The Fed's Favorite Numbers?

AI is sobering up and tech is nursing a headache. The Fed is back in the starring role, and everyone was waiting for today's employment data to get a clearer picture. Published this morning, the data didn't scream recession, but it whispered "slowdown" just loudly enough for rate-cut dreams to survive.

Sometimes, being underweight in tech is an advantage. Granted, let's be honest, it hasn't been often in recent years. As 2025 draws to a close, with anything AI-related starting to look slightly suspect, technological shortfalls are proving rather useful.

Europe managed a 0.7% gain yesterday while Wall Street continued its descent, dragged down by a Nasdaq 100 seemingly intent on correcting its excesses before even getting to the turkey and chestnuts. The US tech index has now suffered three consecutive down sessions. Investors are walking away from the overcrowded AI trade – it's the current zeitgeist, a pause for breath while returns on nebulous investments become a little clearer. Still, the Nasdaq 100 remains up 19% year-to-date, so the present pullback must be kept in perspective.

Since the beginning of November, market enthusiasm has waned somewhat: the Global X AI ETF is down 5%, while the equal-weighted S&P 500 is up 2.5%. (This index is useful when one wishes to neutralise the effect of absurdly valued companies – it treats Nvidia the same as the smallest constituent in the index.)

I touched on the Europe/US performance differential on Monday, and it turns out yesterday's session allowed the Stoxx Europe 600 to overtake the S&P 500 for 2025, once dividends are included. Not bad, all things considered – at least on the equity front. When it comes to investment flows, however, the Danaides' barrel is clearly anchored in the United States.

Still, the mood remains heavy on Wall Street, and we now have the macro numbers in hand rather than hopes and prayers. October retail sales came in unchanged month-on-month, undershooting expectations of a modest +0.1% and confirming that the US consumer is finally losing some swagger. On the labour front, the delayed October report showed nonfarm payrolls falling by 105,000 (versus expectations for a 25,000 decline), while November delivered a rebound of 64,000 jobs, slightly better than feared. The unemployment rate ticked up to 4.6% in November, a shade above consensus and another small but meaningful crack in the once-indestructible US labour market.

Taken together, this is not collapse territory, but it is unmistakably deceleration. Job creation is slowing, revisions are unkind, and consumption is no longer doing the Fed's heavy lifting. From a market perspective, this is almost ideal bad news: weak enough to keep rate cuts firmly on the table, not weak enough to trigger panic about earnings. Once again, we are firmly back in the world where "bad news is good news," at least until it isn't.

Meanwhile, the financial world is keeping an eye on a potential peace deal in Ukraine. The Americans and Europeans have aligned their positions, and the Kremlin appears interested in the latest proposals. Donald Trump has declared that a deal to end the war in Ukraine "is closer than ever". The situation has helped push Brent crude back down to around USD 60 a barrel, its lowest level since May. An amusing detail: for the first time this year, an ounce of silver is worth more than a barrel of oil. I'd have liked to credit the author of that titbit, which I read in a column this morning, but my whelk-brained memory has failed me.

As silver rallies, bitcoin has tumbled back below USD 87,000, another victim of the tech stock pullback.

Two sectors will warrant close attention today. First, defence, which could react to the Ukraine peace talks. Second, the automotive industry, in light of the global retreat from internal combustion engine bans. Ford announced yesterday that it is scaling back part of its all-electric ambitions, a move that will result in a USD 19.5 billion charge on its books. The market's reaction has been mildly positive: investors seem to prefer a hefty write-down to the upheaval traditional automakers face from electric vehicles.

In Asia-Pacific, the correction continues, particularly in the tech-heavy markets. Hong Kong, Taiwan and Tokyo were down more than 1%, while Seoul has dropped over 2%. It's a bit calmer in Sydney and Mumbai. Europe, which managed to stay in the green yesterday, is mostly red so far. US futures remain flat.

Today's economic highlights:

On today's agenda: Japan's PMIs, followed by those of France, Germany, the Eurozone, and the United Kingdom; in the United Kingdom, jobless claims and the three-month ILO unemployment rate will also be released; in Germany, the ZEW survey on the current situation and expectations; in the United States, building permits, housing starts, capacity utilization, and industrial production GM, as well as PMIs. See the full calendar here.

