5 Things to Know Before the Stock Market Opens Friday

Here are five key things investors need to know to start the trading day:

Yesterday’s session delivered a sharp correction to the equity markets, with the AI-driven rally showing definitive signs of fatigue. The Nasdaq Composite took the brunt of the selling pressure, shedding approximately 2.3%, while the Dow Jones Industrial Average and S&P 500 each retreated by over 1.6%. The Russell 2000, representing small-cap stocks, fared even worse, plunging 2.8%. This broad-based decline underscores growing unease about the market’s near-term trajectory following a sustained period of gains.

Key Takeaways:

• Tech’s Tumble: The technology sector’s struggles persist, dragging the Nasdaq into its third consecutive losing session. Investors are reassessing valuations, particularly in AI-related stocks, in light of recent earnings reports and revised growth projections.
• Disney’s Discontent: Disney’s weaker-than-expected quarterly revenue sent its shares reeling, impacting the Dow. Analysts point to concerns about the pace of subscriber growth in its streaming division and the challenges facing its traditional media business.
• Oracle’s AI Doubts: Oracle is poised for its worst week in 2025 as Wall Street recalibrates its expectations for the company’s AI initiatives. While Oracle has made significant investments in cloud infrastructure and AI talent, skepticism remains about its ability to compete effectively against established players like Amazon Web Services and Microsoft Azure in the rapidly evolving AI landscape.
• Rate Cut Rethink: Expectations for a December interest rate cut by the Federal Reserve have diminished significantly. Market participants are increasingly pricing in a more hawkish stance from the Fed amid persistent inflation and a resilient labor market. The shift in sentiment casts a shadow over the potential for further market rallies in the near term.
• Futures Foreshadow: Stock futures are currently indicating further downside pressure at the open, suggesting that the market’s woes may continue into today’s session.

Recent earnings reports from consumer-facing companies are painting a mixed picture of economic health. While discretionary spending remains elevated overall, anecdotal evidence suggests a divergence in consumer behavior, with higher-income shoppers increasingly seeking deals and younger consumers curtailing their spending. This trend raises concerns about the sustainability of current consumption levels as we approach the holiday season.

Key Considerations:

• Consumer Discretion: The performance of retailers in the coming weeks will provide crucial insights into the strength of consumer demand. Investors will be closely watching earnings reports from Walmart, Target, Gap, and Home Depot for signals about evolving consumer preferences and spending patterns.
• Housing Market Headwinds: A recent uptick in foreclosure starts raises concerns about potential vulnerabilities in the housing market. While the housing sector has demonstrated remarkable resilience in the face of rising interest rates, the increase in foreclosures could indicate growing financial strain among homeowners. Analysts will be monitoring housing data closely for further signs of distress.

The labor landscape presents a study in contrasts, with some disputes resolved while others escalate. Boeing defense workers ratified a new contract, ending a prolonged strike that disrupted production. In contrast, Starbucks baristas launched a strike coinciding with Red Cup Day, a significant promotional event for the coffee chain.

Implications:

• Wage Pressures: The Boeing agreement, which includes substantial wage increases and bonuses, underscores the prevailing pressure on companies to attract and retain skilled labor. This trend could contribute to inflationary pressures in the broader economy.
• Labor Unrest: The Starbucks strike highlights ongoing tensions between management and labor over issues such as wages, benefits, and working conditions. The outcome of this dispute could have broader implications for the company’s labor relations and its ability to maintain profitability in a competitive market.

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