By Ben Norris, CFA, Senior Vice President, Senior Investment Strategist
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Markets began last week on a sour note as the first trading day of December saw stocks fall across the board. Despite the weakness, investors were likely still thankful for a rally into the end of November that propelled the S&P 500 (S&P) to a slight gain, cementing seven consecutive months of positive returns for the index. Markets have experienced remarkably strong performance since April’s tariff-induced selloff. Through the end of November, the S&P is up nearly 40% from the April bottom, while the Nasdaq Composite (Nasdaq) has added nearly 50% over the same timeframe. Much of the rally has been supported by excitement around artificial intelligence investments, while some can be attributed to better-than-expected earnings in the face of tariffs. Through the third quarter, reported S&P earnings have grown more than analysts expected at the beginning of 2025 and are on pace for mid-teens growth for the full year.
In economic(ish) news, President Trump indicated on Monday that he had already chosen the next leader of the Federal Reserve (Fed) and will announce his pick early next year. We have covered President Trump’s disappointment with current Fed Chairman Jerome Powell’s job performance in the past. Specifically, the president has pushed for lower interest rates while Powell has remained measured in his approach to easing conditions.
Kevin Hassett, the White House’s chief economic advisor, is expected to be the nominee for the Fed’s top job. Hassett has been clear that he’s aligned with the president’s push for lower interest rates but will still have to receive confirmation from the U.S. Senate before he can enact any policy changes. We should also point out that monetary policy decisions are made by committee, so while Hassett will certainly have influence, he will likely face an uphill battle convincing the more hawkish members of the committee to ease as aggressively as Trump would like. Ahead of this Wednesday’s Fed meeting, markets are betting on another 0.25% rate cut after recent employment and inflation data was enough to support one additional cut before facing a less certain path in 2026.
Stocks closed higher on Tuesday as investors shifted back to a risk-on stance, favoring many of the technology and industrial stocks that have led the market higher so far this year. The S&P gained 0.3%, while the Nasdaq Composite added 0.6%. Tuesday was a relatively quiet day for economic data, and much of the market action was driven by increased confidence that the Fed would follow through with a rate cut.
Wednesday began with some “bad news is good news” market action as the ADP Employment Report showed that private employment fell by more than 30,000 jobs in November—the consensus expectation was for the report to show a gain of more than 40,000 jobs. There was particular weakness among small businesses—companies with less than 50 employees shed 120,000 jobs last month. The ADP Employment Report is not a perfect labor market indicator as the data can and does deviate significantly from government employment data reported by the Bureau of Labor Statistics in the short term. Still, the two data sets look at similar trends and tend to rhyme over time so the weakness here was surely noted by the Fed. A weakening labor market is one of the primary arguments for the Fed to cut rates, and so the ADP data was used as a reason to bid stocks higher in anticipation of lower rates. In other economic data, activity in the service sector of the economy came in stronger than expected in November, according to the ISM Services Purchasing Managers’ Index.
Markets closed mixed on Thursday with the S&P and Nasdaq each managing slight gains and the Dow Jones Industrial Average finishing marginally lower. Additional data from the Labor Department clouded the picture for investors and the Fed as initial and continuing jobless claims data came in better than expected. Similarly, Challenger, Gray and Christmas (a company that specializes in helping corporations with layoffs) reported that the number of layoffs dropped significantly in November compared to October. Investors mostly looked past this data as they geared up for Friday’s inflation data.
The Fed’s preferred measure of inflation showed that while price trends continue to moderate, they are still rising faster than the Fed would like. The Core Personal Consumption Expenditures Price Index (PCE) rose 2.8% from a year ago, above the Fed’s self-imposed 2.0% target and back above levels we saw last year. Still, the fact that most measures of inflation have shown continued progress lower despite tariffs is encouraging. At the same time, data from the housing market indicates that the cost of housing should be less of a headwind in the coming months. All of this adds up to a scenario where the Fed should feel comfortable easing one last time this year before gathering additional data in 2026. As a result, stocks finished Friday slightly higher as technology and consumer discretionary stocks outperformed. The S&P gained 0.2% while the Nasdaq added 0.3%. For the full week, the S&P managed a 0.3% gain as the Nasdaq rose nearly 1.0%.
Looking forward to this week, the most closely watched development will almost certainly be the Fed’s policy statement and accompanying press conference on Wednesday afternoon. As we mentioned earlier, the market is confident that the Fed will cut its interest rate target by 0.25%. Investors will likely be more interested in any clues as to what the Fed’s plans are in 2026 before Powell’s term expires in May. Elsewhere, there are a few notable companies that are scheduled to report earnings—the results and guidance of these companies have the potential to move markets, especially with respect to the artificial intelligence trade. Finally, additional employment data will be welcome for investors looking to get ahead of the Fed in 2026.
| TIME (ET) | REPORT | PERIOD | MEDIAN FORECAST | PREVIOUS |
| MONDAY, DEC. 8 | ||||
| None scheduled | ||||
| TUESDAY, DEC. 9 | ||||
| 6:00 am | NFIB optimism index | Nov. | 98.3 | 98.2 |
| 10:00 am | Job openings (delayed report) | Oct. | 7.2 million | *7.2 million |
| WEDNESDAY, DEC. 10 | ||||
| 8:30 am | Employment cost index (delayed report) | Q3 | 0.9% | 0.9% |
| 2:00 pm | FOMC interest-rate decision | |||
| 2:00 pm | Monthly U.S. federal budget | Nov. | -139.6B | -$367B |
| 2:30 pm | Fed Chair Powell press conference | |||
| THURSDAY, DEC. 11 | ||||
| 8:30 am | Initial jobless claims | Dec. 6 | 220,000 | 191,000 |
| 8:30 am | U.S. trade deficit | Sept. | -61.6B | -$59.6B |
| FRIDAY, DEC. 12 | ||||
| 8:00 am | Philadelphia Fed President Anna Paulson speaks | |||
| 8:30 am | Cleveland Fed President Beth Hammack speaks | |||
| 10:00 am | Wholesale inventories | Sept. | — | 0.0% |
Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Market Commentary/Market