cutting spending on metaverse development, setting up an existential crisis for the company’s marketing department I would assume, and hopefully not trapping people stuck in it. Financials gained as yield spreads widened and labor data was generally positive.    

Lagging sectors saw larger moves in magnitude. Utilities fell 4% with broad weakness as yields rose and action was less defensive. Healthcare continued to pullback from its runup since late September. Life Science Tools, Managed Care and Biopharma were under pressure. Vaccine recommendation rollbacks by the CDC also pressured the sector as regulatory and political concerns flared up again. Consumer Staples, Real Estate and Materials also saw broad weakness.

M&A news flow was relatively light by deal number but not deal size. Netflix has agreed to buy Warner Bros. Discovery for $72B in cash and stock. The company has been in the M&A spotlight for a a while with multiple suitors taking turns as likely buyers. The deal would reshape the media landscape but is also likely to attract strong anti-trust scrutiny, especially since the HBO Max streaming service would come under Netflix’s banner. Reports then surfaced that Paramount Skydance could come over the top and believes it has a better chance of receiving regulatory approval. I just want to be able to watch Season 3 of House of the Dragon. Other deal news included Marvell buying Celestial AI for $3.25b in cash and stock up front, with additional milestone payments of up to $2.25B. Softbank was reported to be in talks to acquire digital infrastructure provider DigitalBridge.    

In one of his better social media posts, President Trump announced he "just approved TINY CARS to be built in America. Manufacturers have long wanted to do this, just like they are so successfully built in other countries. They can be propelled by gasoline, electric, or hybrid'. I really don't know how much this relates to the weekly note other than I'm spending a lot of time thinking about it and laughing at Zoolander references.

It was a pretty light week for data. November's ISM Manufacturing PMI was slightly weaker than expected and fell to 48.2 from 48.7. New Orders declined but Production rose into expansion (>50) territory. Employment contracted and Prices ticked up.

The LMI Logistics Managers Index showed similar dynamics to prior months, but for the first time in the data’s 9-year history respondents reported using less available warehousing space month-over-month. This is due to a continued drawdown of inventory stocks.

Labor market data was mixed but didn't move markets too much overall. The ADP Employment Report came in below expectations. Private sector hiring fell by 32k, the fourth decline in the last six months. Job losses were completely driven by small businesses (-120k) while medium/large businesses added to headcount. Hiring at the largest companies has remained positive in each of the last six months averaging just under 50k jobs. It was yet another example of the K-shaped economy. Standing in contrast was a sharp decline in Challenger job cuts (from 153K last month to 71k) and solid claims data (from 218k to 191k). It was the first sub-200k data since January ’24 and lowest since Sept. ’22. 

ISM Services came in about in line with expectations with mixed underlying metrics. New orders fell to 52.9 from 56.2. Employment improved slightly but remained in contractionary territory. Prices pulled back to 65.4 from 70, back below the 12-month average of 66.1.

PCE is normally a key event but this week's update was from September and came in largely in line (+0.3% m.m / +2.8% y.y), with Core slightly lower. Current consumer sentiment ticked down in the preliminary Univ. of Michigan Sentiment survey but expectations rose. Year-ahead inflation expectations fell for the fourth straight month, from 4.5% to 4.1%, and next five years also declined, from 3.4% to 3.2%.    

The main event will be the Fed’s interest rate decision and Chair Powell’s press conference on Wednesday. An update of the FOMC’s Summary of Economic Projections, or SEP, which includes the famous Dot Plot will be included. Markets have priced in about a 90% chance of a 25bp rate cut. Assuming Powell doesn’t shock markets, the focus shifts to whether the forward guidance on further rate cuts will turn in a more hawkish manner, lowering expectations for future cuts. Earnings will also be a focal point, with more retail and consumer-focused names reporting, including Autozone, Toll Brothers, GameStop and Costco. Oracle’s earnings will be a key event given the ramping scrutiny of AI spend, and Broadcom will also be important update. There will also be a lot of Investor Days, including DE, HD and XOM. We’ll get some belated employment data. The JOLTS reports for September and October will be published as the government catches up from the shutdown. Weekly jobless claims will come out as usual. There's a 10y treasury auction to keep an eye on too, especially given this week’s moves in yields. President Trump said he would announce his pick to succeed Powell as Fed Chair early next year, but, I mean, you never know. Hassett is the big favorite. Speaking of Trump, a decision on the SCOTUS tariff case is expected at some point, but more likely closer to year-end if it happens this year. Enjoy your weekend.    

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