By Jack Kraft, CFA, Vice President, Investment Strategist
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U.S. equities finished last week mixed despite the U.S. government shutdown coming to an end as investors’ concerns around the artificial intelligence (AI) trade sparked a rotation into risk-off areas of the market. Investors also spent the week assessing the probability of a rate cut at the December Federal Reserve (Fed) meeting and monitoring the third-quarter earnings season. The Nasdaq Composite ended a volatile week of trading down 0.5%, while the S&P 500 and Dow added 0.1% and 0.3%, respectively.
The biggest piece of news to hit the tape last week was that on Nov. 14, the record-long 43-day federal government shutdown came to an end after President Trump signed a short-term continuing resolution that extended funding until Jan. 30, 2026. Roughly 1.4 million federal employees, including about 730,000 who worked without pay and 670,000 who were furloughed, are now entitled to backdated wages. As departments reopen, statistical bureaus are scrambling to publish a backlog of economic data releases with talks of some figures such as October CPI and payroll figures not being able to be produced. Without finalized data, the Fed will have reduced visibility on inflation and the labor market going into its December policy meeting.
Economic impact is expected to be somewhat limited, with the shutdown slowing U.S. economic growth by about 1.0% to 1.5% in the fourth quarter and a rebound of roughly the same amount in the first quarter of 2026 as federal spending normalizes. Furthermore, everyday Americans experiencing pain points will start to see relief as federal programs like SNAP (Supplemental Nutrition Assistance Program) has been funded through September 2026. Meanwhile, airlines are targeting to be back to capacity before the busy holiday travel season at the end of November as disruptions ease at the Department of Transportation.
Shifting to the equity markets, six of the 11 S&P 500 sectors traded in negative territory last week, with losses led by consumer discretionary, industrials and utilities. Meanwhile, the health care and energy sectors gained more than 2.5% as investors rotated into less-favored areas of the market year-to-date. Elsewhere, commodities resumed their rally, with gold and silver up 2.1% and 4.6%, respectively. More speculative areas of the market have gotten punished during this momentum reversal, with strong selling seen in bitcoin. Bitcoin is officially in a bear market after breaking through the $100,000 support level. Earlier this year it traded north of $125,000 per coin.
Last week was a reminder of how quickly Wall Street can unwind overbought positions as concerns about technology valuations and AI return on investment saw scrutiny. This theme has been slowly building with only one Magnificent 7 stock (Apple) in the green for the month of November. Meanwhile, other names in the group, such as Tesla, Meta and Nvidia, are down anywhere from 5% to 20% since the start of the month. Mostly, this looks like healthy profit-taking during a classic momentum reversal, with the S&P 500 equal-weight index (RSP) outperforming the cap-weighted index (SPY) month-to-date. This market action is a reminder to not be overly positioned in one area of the market, as many quality industries outside of technology are trading at much more attractive valuations with strong earnings growth.
Although the AI trade is being questioned, market leaders are not pulling back their bets on the technology. Coming into the quarter, analysts had projected $470 billion in hyperscaler capital investment for 2026, but after just a few weeks, that number has been upwardly revised to $530 billion. This large amount of investment is underpinned by company fundamentals and conviction of the top CEOs in the world. One positive is that the multi-year AI infrastructure build-out is supported by companies generating cash flows to cover the investment and little debt on their balance sheets. Warren Buffett also seems to agree after Berkshire Hathaway revealed a new $4.3 billion stake in Google’s parent company, Alphabet.
Despite recent pullbacks in AI-related stocks, third-quarter earnings remained strong, reinforcing the view that the bull market still has room to run. For the third quarter of 2025, the S&P 500 is on track to deliver a blended year-over-year earnings growth rate of 13.1%, marking the fourth consecutive quarter of double-digit gains. A key takeaway from this earnings season is the accelerating demand for AI adoption across corporate America. A record 62% of S&P 500 companies referenced AI during their latest earnings calls, with the highest concentration in communication services and financials. Notably, firms reporting productivity improvements highlighted AI use cases in areas such as software development and customer support, underscoring AI’s growing role as a driver of operational efficiency.
The labor market remains slightly under pressure despite the U.S. economy seeing above-trend growth and strong earnings reports from corporates, all of which is expected to continue into 2026. The pressure is partially being impacted by companies’ willingness to integrate AI to increase productivity. In October, layoffs hit a 20-year high, with U.S.-based employers cutting more than 150,000 jobs. This has continued into November, with Verizon announcing last week its largest job cut of 15,000 employees, or roughly 15% of its workforce.
