Hot inflation and a 5.15 percent ten-year yield cannot stop Wall Street's best week since August

American stocks staged a strong recovery this week even as inflation data came in hotter than expected, government bond yields surged to their highest levels of the year and futures markets moved to price in another interest rate increase next month. The benchmark S&P 500 gained 2.51 percent for the week to close at 7,561.67, snapping a four-week losing streak, while the Nasdaq Composite rose 2.27 percent, the Dow Jones Industrial Average 2.07 percent, up 1,061.82 points, and the small-cap Russell 2000 1.32 percent. All eleven S&P 500 sectors finished higher, led by Energy, up 5.42 percent, Industrials, up 3.76 percent, and Communication Services, up 3.72 percent. The benchmark index is now up 10.5 percent for the year, the Russell 2000 12.4 percent, the Dow 8.9 percent and the Nasdaq 8.2 percent.

The rally was front-loaded: Monday's surge lifted the benchmark 2.3 percent and the Dow by 1,104 points, while the market's fear gauge, the VIX, dropped from 25.64 on November 6 to 19.92. By Friday, technology led the declines, with the Philadelphia Semiconductor Index down 3.4 percent and the Nasdaq-100 off 1.22 percent; the Dow was the only major index to rise on Friday. Two technology headlines dominated the close of the week: Nvidia announced the resignation of its chief executive Jensen Huang on Thursday, and a Microsoft 365 outage disrupted services worldwide from Thursday until the company reported full restoration on Saturday.

Inflation runs hot

October consumer prices, released on Tuesday, rose 0.4 percent on the month against 0.3 percent expected, with the core measure up 0.3 percent against 0.2 percent forecast. No annual rate was reported for October because the Bureau of Labor Statistics did not collect prices in October of last year during the government shutdown; the last annual reading, for September, was 3.7 percent. Producer prices, released on Friday, rose 0.3 percent on the month against 0.4 percent expected, but the annual rate hit 6.5 percent, the largest yearly rise since November 2022, with core producer prices up 0.3 percent on the month, in line with forecasts. The New York Federal Reserve's survey of one-year-ahead inflation expectations came in at 3.91 percent against 3.79 percent forecast.

Yields surge, hike bets build

Treasury yields rose sharply across the curve: the two-year yield gained 36 basis points on the week to 4.89 percent, the five-year 33 basis points to 4.98 percent, the ten-year 29 basis points to 5.15 percent and the thirty-year 22 basis points to 5.48 percent. Futures markets priced a roughly 88 to 92 percent chance of a 25 basis point increase by the Federal Reserve at its December 8-9 meeting. The dollar index climbed 1.1 percent to about 103.4. Gold fell 4.63 percent on the week to about 3,886 dollars an ounce, silver fell 5.18 percent, West Texas Intermediate crude fell 2.50 percent to around 88.56 dollars and Brent 2.52 percent to around 95.84 dollars, and Bitcoin slipped below 70,000 dollars to trade near 68,300, down roughly 7 percent on the week.

A dramatic week for companies

Single-stock moves were sharp. Cloud-computing provider CoreWeave jumped 24.71 percent on Wednesday, while fellow data-centre operator Nebius fell 16.84 percent on Thursday and a further 9.92 percent on Friday. Cisco reported revenue of 18.5 billion dollars, up 24 percent year on year, and earnings of 1.40 dollars a share, raising its fiscal 2027 revenue guidance to between 74.8 and 75.8 billion dollars, yet its shares fell 6.24 percent on Friday. Applied Materials reported revenue of 10.41 billion dollars and earnings of 4.16 dollars a share against 4.05 expected, guiding January-quarter sales to 11.1 billion dollars; its shares fell 2.74 percent.

On November 12, Nvidia announced that Jensen Huang had resigned as president, chief executive and board member, effective immediately, giving no reason. Chief financial officer Colette Kress became interim chief executive while remaining chief financial officer, Harvey C. Jones was named the board's first chair, and the board said it is searching internally and externally for a permanent chief executive. Nvidia shares fell 2.01 percent on Friday, the stock's sixth straight weekly decline; the company still reports earnings on Tuesday after the close, with consensus around 2.52 dollars a share. Separately, a Microsoft 365 outage beginning around midday on Thursday hit Outlook, Teams, Copilot and Exchange Online worldwide; an outage-tracking service logged reports from 74 countries and territories, and governments, courts, healthcare providers and businesses in several countries reported disruptions. Microsoft said the problem was not related to cyber activity and was introduced during an earlier network capacity upgrade; services were restored gradually and the company said on Saturday they were fully restored. Late in the week, press reports said two oil tankers were hit by mines in the Strait of Hormuz and Saudi forces intercepted two Houthi drones, adding to geopolitical unease.

The week ahead

Attention now turns to a busy week ahead: October retail sales and Nvidia's earnings both land on Tuesday, November 17, while Federal Reserve Chair Kevin Warsh speaks on Monday. Other central bank officials, including the New York Fed's John Williams, are also scheduled through the week.