Markets Brief: Economic Data Returns, but Investors Should Tread Carefully

Heading into 2025’s last full trading week, the focus will likely be the incoming government data on the economy, which had been delayed by the federal shutdown.

While investors and Federal Reserve officials are hungry for an update, the shutdown did more than delay the reports; it muddied the actual data collection. Fed Chair Jerome Powell cautioned against reading too much into the reports, saying “we’re going to get data, but we’re going to have to look at it carefully and with a somewhat skeptical eye” until the year-end data comes out in January. Still, the jobs report will likely provide a sense of direction, and as Sarah Hansen writes, the news isn’t likely to be good for the economy.

Just two days after the jobs report, we’ll get the November Consumer Price Index, and that data is also not likely to be friendly. Forecasts call for inflation to tick higher above 3%, both overall and excluding food and energy. That’s well above the Fed’s 2% target. Also due are reports on retail sales and the Fed’s favored inflation indicator, the Personal Consumption Expenditures Price Index. Our weekly economic calendar can be found here.

All this is happening while divisions grow at the Fed. For now at least, only one interest rate cut is penciled in for 2026. But expectations can (and likely will) change as the economic picture becomes clearer.

A Bad Week for AI Trade Leaders

Last week brought losses for artificial-intelligence-related stocks after shoddy earnings, as well as a slight boost in small-cap names. Two of the stocks that had been leaders in the AI tech rally—Oracle ORCL and Broadcomm AVGO—got battered after their latest earnings reports.

In mid-September, Oracle looked unstoppable, having nearly doubled in 2025. This included a 36% one-day jump on news that the firm had added $317 billion in performance obligations (revenue from contracts that have been signed but not yet fulfilled). Things soured when it was revealed that $300 billion of that came from a deal with ChatGPT creator OpenAI, which is reported to generate less than $20 billion in revenue per year. By the time Oracle reported earnings last Wednesday, its stock had lost a third of its value since Sept. 10. It had become a poster child for investor concerns about overinvestment and unsustainable borrowing to fund AI spending.

The company’s earnings report only made things worse, as reported revenue and operating income fell short of expectations, while management said it would be spending more on its data center buildout. Oracle lost another 10% on Thursday and 6% on Friday, wiping out more than its entire September rally. Morningstar equity analyst Luke Yang lowered the stock’s fair value estimate to $286 from $340, and he now thinks it is undervalued.

Investors also found Broadcom’s earnings lacking. Even as the company posted record revenues, the focus appeared to be on its commentary that its now-booming AI-chip business has lower margins than non-AI products. The stock, which had weathered the slump suffered elsewhere in the tech sector in recent weeks, tumbled 11% on Friday. Morningstar senior equity analyst William Kerwin urges investors to buy the dip: “Broadcom’s AI chip business is accelerating, and we see even greater astronomic growth ahead ... investors now have a terrific opportunity to buy into an AI winner.”

Small-Cap Value Stocks Spring to Life, for Now

While tech stocks took losses last week, the on-again/off-again rotation to small caps was back on. Small-cap value stocks rose nearly 2.0%, and mid value stocks were up 1.7%. Commentators attributed some of the bounce to market expectations of more interest rate cuts next year, which is challenging to square with conflicting guidance from the Fed. But with large-cap stocks up 20% this year, ahead of the 15% gain on small-company stocks, it’s possible it’s just a reflection of repositioning more than anything fundamental.