These workforce reductions are amplifying a K-shaped consumer dynamic, which favors higher-income households’ ability to continue spending on discretionary items, while lower-income households are disproportionately affected by layoffs. As the holiday season approaches, shopping activity for discretionary items could be impacted by current labor-market weakness.
Looking ahead to this week, Nvidia earnings on Wednesday will be highly anticipated for clues on the path forward for AI stocks. Retailers will also be in focus, with earnings reports coming from T.J. Maxx, Walmart, Target, Home Depot, Lowes, William Sonoma and Ross Stores. Other notable companies issuing corporate profit results are Medtronic, Intuit, PDD Holdings and Palo Alto. Investors will resume getting government-issued economic data next week, although some releases may still be delayed. Headlining the economic calendar next week will be the September employment report, which is expected to be released on Thursday. Additionally, market participants will get a slew of real estate updates with housing starts, the home builder confidence index and building permits. The last set of catalysts to watch is central bankers, with Christopher Waller, whose name is in the running to be the next Fed Chair in 2026, scheduled to speak. Lastly, the Fed’s October Federal Open Market Committee meeting minutes will be released on Wednesday. These will be key clues as to what the Fed is planning to do during the December meeting as the market is currently split on if we get an additional 25-basis-point cut next month.
Economic Calendar for the Week Nov. 17 to Nov. 21:
| Time (ET) | Report | Period | Median Forecast | Previous |
| MONDAY, NOV. 17 | ||||
| 8:30 AM | Empire State manufacturing survey | Nov. | 5.5 | 10.7 |
| 9:00 AM | Federal Reserve Vice Chair Philip Jefferson speaks | |||
| 10:00 AM | Construction spending | Aug. | ||
| 1:00 PM | Minneapolis Fed President Neel Kashkari speaks | |||
| 3:35 PM | Federal Reserve Governor Christopher Waller speaks | |||
| TUESDAY, NOV. 18 | ||||
| 8:30 AM | *Import price index | Oct. | NA | |
| 8:30 AM | *Import price index minus fuel | Oct. | NA | |
| 9:15 AM | *Industrial production | Oct. | NA | |
| 9:15 AM | *Capacity utilization | Oct. | NA | |
| 10:00 AM | Factory orders | Aug. | ||
| 10:00 AM | Home builder confidence index | Nov. | 37 | 37 |
| 10:00 AM | Business inventories | Aug. | 0.10% | 0.20% |
| 10:30 AM | Federal Reserve governor Michael Barr speaks | |||
| WEDNESDAY, NOV. 19 | ||||
| 8:30 AM | Philadelphia Fed manufacturing survey | Nov. | 3 | -12.8 |
| 8:30 AM | Housing starts | Oct. | NA | |
| 8:30 AM | Building permits | Oct. | NA | |
| 8:30 AM | U.S. trade deficit | Aug. | -$61.0B | -$78.3B |
| 2:00 PM | Minutes of Fed’s October FOMC meeting | |||
| THURSDAY, NOV 20 | ||||
| 8:30 AM | U.S. employment report | Sept. | 22,000 | |
| 8:30 AM | U.S. unemployment rate | Sept. | 4.30% | |
| 8:30 AM | U.S. hourly wages | Sept. | 0.30% | |
| 8:30 AM | Hourly wages year over year | 3.70% | ||
| 8:30 AM | Initial jobless claims | Nov. 15 | 225,000 | NA |
| 10:00 AM | Existing home sales | Oct. | 4.08 million | 4.06 million |
| 10:00 AM | *U.S. leading economic indicators | Oct. | NA | |
| 11:00 AM | Federal Reserve Governor Lisa Cook speaks | |||
| 1:40 PM | Chicago Fed President Austan Goolsbee speaks | |||
| 6:45 PM | Philadelphia Fed President Anna Paulson speaks | |||
| FRIDAY, NOV. 21 | ||||
| 8:30 AM | Federal Reserve governor Michael Barr welcoming remarks | |||
| 8:45 AM | Federal Reserve Vice Chair Philip Jefferson speaks | |||
| 9:00 AM | Dallas Fed President Lorie Logan speaks | |||
| 9:45 AM | S&P flash U.S. services PMI | Nov. | 54.8 | |
| 9:45 AM | S&P flash U.S. manufacturing PMI | Nov. | 52.5 | |
| 10:00 AM | Consumer sentiment (final) | Nov. | 51 | 50.3 |
| *May be delayed due to government shutdown from Oct. 1 to Nov. 14 NA – Not available due to government shutdown |
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