The economy sent mixed, but mostly solid, signals this week. Factory output had a better October than expected, with the ISM manufacturing index rising to 55.5 from 54.5 (any reading above 50 signals growth), marking 10 straight months of expansion. The services side of the economy, which makes up the bulk of U.S. activity, grew for the 28th month in a row at 54.5, just shy of forecasts. Construction spending, however, fell 1.9% in September, a disappointment since economists had expected a small gain. Higher material costs led homeowners to put off renovations while builders continue to deal with more hesitant buyers. Data center building was a bright spot and continues to grow (that piece will likely become interesting in the months ahead given the recent election results). The one concern is costs in general. Prices paid by service businesses remain near their highest levels since 2022, as companies deal with higher fuel and tariff costs and say more price increases may be on the way.
It was another rough week for technology stocks, even with strong earnings. Apple posted record September-quarter sales on solid iPhone demand, AMD’s data center business nearly doubled, and Palantir beat expectations, yet Apple and Palantir shares still slipped after their reports, a sign of how high the bar has become. The midterm elections, which gave Democrats control of both the House and Senate, added a new layer to the story. Stocks first rallied as the results cleared away some uncertainty and pointed to a divided government, which tends to limit big policy surprises. By Thursday, however, investors had turned their attention to what the new balance of power could mean for the AI boom. The worry is that a Democratic Congress, along with newly elected governors in Texas and Ohio, two states with heavy data center construction, could push for tighter oversight of AI and slow the build-out of data centers. Texas’ governor-elect, for example, has proposed a temporary pause on new projects. Trade and tariff policy could also come up for debate. None of this will be settled quickly. The new Congress isn’t seated until January, and how much will actually change depends on what lawmakers propose and what the White House accepts. Until there is more clarity, tech stocks may stay sensitive to headlines out of Washington.
This morning’s jobs report was much stronger than expected. Employers added 165,000 jobs in October, nearly three times the forecast, and unemployment dipped to 4.1%. That strengthens the case for the Fed, which paused last week after a September hike, to raise rates again at its December 8–9 meeting. Markets now see about an 80% chance of a hike, and the 2-year Treasury yield, which tracks Fed expectations most closely, rose to about 4.54%. More to come on this in the weeks ahead.
Interesting to Note
Ever wonder why Election Day is a Tuesday? In 1845, Congress picked the Tuesday after the first Monday in November. Most Americans were farmers then, and the harvest was done by November. Many voters needed a full day to travel by horse and buggy to their polling place, so Monday was out because it meant traveling on Sunday, and Wednesday was market day in many towns. Tuesday was the best fit, and the tradition has stuck ever since.
Looking Ahead
• October inflation report (Nov. 10): A key input for the Fed’s December decision.
• Veterans Day (Nov. 11): Stocks open; bond market closed.
• PCE inflation (Nov. 25): The Fed’s preferred inflation gauge for October.
• Next Fed meeting (Dec. 8–9): Markets expect a quarter-point hike.
Have a nice weekend, and a big thank you to all of our veterans!
Written by: Chris Wasson, CFP®
Sources:
CNBC: U.S. economy added 165,000 jobs in October, way more than expected; unemployment rate at 4.1%
Reuters (via Investing.com): Traders raise bets of Fed rate hike after jobs report
CNBC: 10-year Treasury yield surges after much stronger-than-expected October jobs report
Admiral Markets: Warsh Press Conference: Fed Holds Rates at 3.75% to 4%
CNN: What sparked the stock market’s $2.5 trillion sell-off?
NBC News: Stocks plunge as election outcome and AI worries crush tech shares
Axios: Tech stocks tumble as election rattles AI trade
CNBC: Dow drops 1,800 points; Nasdaq tumbles into correction territory on AI tech wreck
Deadline: Stocks Tank Amid Tech Sell-Off, Reversing Post-Election Rally
Reuters (via GV Wire): US Construction Spending Tumbles in September
TrendForce: US October ISM Manufacturing PMI Rises to 55.5, Beating Expectations
ISM: October 2026 ISM Services PMI Report
Business Wire (via Yahoo Finance): Apple reports fourth quarter results
CNBC: AMD’s data center revenue nearly doubles in Q3 and CEO Su expects growth to accelerate
investingLive: Apple and Palantir beat earnings. Why did both stocks fall?
NPR: Why Are Elections On Tuesdays?
Farmers’ Almanac: Why Is Election Day on a Tuesday? You Can Thank America’s Farmers and Horses
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