Macro Monday: November 3-7, 2025

RECAPPING LAST WEEK
Strong earnings reports from some of the “Magnificent 7” technology companies boosted the Nasdaq Composite index by 2.3%, while U.S. Treasury yields rose after the Federal Reserve lowered interest rates but made statements leading to uncertainty about further cuts this year . The S&P500 gained less than 1% while Russell 2000 slid 1.3%, pressured by a rising U.S. dollar. Sector performance tilted negative despite technology’s strong showing. Sectors representing real assets slumped after trade talks between the U.S. and China resulted in a de-escalation of tensions over issues like rare earth exports, although root causes of the conflict remained unresolved. Crude oil prices fell 1% after news emerged that OPEC+ is leaning towards another modest output increase for December. Gold futures fell for a second straight week but stayed above $4,000 per ounce. Investors were wary of huge artificial intelligence investments by U.S. firms like Meta Platforms and Microsoft but were reassured by Alphabet’s ability to fund its plans from current cash flows and Amazon’s strong forecast. Turning to monetary policy, Fed Chair Powell acknowledged there were “strongly differing views” about how to proceed in December, given the lack of official government data. His comment that another rate cut is “not a foregone conclusion” was slightly unnerving to stock and bond investors, although by week’s end the effects were muted. Odds for a December rate cut fell to around 65%, based on fed funds futures. The Fed also announced it would restart limited purchases of Treasury securities to maintain ample liquidity in the banking system. Meanwhile, the U.S. government shutdown extended into a fourth week with no signs of a resolution, and economic data remained sparse. Research firm ADP announced it would release a weekly estimate of the change in private sector employment in addition to its regular monthly report. While the added transparency may help, it still represents a far-from-complete picture of the U.S. labor market. A Chicago Fed estimate showed the September unemployment rate likely stayed steady at 4.3%, although ADP noted that corporate layoffs increased notably last week. Consumer confidence fell in October on dimmer views for the economy and labor markets. Mortgage rates dropped for a fourth straight week, boosting refinancing activity and new applications. Overseas, the Bank of Japan kept rates unchanged but delivered its strongest signal yet that a hike was possible soon. Inflation accelerated to 2.8% in October, well above the central bank’s 2% target. The European Central Bank also left rates unchanged and offered no clues about future moves. Economic growth has remained steady in the Eurozone despite trade turbulence while inflation hovered near the bank’s goal. The Bank of Canada cut rates by 25 basis points, citing a weakening economy as the impact of U.S. tariffs is becoming more evident. Finally, China’s manufacturing activity contracted more than expected last month while services stayed in expansion territory.

THE WEEK AHEAD
A quick programming note—this newsletter will not be published on November 10 but will return the following week. Typically, the focus for the first week of a new month would be on the U.S. labor market reports, and while investors will get private data from ADP and the Challenger job cuts, the absence of official non-farm payrolls for a second month will contribute to ongoing uncertainty regarding the U.S. economy. The core PCE price index release is another likely victim. This week’s economic releases unaffected by the shutdown include ISM manufacturing and services PMIs along with November’s preliminary consumer sentiment index and inflation expectations. Midweek, the Supreme Court will hear oral arguments regarding the legality of tariffs imposed by the Trump administration. Though the court may not hand down its ruling for several months, any headlines from the proceedings may generate some market volatility. Earnings season is starting to wind down, but a few reports to note include Palantir, Advanced Micro Devices, Qualcomm, and Sandisk. FOMC members will resume public appearances this week, and their commentary could be critical in laying the foundation for the December meeting. On the international side, central banks in the UK and Australia have rate decisions on tap. Pundits put the odds of a cut from the Bank of England at around 30%, while the Reserve Bank of Australia is expected to hold rates steady. Finally, China is tentatively scheduled to release trade balance figures on Thursday evening, with an inflation update to follow on Saturday.

CHART OF THE WEEK
Mega rally
The Nasdaq-100 index (NDX), with its concentration in the mega-cap technology names, has been the strongest major U.S. index. When its relative performance is measured against the small-cap Russell 2000 (RUT) there have only been a few short periods of underperformance since the 2022 lows. One of those started in August of this year when the prospect of rate cuts, lower recession fears, and easing inflation offered a more conducive backdrop for small caps to accelerate. Last week, however, concerns over a shift in Fed policy caused the RUT to lag while “Mag 7” earnings sent NDX above $26,000 for the first time. The MACD indicator for NDX had developed bearish divergences from June through September, but those have now reversed course, negating their prior warnings. NDX has advanced nearly 60% in the past six months, which may be an unsustainable pace even if prices continue to rise. Still, until the index moves lower and starts breaking technical support levels, the path of least resistance appears to be up.


Source: thinkpipes
 
Source: Charles Schwab Corporation
 
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