This Week

We opened November with the S&P 500 at 6,840 and closed it at 6,849, essentially flat. But the path between those points was anything but. What started as a somewhat euphoric run toward 7,000 turned into a full-on momentum unwind, with several Mag 7 names rolling over (NVDA’s post-earnings stumble being the standout) and sharp corrections spreading to ORCL and then to the more speculative corners of the market—from quantum-computing plays to anything related to crypto. We ended up where we started, but with some scars to show for it.

A major driver of the volatility was the whiplash in expectations for a December FOMC cut: we went from “near-certain cut” to “unlikely” and back to “certain” in a matter of weeks. With a cut now largely priced in, we head into December with only a handful of earnings left but a pile of delayed economic data coming due and that mid month FOMC meeting the largest catalyst into year end. Speaking of the Fed, Powell is speaking tomorrow, but it’s within the Fed’s blackout period so will be unlikely to break news. More on this week in a second, but first some stories from the weekend:

• Stocks drift back towards record highs as the final month of 2025 gets underway: What to watch this week (Yahoo Finance)

  • The final month of the year gets underway on Monday, and investors will be looking for a smoother month to round out the year after choppy November trading saw the Nasdaq Composite snap a seven-month winning streak while the S&P 500 moved back to within 1% of a record high. On Friday, markets ended the week by notching a fifth straight session of gains to close out the up-and-down month in a holiday-shortened trading session. And despite snapping its monthly winning streak, the Nasdaq is also within 3% of a record. The Dow is less than 2% off its record close.

• 'I don't know if we'll get that Santa rally': Why Wall Street says December may break from its usual strength (Yahoo Finance)

  • The Santa Claus rally is usually one of Wall Street’s favorite holiday traditions. Stocks tend to grind higher after Thanksgiving, volatility fades, and December often delivers one of the strongest months of the year. This year, strategists say, Santa may not show up. “None [of the months this year] have behaved the way they have seasonally," Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets, told Yahoo Finance. This has been a year when the traditional playbook hasn’t worked because the rules of the game are changing in real time. AI has introduced a level of disruption and uncertainty that strategists say is fundamentally different from anything in the past decade. That means volatility could be a bigger part of the story this December.

• Goldman Traders Say Market Enters December With ‘Cleaner’ Setup (Bloomberg)

  • The S&P 500 may end November essentially flat, but the path forward looks meaningfully clearer as volatility calms down, stock market breath improves and trend-following strategies turn into buyers, according to Goldman Sachs Group Inc.’s trading desk. Several indicators point to stabilization heading into December. Market breadth, measured as the five-day average of S&P advancers minus decliners, collapsed earlier this month to minus 150, indicating “a pretty bad damage beneath the surface,” Goldman’s Lee Coppersmith wrote in a note to clients. Heading into Thanksgiving, it rebounded back to the +150 area. “It’s a big shift – broader participation, not just a narrow squeeze, and another sign that the market cleared a decent amount of stress mid-month,” he added.

• Why China Doesn’t Want to Buy More Nvidia Chips (The Information)

  • Three years after the U.S.’s sweeping export restrictions that cut off Chinese access to AI chips, China has managed to turn the situation around. For the next five years, it will have more AI chips than its companies need. The excessive supply is a combination of local chipmakers catching up and tech companies stockpiling Nvidia chips via both the open and black market, according to estimates from investment bank Jefferies.

• To Bond Investors, Some Emerging Markets Look Safer Than the US (Bloomberg)

  • Global bond investors are beginning to view select emerging markets as safer than many far richer nations, a momentous shift that’s setting the stage for the next phase of outperformance in the asset class. The trend is most evident in the sovereign and corporate securities from AA-rated countries like the United Arab Emirates, Qatar, Taiwan, South Korea and Czech Republic. They have delivered stronger total returns this year than equally rated developed-world credits, in dollars as well as in local currencies. And for some of these nations, dollar borrowing costs are slipping toward those of the US, long considered the safest market of all. What’s more, there are signs of a broader risk convergence, one that’s encompassing even economies with lower credit scores.

