The stock market finished the week with mixed results. The week reflected a market balancing selective sector rotation against caution on policy and stretched valuations. There was some rotation out of the mega-caps and commentary from some members of the Fed chilled the expectations for a December rate-cut. The Dow Jones (+0.3%) and S&P 500 (+0.1%) ended slightly higher, while the Nasdaq (-0.5%), Russell 2000 (-1.8%), and S&P MidCap 400 (-1.2%) lagged.
The health care (+3.9%) and energy (+2.5%) sectors led gains, while the consumer discretionary (-2.7%), communication services (-0.8%), and utilities (-1.2%) sectors underperformed. Despite early-week strength in mega-cap technology, the Vanguard Mega Cap Growth ETF managed only a 0.2% gain for the week, and the PHLX Semiconductor Index finished in negative territory (-2.0%).
There was some optimism early in the week due to the end to the government shutdown which drove the market higher. AI-related and health care leaders like participated in the move. By the middle of the week the AI-related names started to struggle, meanwhile, the Dow Jones reached a record closing above 48,000, supported by the financials (+0.1%) and industrials (-0.9%) sectors. The S&P 500 Equal Weighted Index highlighted rotation beyond mega-cap growth, reflecting broader participation.
Later in the week, hawkish Fed commentary from officials reduced odds of a December rate cut to almost 50/50, pressuring growth oriented and high-beta stocks. Friday saw a partial rebound as chipmakers and other technology stocks stabilized, helping the S&P 500 and Nasdaq reclaim technical support above their 50-day moving averages.