Market Pulse

US markets are regaining momentum despite an increasingly uneven macro backdrop. The S&P 500 is holding near record territory above 6,800, driven by large cap tech, communication services, and a renewed bid for quality growth as investors anchor to the idea that the Federal Reserve is still leaning toward another rate cut on December 10. You are seeing lighter volumes but firm price action, which suggests positioning rather than fundamentals is steering intraday moves.

The Nasdaq Composite continues to outperform with gains supported by cooling inflation readings and solid earnings resilience among mega cap names. At the same time, small caps have lagged, reflecting tighter financial conditions for lower-quality balance sheets and the reality that higher real rates continue to weigh on cash-flow-sensitive sectors.

US Treasuries have stabilized after a volatile two-day stretch. The 10-year yield is trading close to 4.10 percent as markets balance soft ISM prints against strengthening labor market signals. You are seeing the curve steepen slightly, indicating expectations for easing in the front end while long-term inflation and term premium remain sticky.

The dollar is modestly softer against the euro and yen, partly reflecting markets pricing in a near-term Fed cut while foreign central banks remain more patient. In commodities, gold stays elevated near record territory as geopolitical tensions and policy uncertainty keep hedging demand high. Meanwhile, WTI crude remains under pressure near the mid-60s as supply remains well-buffered and demand expectations soften into Q1.

Overall, the US market is signaling optimism on policy but caution on growth, leaving you with an environment where price action looks strong but underlying macro signals remain conflicted.

Deep Dive

The central theme for you this week is how quickly investors have embraced the soft landing narrative despite data that continues to send mixed signals. Inflation has trended lower, with core PCE easing toward the mid-2 percent range, giving markets confidence that the Federal Reserve can deliver another cut at the December meeting. That expectation is now embedded into rate futures, which price a high probability of easing before year end. Lower policy rates support equities, narrow credit spreads, and increase valuations, which explains the broad bid you see across high-quality US assets.

But beneath the surface, the picture is more complicated. Manufacturing activity remains subdued, with ISM readings stuck in contraction territory. Consumer spending is still resilient, but the pace is slowing, and you are seeing higher credit card delinquencies and softer retail sales indicators. The labor market is cooling but not weakening sharply, creating a narrow window where the Fed feels comfortable easing without overstimulating demand. This balance is delicate, and small surprises on wages or inflation can challenge the current narrative.

Equities are reflecting this tension. Mega cap tech, with strong balance sheets and recurring revenue, thrives in an environment where growth moderates but rates drift lower. Cyclical sectors like industrials, energy, and materials are underperforming as investors hedge against the possibility of softer 2026 demand. Financials remain mixed: banks benefit from a steeper curve but face slower loan demand and tighter credit conditions.

For you, the message is clear. Positioning is now heavily tilted toward soft landing outcomes. If inflation remains stable and growth slows gradually, the market supports higher multiples and continued rotation into quality growth and defensives. But if inflation reaccelerates or labor data surprises to the upside, the front end of the curve will need to reprice, and highly valued sectors will feel the pressure first.

This environment rewards balance. Lean into high-quality equities. Maintain some duration but without going too long on the curve. Keep exposure to real assets like gold that benefit from policy uncertainty. And avoid over-levering cyclical risk until the data moves from mixed to convincing.

Quick Insights

• The S&P 500 trades near record highs but market breadth remains narrow. Only about 38 percent of constituents are above their 50-day moving average, highlighting a reliance on mega cap leadership.

• The 10-year Treasury holding near 4.10 percent reflects a market that believes in Fed easing but still expects long-term inflation to remain above pre-2020 levels.

• Consumer data is softening. Credit card delinquencies are at a three-year high, and discretionary retail sales have slowed meaningfully into the holiday season.

• Gold near all-time highs shows demand for hedging still strong even as equities rally, suggesting investors are optimistic but not fully convinced the macro risks have receded.