Market Sentiment Dampened by Ongoing AI-Related Concerns

United States

U.S. equity markets ended the week in negative territory despite several encouraging corporate announcements and upbeat economic data releases. Traders at T. Rowe Price noted that the downturn appeared largely tied to renewed anxieties surrounding high stock valuations and doubts over whether investments related to artificial intelligence will eventually translate into profits substantial enough to justify the extraordinary levels of capital being committed to the technology.

Losses were most acute in the Nasdaq Composite, which carries a heavy concentration of technology names. Mid-cap and small-cap benchmarks such as the S&P MidCap 400 and the Russell 2000 fared somewhat better, though they also finished the week lower. The S&P 500—which recently notched an all-time high in late October—was down roughly 4.4% from that peak. A rebound during a volatile trading session on Friday helped trim some of the earlier declines across major indexes.

NVIDIA’s Strong Results Fail to Lift Market Mood

A highlight of the week was NVIDIA’s widely anticipated earnings announcement. As the largest company in the S&P 500 by market capitalization, its quarterly results drew significant investor attention. The chipmaker reported record revenue that exceeded analyst expectations, driven primarily by robust demand for its AI processors. Management also provided an optimistic revenue forecast for the upcoming quarter that topped consensus estimates.

While investors initially reacted positively when markets opened on Thursday, enthusiasm quickly faded. NVIDIA’s shares reversed course and closed approximately 3% lower, dragging major equity benchmarks with them. According to traders, there was no clear catalyst for the downturn other than a re-emergence of concerns about the sustainability of AI-driven demand—one of the central worries impacting sentiment throughout the week.

The market also digested additional corporate announcements Thursday morning. Walmart, the nation’s largest retailer and private employer, beat expectations with strong performance in its e-commerce division and raised its full-year revenue forecast, adding further signs of resilience within consumer-related sectors.

Delayed Employment Data Offers Mixed Economic Indications

The Labor Department finally released September’s employment figures—delayed more than a month due to the recent government shutdown. The report showed that employers added 119,000 jobs, a number well above expectations and substantially stronger than the nearly stagnant hiring seen over the summer. On the other hand, the unemployment rate rose from 4.3% to 4.4%, its highest level in four years, reflecting conflicting signals about the labor market’s true momentum.

The Bureau of Labor Statistics also confirmed that the next set of employment data (for November) will be released on December 16. Because of the shutdown, the October report has been canceled.

Investors Tilt Toward Expecting a December Fed Rate Cut

Market participants remained focused on the Federal Reserve’s next steps ahead of the December 9–10 meeting. Minutes from the Fed’s October session revealed substantial hesitation among policymakers regarding the need for another rate cut in December. However, remarks from New York Fed President John Williams on Friday seemed to reopen the possibility of near-term policy easing, lifting market sentiment slightly.

CME Group futures data showed that the likelihood of a December rate cut climbed to nearly 70% by Friday, up significantly from 44% the previous week.

Fixed Income Supported by Declining Treasury Yields

U.S. Treasuries posted gains through most of the week, as yields continued to trend lower. Municipal bonds lagged due to heavy issuance ahead of the Thanksgiving holiday. Investment-grade corporate bonds delivered positive but modestly lower returns compared with Treasuries, while high-yield bonds were weighed down by risk-off sentiment and weakness in the equity market. Higher-quality issues within the high-yield space generally held up better than their lower-rated counterparts.

Major U.S. Index Performance

This table is for illustration only and does not portray the performance of any particular security. Past returns do not predict future outcomes.

Europe

European Equity Benchmarks Retreat

In local currency terms, the STOXX Europe 600 Index slipped 2.21% as concerns about inflated AI-related valuations weighed on sentiment. Expectations of a U.S. rate cut also faded during the week, adding to pressure. Major regional benchmarks also posted losses: France’s CAC 40 declined 2.29%, Italy’s FTSE MIB fell 3.03%, and Germany’s DAX shed 3.29%. The UK’s FTSE 100 was down 1.64%.