• Dollar index: 98,067
• Gold: $4,293
• Crude Oil (BRENT): $59.41 (WTI) $56.68
• United States 10 years: 4.17%
• BITCOIN: $87,215

In corporate news:

• Cognizant Technology signed a five-year IT services deal with ERIKS to manage and modernize its operational technology infrastructure.
• Iberdrola and Microsoft strengthened their alliance with two long-term power purchase agreements totaling 150 MW and a focus on new AI solutions.
• A coalition including Deezer and Proton urged the EU to act against Apple over revised App Store fees they claim still violate the Digital Markets Act.
• Ford is recalling 32,160 vehicles in the U.S. over a drive power issue linked to axle shaft disengagement, raising crash risk.
• KKR invested $220 million in Premialab to support its global growth in risk management and quantitative investing solutions.
• XPeng received regulatory approval to begin Level 3 autonomous driving road tests in Guangzhou, advancing its smart EV ambitions.
• TotalEnergies signed a 21-year deal to supply 1 TWh of renewable energy from a new solar plant to Google's data centers in Malaysia.
• Apollo Global Management agreed to acquire a majority stake in French grocer Prosol, with the deal set to close in Q2 2026.
• Zoetis priced a $1.75 billion offering of convertible notes to fund share repurchases and capped call transactions.
• Counterpoint forecasted a 2.1% global decline in smartphone shipments in 2026 due to rising chip costs, with Apple and Samsung expected to weather the downturn best.
• Ford announces a $19.5 billion writedown on EV investments, restructuring lineup for profit-positive returns.
• Uber faces an amended lawsuit from FTC and 21 states over deceptive billing and cancellation practices.
• Nvidia expands open-source AI platform by acquiring SchedMD and introducing Nemotron 3 AI models.
• Kimmeridge proposes a $6 billion acquisition of Ascent Resources.

Analyst Recommendations:

• Accenture Plc: Morgan Stanley upgrades to overweight from market weight and raises the target price from USD 271 to USD 320.
• Albemarle Corporation: Morgan Stanley upgrades to market weight from underweight with a price target raised from USD 58 to USD 147.
• Automatic Data Processing, Inc.: Jefferies downgrades to underperform from hold and reduces the target price from USD 245 to USD 230.
• C.h. Robinson Worldwide, Inc.: Barclays upgrades to overweight from market weight and raises the target price from USD 145 to USD 200.
• Cognex Corporation: Goldman Sachs upgrades to buy from sell and raises the target price from USD 42 to USD 50.
• Eli Lilly And Company: Daiwa Securities upgrades to buy from neutral with a price target raised from USD 940 to USD 1230.
• Essex Property Trust, Inc.: Jefferies downgrades to hold from buy and reduces the target price from USD 304 to USD 282.
• Federal Realty Investment Trust: Jefferies upgrades to buy from hold and raises the target price from USD 101 to USD 115.
• Gitlab Inc.: KeyBanc Capital Markets downgrades to sector weight from overweight with a target price of USD 49.
• Idacorp, Inc.: Morgan Stanley upgrades to overweight from equalwt with a price target raised from USD 137 to USD 139.
• Illinois Tool Works Inc.: Goldman Sachs downgrades to sell from neutral and reduces the target price from USD 258 to USD 230.
• Ingersoll Rand Inc.: Stifel upgrades to hold from neutral and raises the target price from USD 75 to USD 81.
• Jack Henry & Associates, Inc.: RBC Capital upgrades to outperform from sector perform and raises the target price from USD 185 to USD 210.
• Moody's Corporation: Goldman Sachs upgrades to buy from neutral and raises the target price from USD 524 to USD 570.
• Okta, Inc.: Jefferies upgrades to buy from hold and raises the target price from USD 90 to USD 125.
• Resmed, Inc.: Baird downgrades to neutral from outperform and reduces the target price from USD 300 to USD 275.
• Roku, Inc.: Morgan Stanley upgrades to overweight from underweight and raises the target price from USD 85 to USD 135.
• Servicenow, Inc.: Guggenheim upgrades to neutral from sell.
• Southwest Airlines Co.: Barclays upgrades to overweight from equalweight with a price target raised from USD 34 to USD 56.
• The Gap, Inc.: Wells Fargo upgrades to overweight from equalweight with a price target raised from USD 24 to USD 30.
• Trimble, Inc.: KeyBanc Capital Markets upgrades to overweight from sector weight with a target price of USD 99.
• Zimmer Biomet Holdings, Inc.: Baird downgrades to neutral from outperform and reduces the target price from USD 117 to USD 100.