Optimism returned to markets last week as upbeat headlines improved sentiment, while a rotation in market leadership emerged alongside year-end portfolio adjustments.

In the days before the policy announcement, uncertainty was elevated because a government shutdown halted economic releases for September and part of October. The Federal Reserve reduced rates by 25 BPS and followed with a press conference from Chair Powell.

• Powell said the move reflected a change in the balance of risks, with inflation still above target and signs of a weakening labor market.
• He indicated that rates are now within a broad estimate of neutral, implying policy is neither stimulative nor restrictive, and that future steps will depend on incoming data.
• The labor market shows signs of softening: unemployment has edged up and hiring has slowed, which Powell cited in explaining the rate cut.
• Inflation remains somewhat elevated, particularly goods prices affected by tariffs, but core inflation and expectations are moving toward the Fed's 2 % target.

Powell noted that hiring metrics may be overstated, a point that could raise concern if underlying employment data are weaker than reported.

The Federal Reserve sets short-term interest rates and shapes the bond market, which together determine the effective "price of money" across the economy. Movements in rates affect borrowing costs, influencing housing, corporate earnings, consumer spending, equity valuations, risk appetite, and capital allocation. Last week, the Fed said they'd begin buying short term.

After months of lobbying, CEO Jensen Huang secured approval from the Trump administration for Nvidia to sell its H200 chip to China, granting access to higher-performance AI hardware. Previously, US rules limited China to H20-class chips.

The H200 offers roughly six times the performance of the current model, prompting concerns that it could accelerate China's AI capabilities depending on the state of US-China relations. For Nvidia, increased orders from China could translate into substantial additional revenue, though it remains uncertain whether China will purchase at scale. The company's next quarterly earnings is late February 2026, when sales figures and any China contribution will be disclosed.

• U.S. Unemployment Report (Tuesday PM)
• U.S. Retail Sales (Tuesday PM)
• Initial Jobless Claims (Thu PM)
• Consumer Price Index - Inflation Report (Thu PM)
• Consumer Sentiment (Fri 10 AM ET)

PM = Pre-market.

Stay Updated