Friday, December 12, 2025

Pre-market futures are averaging out to be flat at this hour, although we’re seeing a wider band of trading. The blue-chip Dow and the small-cap Russell 2000 — up +110 points and +2 points, respectively — are being slightly offset by -103 points on the tech-heavy Nasdaq and -2 on the comprehensive S&P 500 currently.

Doubts continue about the levels of AI infrastructure spending, and whether they are sustainable into the new year. On Broadband’s AVGO conference call yesterday afternoon following an otherwise robust earnings report, CEO Hock Tan saw some negative sentiment hit his company’s stock when he cited a lower-than-expected level of AI product orders next year. Tan later clarified he saw the $73 billion backlog as a minimum end of the range, but shares remain down -5% in today’s pre-market.
 

Next Week, Reports of Consequence: BLS, CPI

By Tuesday of next week, we’ll have a fresh catalyst for market sentiment. That’s when we’ll see the long-awaited Employment Situation report from the U.S. Bureau of Labor Statistics (BLS) for November. I say “long awaited” because we are skipping right over October’s numbers due to the month-and-a-half government shutdown. Last time around, we saw +119K new jobs created in September, with an Unemployment Rate of +4.4%.

That +119K is not a bad number, especially in our current labor market environment. It likely more than makes up for retirees per month in the domestic labor force, so essentially it’s a growth number — which is good. The trouble is, this is by far the biggest monthly jobs gain of the last four months reported. Averaged out, they only come to +44K new jobs per month — less than what our economy needs to account for Baby Boomers (and older Gen-X) retiring.

Compare this with the four previous months’ average of +100K, and +185K the four months prior to that. So we can see some clear erosion in the labor market over the past year, up until September. Since then, with corporate layoffs taking headlines and immigration crackdowns affecting domestic labor, we don’t see much opportunity for upside in the upcoming BLS report. Unemployment, at 4.4%, is the highest we’ve seen in four years, but not yet anything historically problematic.

Thursday of next week brings us the long-awaited Consumer Price Index (CPI) report, including a fresh Inflation Rate (CPI year over year, headline) for November. This print also suffered the wrath of the government shutdown and is skipping October data, and where we last left off we saw a +3.0% Inflation Rate for the first time since January. 

The trend in the charts going back 2 1/2 years or so — when we finally saw inflation rates come down from multi-decade highs — demonstrate lower highs and lower lows each wave through the cycle. We were at +3.7% in September 2023, +3.5% in March of ’24, and +3.0% in January ’25 for recent highs. But CPI year over year is among the most conspicuously absent of economic prints this year, and that we reached +3.0% in September again in this latest high (so far) may portend a new narrative.

That’s why next week’s data is so important: we appear to be at a new economic impasse, and that no one knows which way things may break is what will likely give the Fed pause going into the new year. Because somewhat lost in the positive outlook for GDP growth and inflation rates through 2026 overall, it’s clear Fed Chair Jerome Powell and his assenters of the FOMC are planning to tiptoe into the next Fed meeting.

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