• Trump’s Focus on Drug War Means Big Business for Defense Startups (WSJ)

  • The U.S. military has turned its attention southward, and the defense industry is lining up to sell it the tools for a different kind of war. Defense-tech companies and artificial-intelligence startups have found a vital new market in President Trump’s rapidly escalating drug war. Weapons and AI platforms that were designed for a future conflict with China or struggled to prove themselves on the Ukrainian battlefield have found a niche in the administration’s tech-enabled crackdown on drug trafficking.

• ‘A full-blown crisis’: Americans brace for a surge in healthcare costs (FT)

  • Mike Plante could hardly believe his eyes when he discovered how much his health insurance premiums will go up next year. The 64-year-old public relations consultant is paying $400 a month. But this will jump to $1,965 — a nearly 400 per cent increase — if he renews his existing plan. “Me and some 65,000 other West Virginians are about to be run off a cliff,” he said. Plante is one of nearly 22mn Americans enrolled in health insurance under the Affordable Care Act — or Obamacare — who will see their premiums soar next year if their tax credits expire as expected on December 31. “It’s a full-blown crisis,” said Mike Pushkin, chair of the West Virginian Democratic party. “Ours will be one of the states hardest hit by the failure of Congress and the Trump administration to extend these subsidies.”

Following last week’s complete crush in implied volatility, expected moves are about half of what we saw the past two weeks.

This Week’s Expected Moves:

• SPX/SPY: 1.2% (6750-6950)

  • QQQ: 1.6%

  • IWM: 1.8%

  • TLT: 1.0%

  • USO: 3.0%

Of note, the expected moves to the upside would take both SPY and IWM back to all time highs, while QQQ’s still have more room to go on that front. These expected moves are based on a VIX that is now near 16. It’s unlikely that it goes much lower than that for the next two weeks, so vol is arguably too low now.

Powell speaks tomorrow but upcoming monetary policy news is not expected. Later in the week we get ISMs and a Sept PCE but the major (known) news will likely be on the jobs front with ADP on Wednesday and Initial Jobless claims on Thursday:

Economic Calendar: 

• Monday

  • 8am - Powell Speech

  • 10am - ISM Manufacturing

• Wednesday

  • 8:15am - ADP Employment

  • 10am - ISM Services

  • 10:30am - ECB Lagarde Speech

• Thursday

  • 8:30am - Initial Jobless Claims

• Friday

  • 8:30am - PCE (Sept)

  • 10am - UoM Consumer Sentiment - Prelim

  • 10am - Factory Orders (Oct)

Not a ton of market movers reporting this week but some interesting software names including Salesforce/CrowdStrike as well as MRVL in the semi space, and the dollar stores, Krogers and Macy’s on the retail side of things.

Earnings (with expected moves):

• Monday

  • After-hours: MDB 12%

• Tuesday

  • After-hours: MRVL 10%, CRWD 7%

• Wednesday

  • Pre-market: M 10%, DLTR 8%

  • After-hours: CRM 7%, SNOW 9%, AI 11%, PATH 12%

• Thursday

  • Pre-market: KR 4.5%, DG 7.5%

  • After-hours: DOCU 8.5%, RBRK 14%, ULTA 8%

One last note: Last week’s equity rally and the corresponding vol crush certainly look like the kind of setup that could fuel a slow grind higher into year-end—and it may. But the volatility we just came through is still going to hang over investor psychology for a bit. A VIX at 28 last week was probably too high for a fairly modest ~5% SPX pullback, but snapping right back to 16 VIX feels too far, too fast, especially with the back half of last week distorted by thin Thanksgiving trading. SPX 7000 remains a major zone of overhead supply thanks to year-end options positioning, and with that level just 2% or so away and a Dec rate cut all but priced in, a good portion of the Santa Clause rally may have already happened, and pullbacks with a VIX near 20 may be better entry levels into year end.

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