Have you ever watched the market swing on a single economic report and wondered just how much power those monthly numbers really hold? Yesterday was one of those days. A surprisingly soft private payroll reading flipped the script, sending the major averages higher and pushing the odds of a December rate cut to levels we haven’t seen in weeks.
It felt like the market collectively exhaled. After months of worrying about sticky inflation and a resilient labor market, one downbeat jobs figure was all it took to reignite the rate-cut rally. In my view, that’s both the beauty and the frustration of trading these days—everything hinges on what the Fed might do next.
A Classic “Bad News Is Good News” Session
The day started quietly enough, but everything changed when the ADP private payroll report crossed the wires. Instead of the expected gain of around 130,000 jobs, November actually saw a decline—the first negative print in quite some time. Markets didn’t waste a moment interpreting that as evidence the labor market is finally cooling.
By the close, the Dow Jones Industrial Average had climbed more than 400 points, a solid 0.9% gain. The S&P 500 added 0.3%, and even the Nasdaq Composite managed a modest 0.2% rise despite ongoing pressure on big tech names. It was a textbook example of bad economic news translating into good news for stocks.
I’ve always found these moments fascinating. When the economy shows signs of slowing, investors immediately price in easier monetary policy. It’s almost reflexive now. And with the Fed’s next meeting just days away, the timing couldn’t have been better for the bulls.
Rate Cut Odds Surge Overnight
As evening settled in, futures markets told the rest of the story. Contracts tied to the Dow ticked up about 42 points, while S&P and Nasdaq futures hovered basically flat. Nothing dramatic, but the underlying sentiment remained constructive.
Perhaps more telling was the updated probability on the CME FedWatch tool. Just a couple of weeks ago, a December cut looked far from certain. Now? Traders are assigning an 89% chance of a quarter-point reduction. That’s a remarkable shift in such a short period.
The latest jobs figures helped lift investor spirits, reinforcing the view that the Federal Reserve still has room to ease policy before year-end.
In my experience, when the probability crosses 85%, it’s essentially a done deal in market terms. The only real question left is whether we’ll get another cut early next year or if the Fed will adopt a wait-and-see stance.
After-Hours Winners Steal the Show
While the broader indexes settled down for the night, individual stocks kept the excitement going. Salesforce shares jumped more than 5% in extended trading after delivering a revenue outlook that easily topped estimates. It’s a reminder that strong fundamentals can still drive big moves, even in a choppy environment.
Discount retailer Five Below also impressed, climbing about 2% on earnings that blew past expectations. Consumer discretionary names have been volatile lately, so seeing solid results from a value-oriented player felt encouraging.
- Salesforce: Revenue guidance well above consensus
- Five Below: Earnings and sales both beat Wall Street targets
- Both moves highlight pockets of strength outside mega-cap tech
These after-hours pops often set the tone for the next session. If they hold their gains into Thursday’s open, we could see follow-through buying in related sectors.
Tech’s Stumble Continues
Not everything was rosy, though. The technology sector remained the weakest link among S&P groups, dragged lower by heavyweights like Microsoft, Nvidia, and Broadcom. Microsoft alone shed 2.5% during regular hours after reports surfaced suggesting the company had lowered internal AI-related sales targets.
The company pushed back against the story, and shares did recover somewhat from their worst levels. Still, the damage was done. When your largest constituents are under pressure, it’s tough for the broader indexes to mount huge rallies.
I’ve noticed this pattern repeating lately—money rotating out of the AI darlings and into more cyclical or defensive areas. It’s a healthy development in many ways, but it also raises questions about whether the magnificent leadership we’ve enjoyed is starting to crack.
Rotation is often called the lifeblood of a bull market, yet recently the shift away from tech has moved toward defensive areas—marking the first notable sign of risk aversion since spring.
– LPL Financial chief technical strategist Adam Turnquist
He’s got a point. Breadth has improved dramatically this year, but when investors begin favoring staples and utilities over growth, it’s worth paying attention. Could this simply be a breather after an extraordinary run, or are we seeing the early stages of something more concerning?
Tariffs Back in the Spotlight
Another wildcard hovering over markets is the incoming administration’s trade agenda. Treasury Secretary nominee Scott Bessent made headlines at a major policy summit, stating confidently that several legal avenues exist to implement tariffs—even if certain court challenges succeed.
Investors have been trying to handicap how aggressive the new policies might be. Some sectors clearly stand to benefit, while others—particularly those reliant on global supply chains—could face headwinds. The uncertainty alone tends to keep a lid on animal spirits.
Personally, I think the market has already priced in a fair amount of tariff risk. The real test will come when concrete proposals emerge. Until then, expect periodic flare-ups whenever officials speak on the topic.
What Investors Should Watch Next
With the Fed meeting looming and year-end approaching, volatility often picks up. Here are the key events and levels I’m monitoring closely:
- The official November jobs report this Friday—any further weakness could seal the deal for a cut
- Inflation readings (PCE and CPI) in the coming weeks
- Early guidance from companies on how potential tariffs might affect 2026 outlooks
- Whether the S&P 500 can hold above its 50-day moving average during any tech-led pullback
- Breadth indicators—if more stocks start participating on the upside, that’s tremendously bullish
Right now, the path of least resistance still appears higher, especially if rates are indeed coming down. But rotations like we’re seeing can be tricky. They often precede either a healthy consolidation or a more meaningful correction.
One thing I’ve learned over the years is that markets rarely move in straight lines. These pauses and sector shifts are normal, even necessary. The bulls have been in control for some time now, and a little churning underneath the surface doesn’t automatically mean the party’s over.
Looking ahead, the combination of potentially easier policy and still-solid corporate fundamentals creates an attractive backdrop for equities. Yes, risks remain—trade friction, sticky services inflation, geopolitical flare-ups—but the reward side of the equation continues to look compelling at current levels.
In many ways, yesterday felt like a microcosm of this entire cycle: economic data surprises drive Fed expectations, which in turn drive risk assets. As long as growth holds up without reaccelerating inflation, stocks should have room to run.
Of course, nothing is guaranteed. Markets have a way of humbling even the most confident forecasts. But for now, the weight of the evidence points toward continued upside, albeit with some bumps along the way. That’s the environment patient, disciplined investors can navigate successfully.
So while the headlines will keep coming fast and furious—jobs reports, Fed speakers, tariff updates—try to keep your eyes on the bigger picture. The bull market that began back in late 2022 has weathered plenty already. A little sector rotation and elevated rate-cut hopes aren’t likely to derail it anytime soon.
At least, that’s how I’m reading the tape right now. Time, as always, will tell the final story.
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