Here is Schwab's early look at the markets for Monday, November 17
Nvidia and a host of retail earnings loom this week following Wall Street's recent anemic performance. Concerns about growing Federal Reserve hawkishness and AI valuations took their toll, and the days ahead could shed light on investors' risk appetite now that the tech rally has faded a bit.
To some extent, that hinges on government data, but skies are still foggy when it comes to numbers. The government re-opened from its six-week shutdown last Thursday and some data begins filtering in later this week, including September's jobs report on Thursday.
Labor market concerns led the Fed to two rate cuts in September and October, but chances of another cut in December fell to around 44% by late Friday from 66% at the start of last week, according to the CME FedWatch Tool.
"The likelihood of a December rate continues to decline," said Collin Martin, head of fixed income research and strategy, Schwab Center for Financial Research."
Fed speakers last week sounded increasingly hawkish, with Minneapolis Fed President Neel Kashkari saying he sees "underlying resilience in economic activity" and suggesting he's undecided on how to vote, Bloomberg reported. And Kansas City Fed President Jeff Schmid, who voted against the October cut, warned that rate cuts won't do much to patch cracks in the labor market and could have "longer lasting effects on inflation."
Magnificent Seven and AI stocks took it on the chin late last Thursday as the semiconductor space fell to nearly one-month lows. Selling blanketed the sector before a slight rebound Friday, hitting the biggest and smallest tech firms alike. This followed months of concern about a possible "AI bubble," as valuations climbed.
It's harder to spend when rates are at their current moderately high level between 3.75% and 4%, and that's where hawkish Fed talk and the AI sell-off collide. There's little coincidence that the tech plunge accompanied a plunge in rate cut odds, as the long rally partly built inan accommodating central bank. Meta Platforms and Oracle both are at the center of AI financing concerns, with both facing interest payments.
The 10-year U.S. Treasury yield climbed four basis points Friday and six for the week to 4.15%, near one-month highs, as rate cut odds sank. A continued rise in yields this week would likely raise eyebrows, especially if the 10-year moves much above 4.2%.
The more likely rate scenario and one the market is building in would be a pause in December and then one or two cuts in the first half of 2026. Economists and policy makers likely won't feel confident about the data picture until the end of the year, giving the Fed impetus to wait. Private data that filled the gap during the shutdown suggests lukewarm overall growth, cooler labor demand, and weak consumer sentiment.
Minutes from the last Fed meeting are due Wednesday afternoon and could offer additional perspective on how policy makers feel about "driving in the fog," to quote Fed Chairman Jerome Powell.
Inflation remains stubborn at levels well above the Fed's 2% goal, and consumers could face higher costs when Affordable Care Act premiums expire at the end of the year.
One bright spot is robust earnings with more than 90% of companies reporting. The season gathers new momentum this week with reports from major retailers Walmart, Home Depot, and Target. Walmart was in the news Friday as its long-time CEO Doug McMillon announced his 2026 retirement plans. He'll be succeeded by a company insider.
As retailers report, the key element could be fourth quarter guidance. Consumer sentiment recently hit multi-year lows and credit card delinquencies remain a problem, raising concern about how much holiday shopping will take place. That's particularly relevant now, as some people possibly bought large items earlier this year attempting to get ahead of tariffs.
Consumers expect to spend 3.9% less on gifts this holiday season versus last, not adjusted for inflation, the Conference Board said in its October consumer confidence report.
Nvidia's results Wednesday could be the cornerstone this week, but they're far from guaranteed to get tech back on track even if they impress. Nvidia shares have frequently stepped back after recent quarterly reports, with investors scrutinizing the numbers for any weak spots. It wouldn't surprise if that's the case again. Falling margin is one worry. Sales guidance for the important China market is another, with recent trade talks apparently not providing much traction for getting Nvidia's chips back into that market.
"Investors will be listening for any potential signs of deceleration in AI compute demand or competitive pricing pressures," said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research. "Given the slew of AI deals that have been announced this quarter, along with the guide up in CapEx spend from the hyperscalers, one would think that demand has yet to reach saturation."
Last week featured a clear rotation into sectors perceived as having more room to run due to lower price-to-earnings, or P/E ratios. Materials, health care, and energy were among the beneficiaries, so investors might want to watch if that pattern continues in coming days. Market breadth slightly improved last week, but if yields keep rising, it could hurt interest-rate-sensitive sectors.
As investors retreated to more defensive areas of the stock market, they showed little propensity to pile into Treasuries. That could reflect soft demand for several U.S. Treasury auctions last week, which often implies rates need to rise for investors to get interested. There's lots of worry about the U.S. fiscal situation as the deficit continues to swell, another headwind for Treasuries.
Friday's early Wall Street rally ran into late selling, keeping markets in check for the second straight week. Still, the S&P 500 index and the Nasdaq 100 held above their respective 50-day moving averages. And the Nasdaq Composite managed a slightly higher finish Friday, buttressed by a slight recovery in semiconductor shares, including Nvidia.
"It appears that technical support is holding up. This could set stocks up for a recovery" when the new week starts, Peterson said. He also noted Friday's flat performance from the Cboe Volatility Index, or VIX, the so-called "fear index."
The VIX is at around 20, near historic averages, but its relatively mild move last week from recent lows below 17 suggests that at least for now, fear isn't taking over.
"Also worth pointing out is the bullish seasonality that accompanies November and December and the potential for performance chasing by fund managers, especially since stocks have pulled back recently," Peterson added. "Then there’s Nvidia’s earnings report, which has the potential to reignite the 'AI bull trade' or add fuel to recent concerns around high valuation and over-investment."
In sectors Friday, info tech took the silver medal behind energy, but defensive areas like real estate, utility and staples also placed high. Discretionary stocks continued to struggle and are down 2.6% over the last week, the worst performance on the S&P 500 and not a particularly positive omen ahead of the holidays.
In stock action Friday, Warner Bros rose 4% Friday after The Wall Street Journal reported that several firms, including Netflix and Paramount Skydance are preparing bids for the entertainment firm. The deadline is November 20.
AI-related shares Micron, Super Micro Computer, Palantir, and Oracle all rose 1% or more following losses earlier in the week.
Tesla recovered from sharp early losses Friday to close slightly higher but finished the week well off recent peaks.
Airline stocks generally fell amid economic concerns linked in part to rising yields and falling rate cut odds.
The Dow Jones Industrial Average® ($DJI) dropped 309.74 points Friday (-0.65%) to 47,147.48; the S&P 500 index (SPX) gave back 3.38 points (-0.05%) to 6,734.11, and the Nasdaq Composite® ($COMP) gained 30.23 points (0.13%) to 22,900.59.
For the week, the DJIA was up 0.34%, the SPX rose 0.08% and the Nasdaq fell 0.45%.