U.S. consumer sentiment approaches multi-year low

United States

U.S. stocks break three-week winning streak as tech sector declines

Major U.S. equity benchmarks ended the latest week lower. Concerns about stretched valuations in growth-driven technology companies and heightened scrutiny of artificial intelligence–related investments contributed to broad weakness. The Nasdaq Composite led losses among major indexes, while the Russell 1000 Growth Index trailed the Russell 1000 Value Index by 2.88 percentage points, marking the widest performance gap since February.

A prolonged federal government shutdown—the longest on record—added stress to market sentiment. Although previous headlines had little immediate impact, investors grew more cautious after reports that the Federal Aviation Administration would request airlines to reduce flight schedules due to air-traffic-controller shortages. Market observers also expressed concern that the absence of timely government data and the ongoing shutdown could weigh on gross domestic product calculations.

October job reductions reach highest level in more than two decades

Government data releases remained limited due to the shutdown, prompting investors to turn to private-sector indicators. According to ADP’s October report, private employers increased payrolls by about 42,000 positions, reversing declines seen over the prior two months. However, hiring remained concentrated, with professional business services, information, and leisure-and-hospitality sectors losing jobs for a third consecutive month. Compensation trends showed little change.

A separate report released by Challenger, Gray & Christmas suggested that nearly 1.1 million employees have been laid off so far this year, up 65% from the same period last year and representing a 44% increase from full-year 2024 levels. Job cuts during October—153,074—were the highest for any October since 2003.

Services sector expands; manufacturing activity decreases for eighth straight month

The Institute for Supply Management (ISM) reported that the services sector returned to growth in October. The ISM Services Purchasing Managers’ Index (PMI) rose to 52.4% from 50.0% in September, indicating expanding activity. New orders climbed to 56.2%, the strongest level since October 2024. Eleven service-related industries reported monthly growth, compared with ten the month prior.

Conversely, manufacturing activity remained in contraction territory, declining to 48.7% from September’s 49.1% reading. Lower production and weaker inventory levels contributed to the decline, marking the eighth month of contraction.

Consumer sentiment falls to its weakest reading since 2022

The University of Michigan’s preliminary November Consumer Sentiment Index registered 50.3, down 3.3 points from October and the lowest figure since June 2022. The downturn reflected sharp declines in respondents’ evaluation of personal finances (down 17%) and year-ahead business expectations (down 11%). Analysts attributed much of the decline to worries related to the government shutdown. Inflation expectations for the next 12 months rose to 4.7%, slightly above October’s 4.6%.

Equity weakness pressures high-yield bonds; Treasuries advance

U.S. Treasury securities generated positive returns, with short- and intermediate-term yields generally declining and long-term yields drifting higher. (Bond prices and yields move in opposite directions.) Municipal bonds delivered similar performance, supported by new-month reinvestment flows and steady secondary-market demand.

With equity markets trending lower, investor preference shifted toward safer assets, causing high-yield bond performance to lag. Traders noted that risk-off positioning outweighed support from Treasury strength.

Major Index Performance

This table is for reference only and does not represent any specific investment. Past performance does not guarantee future results.

Data sources: Reuters via Yahoo! Finance; Bloomberg. Closing values as of 4 p.m. ET. The Dow Jones Industrial Average, S&P 500 Index, S&P MidCap 400, Nasdaq Composite, and Russell 2000 are unmanaged market indexes. Russell® is a registered trademark of Russell.

Europe

European markets decline as AI valuation concerns rise

In local-currency terms, the STOXX Europe 600 Index declined 1.24%. Signs of overvaluation among AI-related companies contributed to widespread selling pressure. Major country indexes also fell: Italy’s FTSE MIB retreated 0.60%, Germany’s DAX declined 1.62%, France’s CAC 40 slid 2.10%, and the UK’s FTSE 100 slipped 0.36%.

