Markets fell as big earnings reports hinted at an overvalued equity market. Was this week a reminder to not have all your eggs in one basket?
Monday S&P 500 0.17% | NASDAQ 0.46%
Monday’s trading responded to a cloud deal between OpenAI and Amazon (AMZN), which also posted strong earnings on the day. The S&P500 was relatively unchanged while the DOW Jones fell lower. Manufacturing continues to operate in contraction territory and may weigh on other data in the new year.
Tuesday S&P 500 1.17% | NASDAQ 2.04%
Markets swung lower on Tuesday in a likely profit pull which suggests that valuations may be rich. Markets are assigning roughly 2:1 odds for another Federal rate cut in December 2025, which has largely been priced in. GDP, according to Atlanta Fed GDPNow, has increased the 4th quarter’s projection to 4%.
Wednesday S&P 500 0.37% | NASDAQ 0.65%
The government shutdown is now the longest in history, but we did get information on jobs data from ADP. Non-Farm jobs added (Oct) came in higher and reversed negative figures in September. Services also rose, indicating that strong production may be the driving force for a strong quarter ahead.
Thursday S&P 500 1.12% | NASDAQ 1.90%
A little bit more of the same from Tuesday as stocks slid through the close. Sustained valuations, specifically tech/tech-enabled companies, have come into question this week. Volatility measures (VIX) picked up pace.
Friday S&P 500 0.13% | NASDAQ 0.21%
Michigan Consumer Sentiment (Nov) came out on Friday, hinting at less-than optimistic consumers. Consumer credit figures exceeded projections for September, further painting a picture of spending habits. The sentiment reading moved indexes slightly, perhaps showing that enough selling had transpired early this week.
Conclusion S&P 500 1.63% | NASDAQ 3.04%
The week unfolded with more selling than buying. Earnings season can shed light on strengths and weaknesses, as more roll in. The primary focuses this week centered around the sustainability of those earnings but with particular attention on company stock prices. The data that is available to the public on the major exchanges often boils down to price/earnings ratios. This analysis provides insight into whether companies are over-valued or “rich”. With more earnings to come and less than two months of the year remaining, we may see a shift around equities. It is important to note that one week of trading doesn’t represent a trend. Even a small pullback can bring price/earnings ratios back in line with historical averages. Broad diversification across asset classes, industries, and investments are key to mitigating risk. Perhaps this week was a good reminder of the importance of maintaining that focus.
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