A rotation out of tech drove most major indices lower this week. Chip makers fell again: the VanEck Semiconductor ETF (SMH) lost more than 10%, its worst week since July. The drop was led by Micron (MU), AMD (AMD), and SanDisk (SNDK), hit by fears of competition from China's CXMT. Those declines, plus drops in other AI-linked names like the neoclouds, pulled the broad market down. The S&P 500 ended the week off 2%, the Nasdaq shed 5.5%, and the Dow closed higher by just under 1%.
Tesla-SpaceX merger speculation
Prediction market traders are increasingly betting Elon Musk could merge Tesla (TSLA) and SpaceX. Odds have risen to about 58% for a deal before May 1, 2027. Tesla unveiled a redesigned Roadster this week featuring SpaceX-developed rocket thrusters, which fed the speculation, along with fresh analyst talk about the overlap between Musk's businesses. A combination would bring Tesla's AI and robotics work closer to SpaceX's technology and infrastructure. Neither company has confirmed merger plans. Any deal would face questions over valuation, governance, shareholder approval, and regulatory scrutiny. Barclays said it expects an announcement before Tesla's December 6 shareholder meeting, so a vote could be held then.
A triple dose of inflation data
Three inflation reports landed this week: CPI, PPI, and import prices. Import prices rose more than expected last month, driven by higher costs for energy and tech goods. Prices were up 8% from a year ago. Imported fuel costs rose nearly 5% for the month. Capital goods rose 0.9%, pushed by prices for products like computers and chips; from a year ago, capital goods rose over 8%, the highest since 1987. Imports from China were up 0.7%, the most in five years. Import prices do not include tariffs and duties, which matters for reading the data. This followed hotter-than-expected consumer and producer prices, suggesting price increases are spreading beyond just energy as the Iran war drags on.
Fed expectations
Markets still expect the Fed to skip a hike at the end of the month. Odds for an increase fell below 20% today, after looking like a coin flip on Wednesday.
Consumer staples lead
Consumer staples outperformed in the face of higher prices and ahead of the holiday season. These stocks drew buyers this week during the rotation out of riskier tech. Walmart (WMT) stood out as investors moved into more reliable safe havens like big retailers.
The week ahead
Earnings bring heavyweight names: Netflix (NFLX), Meta Platforms (META), Tesla (TSLA), and IBM (IBM). Several aerospace and defense names report, including RTX (RTX), plus airlines United (UAL) and American (AAL). Western Digital (WDC) also reports and got a price target cut from Wells Fargo (WFC) today.
Watch the weekend for any escalation in the Iran conflict. A Fed blackout means little commentary from that side. Data includes manufacturing PMI, University of Michigan consumer sentiment, and Chinese GDP, with a large data release Monday. Jensen Huang gives a keynote at GTC in Berlin, a focus point for reading the state of the AI trade.