Bank of England keeps interest rates unchanged

The Bank of England (BoE) maintained its benchmark rate at 4.0%. The Monetary Policy Committee voted 5–4 in favor of holding rates steady. Comments from Governor Andrew Bailey suggested that current market assumptions—projecting a terminal rate near 3.5% within three years—aligned with his view of a reasonable policy path.

Scandinavian central banks maintain current policies

Sweden’s Riksbank held its policy rate at 1.75%. Governor Erik Thedeen indicated that policymakers expect rates to remain unchanged for a period. Norges Bank also left its key rate at 4.0%, emphasizing that inflation remained above target. Governor Ida Wolden Bache noted that it may take time before rate adjustments are appropriate.

Eurozone retail sales remain soft; German production outlook subdued

Eurozone retail sales fell by 0.1% month-over-month in September, missing consensus expectations for a 0.3% increase. On a year-over-year basis, retail trade expanded 1.0%, slower than August’s 1.6% pace.

The German economy ministry commented that manufacturing conditions remain weak. September industrial production rose 1.3% month-over-month, below expectations for a 3% gain. Orders increased 1.1% from the previous month but fell 3.0% for the quarter.

Japan

Japanese equities retreat as investors reassess AI stocks

Japanese markets moved lower during the week. The Nikkei 225 dropped 4.07%, while the broader TOPIX slipped 0.99%. Technology and semiconductor giants, which had recently propelled gains, experienced profit-taking as investors questioned sustainability of valuations.

The yen strengthened to the mid-153 range against the U.S. dollar, supported by investor demand for relatively safer assets and government signals that currency movements were being closely monitored.

The 10-year Japanese government bond yield rose to 1.68% from 1.65% the prior week. Markets continued to anticipate gradual policy tightening from the Bank of Japan (BoJ), whose leaders have emphasized wage growth trends as central to rate decisions.

Nominal wages rose 1.9% year-over-year in September, in line with expectations. However, real wages declined for the ninth consecutive month, falling 1.4% year-over-year due to persistent inflation.

New Prime Minister Sanae Takaichi stated that Japan has not yet achieved sustainable inflation supported by wage growth. She signaled plans to deploy fiscal measures to support household spending and economic activity, with details expected later this month.

China

Mainland stocks edge higher as trade tensions ease

Chinese equities advanced as signs of reduced U.S.–China trade frictions improved sentiment. The CSI 300 Index rose 0.82%, while the Shanghai Composite added 1.08%. Hong Kong’s Hang Seng Index increased 1.29%. The CSI 300 reached a nearly four-year high despite lingering concerns about China’s broader growth trajectory.

Sentiment improved following a one-year pause in U.S.–China trade hostilities announced after talks at the APEC summit in South Korea. Although few concrete policy commitments emerged, analysts characterized the overall tone as pragmatic. Many countries appeared focused on selectively engaging in trade while carefully managing competitive risks. Longer-term structural rivalry between the U.S. and China is still expected to continue beyond trade issues.

Other Key Markets

Poland

Poland’s central bank reduced its benchmark interest rate by 25 basis points, from 4.50% to 4.25%—its fifth rate cut of 2025. Policymakers noted encouraging trends in retail sales, industrial output, and construction activity, although wage growth has moderated and employment has declined in year-over-year comparisons.

Consumer inflation eased to 2.8% in October from 2.9% in September. Officials cited cooling food prices and declining core inflation outside food and energy. Given these trends and expectations for future declines, policymakers determined that rate levels could be further adjusted.

Mexico

Mexico’s central bank reduced its overnight interbank rate by 25 basis points, from 7.50% to 7.25%. The vote was not unanimous, with one policymaker favoring no change.

The central bank noted softer third-quarter economic activity, ongoing geopolitical uncertainty, and moderating inflation expectations. Headline inflation is projected to align with official targets by the third quarter of next year. Officials emphasized that policy decisions will continue to account for factors affecting inflation and economic stability.