A Relief Rally, a Rout and a Surprisingly Strong Jobs Report

The S&P 500 closed at 7,376.86, down 2.68% on the week, with the Nasdaq Composite off 3.37% at 24,579.42, the Dow down 0.94% at 51,285.73 and the Russell 2000 down 2.05% at 2,754.11. It was a fourth straight weekly decline for the S&P 500 and Nasdaq, and the S&P is now up about 7.7% year to date. We could not verify the NYSE Composite close at press time and have left it blank rather than guess.

Midterms: Relief on Wednesday, Reckoning on Thursday

Democrats made gains that shifted control of Congress in Tuesday's midterms. Markets first cheered the clarity: Wednesday's rally gave the Dow its biggest gain of the year. Thursday reversed it. The Dow fell 1,833 points (3.4%), the S&P 500 fell 4.4% to about 7,354, and the Nasdaq lost 5.5% to 24,315, more than 10% below its October high. The Nasdaq-100 dropped 6.4% and the Philadelphia Semiconductor Index fell roughly 12%, both the worst since March 2020. Nvidia lost 9.3%, AMD 17.3% and CoreWeave 9.8%. Investors worried that Democratic control could bring AI regulation and limits on data-center construction; Senator Sanders called for a national moratorium and UBS estimated roughly 30% of planned 2028 data-center capacity is at risk. Oracle also slid after Microsoft ended an AI cloud capacity rental deal. Whether policy will really restrain the buildout is unproven, and supporters of oversight argue guardrails could make the boom more durable.

Jobs Beat, and the Fed Stays in Play

Friday's report showed 165,000 jobs added in October against a consensus near 60,000 to 70,000. Unemployment slipped to 4.1% from 4.2%, average hourly earnings rose 3.1% year over year, and August and September were revised up by a combined 84,000 (September is now 60,000). The 10-year yield ended at 4.86% and the dollar jumped 0.76%. Market pricing for a December quarter-point hike rose to about 78%, up from roughly 67% after Thursday's rout. The Fed held at 3.75-4.00% on October 28 with two dissents for a hike, and Fed speakers split in tone this week: Richmond's Barkin said a gradual pace makes sense, while Cleveland's Hammack said policy must become restrictive. Chips bounced about 4% Friday, helping the Nasdaq gain 1.09% and the S&P 0.31%, while the Dow slipped 0.46%. Productivity grew 3.6% in Q3, unit labor costs fell 0.7% and jobless claims dropped to 189,000.

Oil Slides, Gold Rebounds, Rates Elsewhere

Oil had its sharpest drop in years on hopes the midterm outcome could ease the US-Israeli confrontation with Iran: Brent fell about 13% on the week to roughly $97.79 and WTI to $90.37, though tanker fires near the Strait of Hormuz kept risk premiums alive. Gold rebounded about 4.5% to $4,074.90 (December futures) from last week's one-year low, and bitcoin held near $75,940. The VIX closed at 25.64, after touching 28.18 Thursday. The Bank of England raised Bank Rate to 4.00% from 3.75% on an 8-1 vote. Asian chip stocks sold off sharply Friday, with Korea and Japan down about 6%.

Inflation Takes the Stage

The marquee event is October CPI on Tuesday, November 10 at 8:30 AM ET. Because of data-collection gaps, no year-over-year rate will be published for overall prices, so markets will focus on the monthly headline and core readings. A hot print would firm December hike pricing; a cool one would revive the soft-landing camp.

Mon Nov 9 and Tue Nov 10: Quiet Open, Then CPI

Monday has no major US releases (China publishes October CPI and PPI). Tuesday brings CPI, with stocks looking for any sign that energy declines are starting to feed through.

Wed Nov 11 to Fri Nov 13: Veterans Day, Housing and PPI

Wednesday is Veterans Day; US stock markets are open. Thursday brings October existing home sales at 10:00 AM ET, and Friday brings October PPI at 8:30 AM ET. Fed speakers are scheduled through the week.

The constructive reading is that payrolls are re-accelerating, unemployment is 4.1%, oil has fallen sharply and the S&P 500 is still up about 7.7% for the year. The cautious reading is that the Nasdaq is in a correction, the semiconductor index just had its worst day since 2020, the VIX is above 25 and a strong labor market keeps a December Fed hike very much alive. Tuesday's CPI is the next test of which narrative the market believes.