Markets ended the holiday-shortened week higher, with the S&P 500 notching its best weekly return in six months, as recent concerns about AI valuations eased. The rally left the S&P 500 within 1% of its all-time high set in late October.
Beneath the surface, the rebound in AI stocks was more nuanced. Google recently released an updated version of its AI model, Gemini, that has been well received. Since then, AI-related stocks connected to Google’s AI efforts have experienced strong returns while stocks connected to OpenAI have seen more modest gains. That bifurcation could prove to be short-lived, however, given the regular updates released by OpenAI (ChatGPT) and other large AI model providers.
The week’s economic data was inconclusive regarding the Fed’s upcoming meeting. Economic data set to be released this week is also unlikely to move the needle much, as November CPI inflation and employment reports will not be released until after the Fed’s December meeting. Markets ended the week pricing in an 86% chance of a 0.25% cut at the upcoming meeting, up from just 30% the prior week, as optimism stemming from recent comments by NY Fed Governor John Williams continued.
According to Adobe Analytics, Black Friday online sales rose 9.1% from last year to $11.8B. However, according to Salesforce, shoppers actually purchased fewer items at checkout, with units per transaction falling 2% from 2024. The boost to headline spending is the result of higher prices, due in part to tariffs, and higher-income earners spending more on luxury items.