Eurozone Activity Logs Steady Expansion

Preliminary PMI readings compiled by S&P Global signaled continued expansion in eurozone business activity during November. The composite PMI—which blends manufacturing and services—slightly softened to 52.4 from 52.5, above the expected 52.1. Services activity continued to strengthen, rising to an 18-month high of 53.1, while manufacturing dipped below the 50 threshold to 49.7.

Germany’s output expanded but at a slower rate, while France’s private-sector activity showed improvement, with services underpinning a rise in overall PMI from 47.7 to 49.9.

Consumer Sentiment Holds Stable

Eurozone consumer confidence stayed at -14.2 in November, matching an eight-month high but slightly below expectations of -14.0.

UK Inflation Declines Further

UK inflation cooled in October, with the annual headline rate dropping to 3.6% (from 3.8%). This increase in disinflation momentum boosted expectations for a December rate cut. Core inflation eased slightly from 3.5% to 3.4%.

Bank of England Chief Economist Huw Pill signaled that wage growth remains above levels consistent with the 2% inflation target, suggesting policy adjustments may remain cautious despite improving inflation trends.

Japan

Japanese Equities Slide

Japan’s equity markets experienced notable declines as AI-linked technology stocks sold off sharply. The Nikkei 225 dropped 3.48%, while the broader TOPIX fell 1.85%.

Government Approves Major Fiscal Stimulus

Japan’s government moved forward with a large-scale stimulus package totaling around JPY 21.3 trillion (approximately USD 135 billion). The plan includes spending measures, tax incentives, and targeted investment in areas such as AI and shipbuilding, aiming to support growth and cushion households from inflation.

The yen weakened to roughly JPY 156.7 per USD, driven in part by concerns about the long-term effects of substantial government spending on fiscal health. Meanwhile, the yield on 10-year Japanese government bonds climbed to 1.78%, briefly touching a 17-year high.

Inflation remained above target: core CPI rose 3.0% in October, slightly above September’s 2.9%. GDP contracted less than expected in Q3, shrinking 1.8% on an annualized basis versus forecasts of -2.4%.

China

Mainland Markets Face a Weekly Decline

Mainland Chinese markets mirrored the downturn seen in U.S. and Japanese equities, with AI-related valuation concerns again playing a central role. The CSI 300 Index fell 3.77%, and the Shanghai Composite dropped 3.90%. Hong Kong’s Hang Seng Index slid 5.09%.

Property Market Measures Under Consideration

No major economic indicators were released during the week, but Bloomberg reported that policymakers are considering new strategies to ease the ongoing property market slump. Proposed measures include nationwide mortgage subsidies, higher income tax rebates for borrowers, and lower transaction costs.

Housing data continued to show pronounced weakness. Prices for new homes in 70 major cities declined at the fastest pace in a year, and existing home values recorded their steepest drop in 13 months. Analysts at Fitch projected continued deterioration in 2026, warning of lingering risks to banks’ asset quality.

Other Key Markets

Hungary

Hungary’s central bank left its key interest rates unchanged: the base rate at 6.50%, the upper corridor at 7.50%, and the lower corridor at 5.50%. Officials acknowledged slight improvements in global growth conditions but highlighted ongoing geopolitical and trade-related uncertainties.

Domestic GDP grew only 0.6% year over year, signaling a stagnant economy. Policymakers maintained that inflation—currently at 4.3% headline and 4.2% core—should gradually recede into the target band by late 2025.

South Africa

South Africa’s Reserve Bank cut the repurchase rate from 7.00% to 6.75% following a recalibration of its inflation target to 3% ± 1%. Officials highlighted global economic turbulence but noted resilient capital flows and stronger-than-expected emerging-market performance.

Domestic economic conditions improved modestly, with rising employment and steady consumer spending supporting growth. Inflation rose to 3.6% in October due to increases in non-core categories but is expected to decline again early next year.