Markets Pause After Tech-Led Pullback
U.S. stocks gave back early gains Monday as investors entered the final full trading week of 2025 with caution, awaiting a wave of delayed economic data that could shape interest-rate expectations for 2026.
The S&P 500 fell roughly 0.2%, while the Dow Jones Industrial Average slipped 0.3%. The Nasdaq Composite underperformed, sliding about 0.5%, as tech stocks remained under pressure following last week’s sharp selloff.
Recent market action has been marked by growing skepticism around overheated AI expectations, prompting investors to rotate out of high-growth tech names and into value-oriented sectors. That shift has weighed on the Nasdaq and broader indexes, while insulating the Dow to some extent due to its lower tech exposure.=
Rotation Seen as Healthy, Not Harmful
Despite the pullback, many strategists view the sector rotation as constructive rather than concerning. A broadening of market leadership away from a narrow group of AI-driven stocks could help stabilize equities and support other industries that have lagged throughout the year.
Markets are also heading into year-end with a generally optimistic outlook for 2026. Investors expect a mix of monetary and fiscal support next year, including the potential for further interest-rate cuts and pro-growth policy initiatives that could lift corporate earnings.
Economic Data Takes Center Stage
This week’s focus turns to several high-impact data releases that were delayed by the U.S. government shutdown. The November jobs report is due Tuesday, followed by a key inflation reading on Thursday, while updated retail sales data will also be closely watched.
Together, these reports will influence the debate over whether the Federal Reserve has room to continue cutting rates in 2026 — or whether policy easing is nearing its end.
Adding to the uncertainty is the question of future Fed leadership. With Chair Jerome Powell’s term ending in May, markets are watching closely for signals on who may take the helm and how that could influence the policy path next year.
Fed Signals Cautious Optimism
New York Fed President John Williams said Monday that interest rates are now closer to neutral following recent cuts, but still modestly restrictive — suggesting additional easing may be possible.
Williams said he expects the U.S. economy to regain momentum in 2026, citing resilience despite recent uncertainty and signaling confidence that growth and price stability can coexist.
Corporate Highlights
On the corporate front, iRobot shares collapsed after the Roomba maker filed for bankruptcy, highlighting pressures facing consumer hardware companies amid rising competition and tariff headwinds.
Separately, the accelerating AI boom is reshaping corporate strategy beyond tech. Companies across industries are scrambling to manage soaring electricity costs, with firms ranging from Big Tech to media companies hiring energy traders to secure power supplies and hedge volatility.
WSA Take
Markets aren’t panicking — they’re recalibrating. The pullback reflects positioning ahead of critical data, not a loss of confidence in the broader bull case. If upcoming economic reports confirm cooling inflation without a sharp slowdown, expectations for further rate cuts in 2026 could quickly re-ignite risk appetite.
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Disclaimer
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