US markets recover despite initial losses
U.S. stocks recovered from early losses on Friday to close mostly higher, boosted by hopes that lawmakers are making progress toward ending the government shutdown.
However, for the week, the Nasdaq 100 fell 3.09% (its worst weekly performance since April) as artificial intelligence (AI) names remained under pressure. The S&P 500 fell 1.63%, while the Dow Jones lost 575 points or 1.21%.
The progress of the government shutdown raises confidence
The US government shutdown, now in its 40th day, appears to be coming to an end after the Senate advanced the bipartisan continuing resolution (CR) in a procedural vote late Sunday, crossing the 60-vote threshold with 12 Democratic supporters (more than the 10 needed).
This clears the way for final approval likely Monday morning (Nov. 10), reopening the government at noon if President Trump signs promptly. The agreement funds through January 30 and includes three full-year appropriations bills (Veterans Affairs, Agriculture and Legislature) and ensures a Senate vote in December on Affordable Care Act (ACA) tax credit extensions, addressing progressive concerns without an immediate extension.
The progress of the shutdown – combined with President Trump’s renewed promise to deliver at least $2,000 in tariff-funded dividend checks to most Americans (excluding high-income earners) – has lifted Nasdaq 100 futures 0.60% to 25,316 in early Asian trading. While reopening restores critical services and alleviates economic uncertainty, the refund plan remains dependent on congressional approval and sufficient tariff revenue, leaving its timing and viability in doubt.
Concerns persist over AI spending
While some of the headwinds that weighed on markets last week have eased, this is unlikely to ease investor concerns about AI spending in the face of the recovery, which intensified last week.
The backlash grew stronger after OpenAI’s chief financial officer (CFO) suggested that the US government should subsidize the company’s loans because AI is “strategic.” This concern is compounded by a financing mix increasingly funded through debt and off-balance sheet structures rather than free cash flow. In summary, the AI ​​narrative remains strong in the medium term, but the widening gap between high capital expenditure (capex) and near-term revenue – coupled with a heavy reliance on leverage – is prompting the market to rein in near-term expectations.
Earnings season update and rate outlook
This week, third quarter (Q3) earnings decline, with reports from CoreWeave, Cisco, Disney and Quantum Computing. About 88% of S&P 500 companies have reported, about 80% have beaten third-quarter earnings estimates (up from 73% over the past four quarters) by an average of 9%, while 74% have beaten revenue estimates (up from 64%) by an average of 2.8%.
The US interest rate market this week begins to discount 18 basis points (bps) of cuts for the December Federal Open Market Committee (FOMC) meeting and around 85 bps of accumulated easing from the Federal Reserve (Fed) through December 2026.
