The week has unfolded with markets displaying a notable degree of resilience, even as leadership continued to rotate and macro data reinforced a cooling economic backdrop. Equities held together despite renewed weakness in semiconductor leaders, volatility stayed calm, and investors focused on whether slowing growth and easing inflation are converging in a way that supports further policy relief without tipping the economy into contraction.

The most consequential development was the long-delayed November employment report, released this week after the 43-day government shutdown disrupted data collection. Payroll growth came in at 64,000, beating economists’ expectations near 50,000, but the headline masked deeper softness. The unemployment rate rose to 4.6%, well above the 4.4% consensus and the highest level since September 2021. Compounding the concern, job gains for prior months were revised lower: August employment was revised to -26,000, while September was cut to +108,000, for a combined 33,000 downward revision. Taken together, the report reinforced the narrative of slowing hiring momentum, rising labor slack, and diminishing labor market tightness.

Inflation data also shaped the week, though with unusual controversy. The October CPI report was never released due to the shutdown and the subsequent November CPI showed headline inflation near 2.7% year over year and core CPI around 2.6%, both softer than expected. While the disinflation trend remains intact, economists cautioned that shutdown-related disruptions likely affected survey coverage, seasonal adjustments, and pricing samples. In other words, the data pointed in the right direction, but confidence in its precision was lower than usual, keeping markets wary of overreacting to a single print.

Rates reflected this balance. The front end remained anchored by expectations that the Fed’s December cut will not be reversed, while longer-dated yields held firm, leaving the curve modestly steeper. The dynamic of short rates falling while long rates stay elevated has historically been constructive for equities, signaling easing financial conditions without an imminent growth scare. However, global rates introduced a new variable as the Bank of Japan raised its policy rate by 25 basis points, pushing Japanese yields to their highest levels in decades. The move briefly pressured U.S. Treasurys as Japanese capital found more attractive domestic alternatives, but for the time being negative spillovers seem to be well contained.

Semiconductors remained at the pressure point. Nvidia (NVDA) and Broadcom (AVGO) extended recent pullbacks as investors digested valuation fatigue, profit-taking, and rising questions about AI margin sustainability as infrastructure spending matures. The weakness felt more like digestion than a collapse, but it weighed on the Nasdaq and reinforced the sense that the AI trade is no longer the default destination for incremental capital.

That capital didn’t leave equities in total, but rather it rotated. Within the so-called Magnificent Seven, Tesla (TSLA) outperformed as flows shifted away from AI infrastructure plays toward names with differentiated catalysts and less exposure to near-term AI capex scrutiny. Apple (AAPL) and Microsoft (MSFT) traded steadily, while Alphabet (GOOGL) and Meta (META) were mixed. This internal rotation suggests investors are becoming more selective rather than broadly risk averse.

Volatility confirmed that interpretation. The VIX remained in the mid-teens all week, signaling calm rather than complacency. Options markets showed little demand for crash protection, implying that investors view current conditions as a period of consolidation, not crisis.

In sum, the week so far has been defined by adjustment rather than alarm. Labor data confirmed cooling conditions, inflation continued to drift lower amid data-quality limitations, and global rates introduced crosscurrents without derailing U.S. markets. Semiconductor leaders rested, leadership broadened, volatility stayed calm. If inflation continues to ease and the labor market slows gradually rather than abruptly, this period of rotation may prove to be a stabilizing phase rather than a warning sign as markets head into year-end.

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