U.S. stocks under pressure, initial unemployment claims rise, market focuses on AI valuation risks and Federal Reserve policy trends

The global financial markets are in a correction phase. The three major US stock indices all declined, with the S&P 500 index recording its fourth consecutive day of decline, down 0.83%; the Dow Jones Industrial Average fell 1.07%; and the Nasdaq index dropped 1.21%. European markets were also not spared, with the UK FTSE 100, France CAC 40, and Germany DAX 30 indices decreasing by 1.27%, 1.86%, and 1.74% respectively.

Driven by risk aversion sentiment, the US dollar index rose 0.06% to 99.59, climbing for the third consecutive trading day; gold prices stabilized above $4,000 per ounce, up 0.56% to $4,067; Bitcoin regained the $90,000 mark, rising 0.8% within 24 hours, currently at $92,835; Ethereum fell 2.97% to $3,116.7. The VIX fear index increased 10% to 24.68, reflecting heightened market concerns over risk assets.

Unexpected Increase in Initial Jobless Claims, Labor Market Loses Momentum

Data released by the US Department of Labor shows that for the week ending October 18, initial unemployment claims rose to 232,000, higher than the last reported 218,000 before the government shutdown. Continuing claims for unemployment benefits stood at 1.957 million, indicating signs of pressure in the employment market.

Data from research firm ADP further confirms this trend. Over the four weeks ending November 1, US companies averaged 2,500 layoffs per week, indicating that the labor market had lost growth momentum in late October. However, after entering November, the rate of employment loss slowed, with ADP’s November 5 monthly report showing private sector employment increased by 42,000, ending two consecutive months of decline.

The US Bureau of Labor Statistics will release the September employment report this Thursday, expected to show non-farm payrolls increased by 55,000 from the previous month. Market anticipation is high for this data, as it will be an important reference for Federal Reserve decision-making.

Fund Cash Holdings Hit Twenty-Year Low, Bank of America Warns of Market Correction Risks

Latest survey data from US banks reveal signs of market fragility. The cash holdings of fund managers fell to 3.7%, the 20th time since 2002 that this level has been reached. Bank of America strategist Hartnett warns, based on historical experience, that the stock market faces downside risks over the next 1 to 3 months, while US Treasuries are expected to outperform stocks.

Additionally, US banks and financial stocks are on the verge of breaking key support levels, sending warning signals to the broader market. Analysts believe this may indicate an imminent broader market correction.

Reassessment of AI Valuations Emerges, Wall Street Executives Issue Warnings

Valuation risks in the artificial intelligence sector have become a market focus. JPMorgan Chase Vice Chairman Pinto stated that AI industry valuations need urgent reassessment, as any downward adjustment could trigger a chain reaction in the stock market and potentially impact other sectors, the S&P 500, and the entire industry.

This warning echoes concerns from other Wall Street institutions. Rothschild & Co Redburn downgraded ratings for Microsoft and Amazon, citing that the economic benefits of generative AI are “weaker than expected.” The firm’s analysts pointed out that generative AI is more capital-intensive, with diminished pricing power, and depreciation cycles extended to 5-6 years, compared to 3 years during the early cloud computing era, raising concerns about return on investment. Rothschild & Co Redburn lowered Microsoft’s target stock price from $560 to $500.

Tech stocks led the decline, with Nvidia down 2.81%, Amazon down 4.43%, Microsoft down 2.70%, and Google down 0.26%. Nvidia will announce earnings after the US market close this Wednesday, a key report to assess whether AI stock valuations are overly high.

Federal Reserve Policy Shift Becomes Focus, Trump’s New Chair Candidate Emerges

Market attention is increasingly focused on the possibility of a rate cut by the Federal Reserve in December. Meanwhile, the next Federal Reserve Chair candidate is highly anticipated. Trump stated that a candidate has been identified but did not disclose specifics, saying “there are some surprising names, and some routine names.”

US Treasury Secretary Yellen has narrowed the candidate pool to five: current Federal Reserve Board members Waller and Bostic, former Fed officials Waller and Bostic, White House National Economic Council Director Hassett, and BlackRock executive Reed. Yellen plans to submit recommendations to Trump after the Thanksgiving holiday.

The next Fed Chair will face a delicate balancing act: catering to Trump’s desire for low interest rates while maintaining investor confidence and controlling inflation expectations.

Gold’s Mid-term Outlook Remains Optimistic, Central Bank Purchases Support Prices

Gold prices are expected to rise to $4,900 per ounce by the end of next year, supported by ongoing central bank purchases and inflows from private investors, according to Goldman Sachs.

Data shows that in September, central banks purchased 64 tons of gold, far exceeding August’s 21 tons. Goldman Sachs maintains its assumption of central banks buying an average of 80 tons of gold per month from the fourth quarter through next year, reflecting a long-standing trend of diversification reserves to hedge geopolitical and financial risks.

Market Regulation Data Continues to Fill Gaps, Economic Indicators to Be Released

After the US government resumed operations, missing economic data will be gradually released. The Labor Department plans to complete the weekly initial jobless claims data missing during the shutdown by this Thursday, and will release September PPI data on November 25 and September import-export price indices on December 3.

The US Commodity Futures Trading Commission announced that it will begin releasing trader position reports this week. The first report is expected to be published early Thursday Beijing time, with up to two reports per week thereafter until normal schedule resumes on January 23 next year.

Tech Giants Updates: Google Launches New Model, Pinduoduo’s Earnings Miss Expectations

Google(Alphabet) launched its latest AI model Gemini 3, claiming a “huge leap” in reasoning and coding capabilities. The model can handle multiple media types such as text and images and solve complex scientific and mathematical problems. Google also introduced the Antigravity development platform for building AI-driven coding agents.

E-commerce platform Temu’s parent company Pinduoduo’s stock fell 7.3%. The company announced third-quarter revenue of 108.28 billion RMB, slightly below market expectations of 108.41 billion RMB; adjusted net profit was 31.38 billion RMB, up 14% year-over-year; adjusted earnings per share were 21.08 RMB, exceeding the expected 16.84 RMB.

Market Outlook

Pinto pointed out that US economic growth is slowing, with further deceleration possible next year, but a significant recession is less likely. He also acknowledged that the current upside potential of US stocks is limited. Investors should closely monitor the upcoming US September non-farm payroll data, Nvidia’s earnings report, and the Federal Reserve meeting minutes, as these will be key references for the market’s future direction.