Markets Stall Ahead of Fed Clarity, Bitcoin Breaks Lower

After an early tech-led rebound, U.S. stocks faded into the close Friday as caution took hold ahead of key economic data releases and growing doubts about a December Fed rate cut. The S&P 500 and Nasdaq were little changed, but the Dow extended its slide. Bond yields ticked higher, and Bitcoin slumped below $95,000. Momentum behind the AI trade wobbled again, while sector rotation toward defensive names like health care and consumer staples gained traction.

Key Headlines & Market Movers:

• Fed Doubts Weigh on Markets: A flurry of hawkish Fed commentary continued to dampen expectations for a December rate cut, with odds now below 50% versus nearly 70% last week. Despite calls for data dependence, investors appear unsettled by the lack of clarity, especially in the absence of full economic data flow during the recent government shutdown. The 10-year Treasury yield rose to 4.15%, with shorter- and longer-dated yields also ticking higher.

AI & Tech Show Cracks: Nvidia rebounded ahead of earnings next week, but the broader AI and high-growth tech complex remains under pressure. After Thursday’s sharp drop in major names like Tesla, Palantir, and AMD, some recovered Friday, but sector volatility remains elevated. Nvidia’s implied post-earnings move is 6.2%, the largest in a year, highlighting market nervousness around AI valuations.

Sector Rotation into Defensives: Despite the S&P 500 holding near its 50-day average, internal breadth is weakening. Health care and consumer staples saw renewed interest this week, signaling growing investor preference for defensives amid macro uncertainty. Analysts flagged this as a “mini bear market” within pockets of the equity market, even as index levels remain near recent highs.

Bitcoin Sinks, Risk Appetite Tested: Bitcoin dropped over 4% to trade below $95,000, its lowest level since May, as sentiment across risk assets cooled. The crypto market continues to unwind after October’s leveraged liquidation event erased over $1 trillion in value. The latest move underscores reduced risk appetite and tightening liquidity conditions.

S&P 500 Sector Performance

Looking Ahead

Next week brings a critical set of data points including inflation and labor market indicators that could help resolve the Fed policy debate. Big-box retailers like Walmart and Target report earnings, offering a window into consumer health. Nvidia’s results will be a litmus test for the AI trade. Until then, expect continued caution and elevated volatility, especially in high-momentum names.

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