Mixed earnings, September’s delayed jobs report and the AI obsession.
“There is a wisdom that is woe; but there is a woe that is madness.”
Herman Melville, Moby Dick
Do you remember reading “Moby Dick”? I must admit it wasn’t my favorite; I was more of a fan of Mary Shelley or the Brontë sisters when it came to obsessive quests. But that giant elusive white sperm whale popped into my mind this week as the perfect metaphor for our AI obsession. A destructive or indifferent force, we aren’t quite sure, but AI is driving our obsessions right now, bringing us mostly wealth and wisdom, but this week a bit more woe and madness.
Nvidia CEO Jensen Huang delivered a whale of a report about the largest U.S. company by market capitalization, posting earnings per share of $1.30 on revenue of $57 billion. Revenue rose 62% year over year, and Huang said next quarter revenue will be between $63.7 and $66.3 billion. Huang described sales of the company’s Blackwell chips “off the charts, and cloud GPUs are sold out.” He went on to say, “compute demand keeps accelerating and compounding across training and inference—each growing exponentially.”
While that report exceeded Wall Street expectations, it was not enough to settle investor nerves about AI stock valuations. Neither was the finally released jobs report for September.
September’s nonfarm payrolls showed a surprising 119,000 jobs created versus the expected 50,000, but the numbers behind the headline were more mixed, with downward revisions to prior reports and a mild rise in the unemployment rate from 4.3% to 4.4%.
It was also a bit disheartening to see September services employment growth outpaced growth in more lucrative professions and the government subtracted 33,000 jobs from prior reports. Jobs growth in August turned negative with the revisions.
While any information is welcome following the data desert which we have been navigating, the next employment report will not be released until Dec. 16, after the Federal Reserve’s policy meeting. Between the 119,000 jobs created and the Fed meeting minutes released this week, investors now believe the central bank may hold rates steady instead of cutting them next month.
Without the boost of an interest-rate cut, and growing signs of consumer weakness reported by retailers like Home Depot and Target, who missed investor expectations on weak consumer demand, markets pulled back this week. Target Chief Commercial Officer Rick Gomez described shoppers as “stretching budgets and prioritizing value through spending where it matters most, especially in food, essentials and beauty.” In contrast, Walmart smashed expectations, with CEO Doug McMillon noting, “we saw strength across income cohorts and especially with higher-income households.”
It is ironic that the 800-pound gorilla of retail and the Moby Dick of AI have us confused and entangled like Captain Ahab’s harpoon line about the market’s outlook. Are we headed for a meaningful reset or is this week’s market slide just some short-term profit-taking amid year-end rebalancing?
Time will tell, as it always does, but this week’s market woes remind us of the importance of planning for a range of outcomes. Captain Ahab died because he was obsessed with something he couldn’t control, but we can do better together. Finding the right balance, being ready for market highs as well as market lows, and focusing on our goals for living well and taking care of those we love means we won’t be tangled up by circumstance.
Written by a human.