Making sense of the forces driving global markets

By Jamie McGeever, Reuters Open Interest Markets Columnist 

Wall Street was mixed on Wednesday after the Federal Reserve lowered interest rates but signaled a cut in December was in the balance, while Nvidia became the world's first $5 trillion company. Investors now turn their attention to Thursday's meeting between U.S. President Donald Trump and Chinese President Xi Jinping. 

In my column today, I look at how the U.S. job market is now moving from a 'no hire, no fire' landscape towards 'no hire, more fire' territory. 

I’d love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. 

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* The $5 trillion club...

Chipmaker Nvidia is the world's first $5 trillion company, only three months after it reached the $4 trillion mark. Its market cap is up 12-fold since the launch of ChatGPT in 2022, and is now worth around half of the entire benchmark European Stoxx 600 index. UBS and BofA are among those significantly raising their price targets still.

The firm's importance to U.S. growth, power and national security is increasingly evident. CEO Jensen Huang unveiled $500 billion in AI chip orders and said he plans to build seven supercomputers for the U.S. government, while President Trump says he will speak to Chinese President Xi Jinping about Nvidia's state-of-the-art Blackwell AI chip on Thursday.

* ...and Wall Street's historic imbalance

Contrast Nvidia and the 'Mag 7' AI megacaps with the wider market. Tuesday was a historic day on the S&P 500 for a very different, but related, reason - even though the index rose, 398 of its constituents fell. Analysts say that's the worst market breadth for an 'up' day since at least 1990, maybe ever. 

The latest surge at the top has meant the equal-weight S&P 500 has lagged badly, so much so, it is now underperforming the benchmark market-weight index by the widest margin since May, 2003. How long can literally two handfuls of stocks keep lifting such a heavy weight?

* Fed cools on December cut

The Federal Reserve lowered interest rates by 25 basis points on Wednesday, as expected, but Fed Chair Jerome Powell said another cut in December is not a done deal. "Far from it". 

Wall Street pared its gains and rates traders dramatically reduced the probability of a December cut to 65% from 85% before the Fed meeting. It was over 90% earlier this week. The Fed's next meeting is in six weeks, which is a long time for policymakers, especially in the fog of a government shutdown.

The U.S. labor market has been characterized as a 'no hire, no fire' landscape for much of the past year. But 'no hire, more fire' increasingly looks more accurate, providing further ammunition for the Federal Reserve to cut interest rates.

Retail giant Amazon on Tuesday announced 14,000 layoffs, with more to come next year, while delivery service UPS revealed that it has cut a whopping 48,000 employees over the past year. The reasons cited include protecting margins, employing more artificial intelligence, and reversing pandemic-era over-hiring.

These aren't the only eye-opening announcements recently: around 25,000 workers are being let go at Intel, 15,000 at Microsoft, and 11,000 at Accenture. The Trump administration is also firing swathes of government workers.

In total, U.S. employers announced almost 950,000 job cuts in the January-September period, according to global placement firm Challenger, Gray & Christmas, with the top affected sectors being government, tech and retail. 

While most of that was earlier in the year, these figures suggest the labor market is truly cracking, lending credence to Fed Chair Jerome Powell's view that downside risks to employment outweigh upside risks to inflation.