Last week delivered Wall Street's weakest performance of the quarter, and the culprit was familiar: AI stocks cracked again, while a confusing jobs report made the Federal Reserve's job even messier.
Thursday's trading session captured the mood perfectly. The Nasdaq jumped more than 2% at the open after Nvidia (NVDA) reported earnings, only to finish the day down 2%. It ranked among the year's most dramatic intraday reversals.
What happened? CEO Jensen Huang delivered exactly what bulls wanted to hear. He said demand for Blackwell AI chips was "off the charts" and that cloud GPUs were essentially sold out. Analysts loved it. The stock spiked, briefly pulling the entire tech sector higher. Then reality set in. Investors started asking the uncomfortable questions again: Are these valuations sustainable? Can AI-related capital spending keep growing at this pace? The market's answer was clear—even spectacular earnings aren't enough to justify expanding multiples in the most crowded AI names anymore.
The macro backdrop didn't help. September's nonfarm payroll report finally arrived after delays, showing headline job gains well above expectations. Sounds good, right? Not quite. Previous months got revised lower, and the unemployment rate climbed to its highest point since October 2021.
The combination reinforced what many traders already suspected: we're in the late cycle phase. Growth looks solid on the surface, but the labor market is quietly deteriorating underneath.
Fed officials picked up on the tension. They leaned cautious, pushing back against expectations for aggressive rate cuts after already delivering two consecutive reductions. New York Fed President John Williams tried to thread the needle, acknowledging there's room for additional easing down the road. His balanced tone helped steady sentiment a bit heading into Friday.
In currency markets, dollar stability dominated. Asian currencies including the yen, Australian dollar, and New Zealand dollar underperformed despite encouraging PMI data from Japan and Australia, plus firmer Japanese inflation figures. Traders seem more interested in what the Fed does next than regional economic improvements.
Currency Pairs Worth Watching
AUD/SGD Testing Support
The Australian dollar versus Singapore dollar pair has repeatedly failed to break through resistance at 0.85500 since September, hitting that ceiling four times. After finally breaking through, it got rejected at the next key level down at 0.84750.
As long as the pair stays below that threshold, the probability increases that it will retest temporary support at 0.83420, a level it touched about a month ago. The technical setup suggests downside pressure is building.
GBP/AUD at a Critical Juncture
The British pound versus Australian dollar found support around the psychologically important 2.00 level. After bouncing from there, prices stalled near 2.03, which happens to be the previous year's high.
Multiple rejections at this resistance zone raise the likelihood of a reversal. If selling pressure continues, the pair could break back below the prior support level. Traders are watching closely to see if buyers can push through or if the rejection holds.
What's Coming This Week
Thanksgiving gives investors a compressed trading schedule, with U.S. markets closed Thursday and running shortened hours Friday. But don't mistake a short week for a quiet one. The setup remains fragile: high-multiple growth stocks including AI leaders are under pressure, positioning is crowded, and the Fed has signaled a slower, more cautious approach to rate cuts.
The economic calendar is packed despite the holiday. Tuesday brings delayed September retail sales and producer price index data. Wednesday delivers durable goods orders. Together, these reports will help answer critical questions: Is consumer spending cooling in a meaningful way? Are upstream inflation pressures returning or normalizing?
Any upside surprises in growth or inflation would strengthen the case for the Fed to pause in December and slow the pace of cuts planned for 2025. That scenario typically hurts long-duration growth stocks and expensive tech names that have already stretched valuations.
Globally, the big question is whether dollar strength continues and how Asian and European markets digest the U.S. tech selloff. In Japan, stronger inflation readings and improved PMI data keep the possibility of a Bank of Japan rate hike alive. If that happens, it would narrow the policy gap between the BoJ and the Fed, potentially shifting currency dynamics.
The next few trading days may be fewer in number, but they're likely to be meaningful for determining whether recent market trends hold or crack.