Good Afternoon. Markets were split again Thursday: housing cooled, workers dug in, and another AI giant stumbled under the weight of its own ambitions, yet the Dow cruised toward a record anyway. It’s one of those days when the economy looks fragile underneath and strangely buoyant on top. Let’s get into it.

—Rosie, Wyatt, Evan & Conor

🔥 What’s Hot: 🔥

🥶 What’s Not: 🥶

1. Dow Surges Toward Record Even as Oracle Slide Hits the Nasdaq

The News: Oracle shares fell 10% Thursday. The sell-off dragged on the Nasdaq, but the Dow powered higher, rising more than 1% and touching an intraday record above 48,700. The S&P 500 also turned positive and traded near record highs. The broader rally extended Wednesday’s momentum after the Fed’s rate cut.

Why It Matters: Markets are signaling they’re skeptical of tech valuations and looking for safer pastures. Oracle’s decline underscores a broader concern: the AI buildout is getting expensive fast, and companies are stretching balance sheets to keep up. Meanwhile, delayed data showed the U.S. trade deficit narrowing sharply and jobless claims ticking higher, offering a mixed read on economic momentum. Commodities diverged: silver hit another all-time intraday high, while Brent crude fell nearly 2% and natural gas slid on warmer-weather forecasts.

What to Watch: Earnings from Broadcom and Costco, how markets digest rising AI capex across cloud providers, and whether early-2026 data confirm improving growth or the labor-market softening Powell flagged. For now, the Dow’s partying, the Nasdaq, less so.
Source: wsj.com

2. U.S. Home Prices Turn Negative for First Time Since 2023

The News: Home prices slipped just under 1% year-over-year and are down 1.4% over the past three months, according to high-frequency data from Parcl Labs, the first national decline in more than two years. Inventory has climbed off historic lows, with active listings up nearly 13% in November, though new listings rose only 1.7% as many sellers pulled homes from the market. Mortgage rates have hovered in a tight band for three months, and builder earnings and sentiment point to continued demand weakness. Regional swings are widening: prices fell 10% in Austin and 5% in Denver, while Cleveland climbed 6% and Chicago and New York gained 5%.

Why It Matters: For buyers, slight cooling offers modest relief after years of affordability shock but with mortgage rates stuck and supply still thin, relief is limited. For homeowners, national price softness could pressure tappable equity, especially in apparent overheated markets like Austin, Tampa, and Phoenix. Builders continue to rely on incentives as a soft labor market and stretched consumer finances weigh on sales. With no government housing-starts or permits data since before the shutdown, forecasting is tougher but early signals suggest 2026 brings stability, not a crash.

What to Watch: Mortgage-rate movement after the Fed’s recent cut, builder incentives through Q1, and how quickly sidelined sellers return. For now, the pandemic’s double-digit gains have given way to something unfamiliar: a housing market that’s finally flatlining.
Source: cnbc.com

3. Michael Burry Warns Fed’s Treasury Buying Signals “Fragility,” Not Stability

The News: Michael Burry, famous for his “big short,” criticized the Fed’s plan to restart monthly Treasury bill purchases of roughly $35–$45 billion starting in January, arguing the move reflects growing weakness in the U.S. banking system. The Fed ended quantitative tightening after shedding $2.4 trillion in assets since 2022 and paused balance-sheet runoff as repo-market volatility intensified. Burry noted banks now require more than $3 trillion in reserves to function smoothly, far above the ~$2.2 trillion needed before the 2023 turmoil and dramatically higher than 2007’s $45 billion.

Why It Matters: If the Fed is rebuilding reserves because short-term funding markets can’t stabilize on their own, it signals that liquidity stress is deeper than official messaging suggests. More Fed buying could suppress yields at the short end and buoy risk assets, but it also raises concerns about creeping dependence on central-bank support, especially with Treasury issuing more bills to avoid lifting long-term rates. Burry’s darker take: repeated Fed interventions blur the line between stabilization and de facto bond-market nationalization, with each crisis pulling the central bank further into the system’s plumbing.

What to Watch: How repo rates behave as reserve management purchases roll out, whether Treasury shifts issuance again, and if Fed officials push back on the “fragility” narrative. Markets may be cheering, but the pipes underneath are rattling a little louder.
Source: benzinga.com

4. Starbucks Strike Enters Week Four as 3,800 Baristas Walk Out Nationwide

The News: Starbucks’ longest labor stoppage ever expanded Thursday, with 3,800 baristas striking across 180 stores in more than 130 cities — up from the initial Red Cup Day walkout on Nov. 13. Workers want higher wages, more stable hours, and action on over 700 pending unfair labor practice complaints. Negotiations have been frozen since April after the union rejected a proposal offering 2% annual raises and no immediate pay bump. Tensions escalated under CEO Brian Niccol, whose 2024 compensation of $96 million, 6,666 times median barista pay, has become a flashpoint.

Why It Matters: A month-long strike across a major national brand signals growing pressure in the service sector, especially among lower-wage workers navigating high living costs. Starbucks says 99% of its 17,000 U.S. stores remain open and claims the strike is losing momentum, though the union says more than 125,000 customers have pledged to boycott. The work stoppage lands as Starbucks faces reputational and regulatory strain, including a $38.9 million settlement for 500,000 scheduling violations in NYC, and persistent calls from 26 senators urging a contract settlement. For investors, prolonged unrest risks higher labor costs, slower store performance, and brand drag.

What to Watch: Whether federal mediation or political pressure pushes both sides back to the table, how holiday traffic holds up amid boycotts, and if other chains see similar labor flare-ups. “No Contract, No Coffee” may be a slogan but the fourth week of walkouts shows workers mean it.
Source: reuters.com

5. Oracle Shares Plunge as AI Buildout Costs Surge Far Beyond Expectations

The News: Oracle stock dropped nearly 14% Thursday, its steepest fall since January, after fiscal Q2 results revealed capital spending of $12 billion, triple last year’s level and well above the ~$8 billion analysts expected. The company also raised full-year capex guidance to $50 billion from $35 billion, even as quarterly revenue of $16.06 billion missed the $16.21 billion forecast.

Why It Matters: Oracle is becoming the AI economy’s stress test. Massive AI-related capex, financed partly with rising debt, is feeding investor fears of an early-stage AI bubble, especially as Oracle leans heavily on OpenAI commitments to support its multi-year growth targets. The company’s credit-default swap pricing hit its highest level since 2009, a sign markets are uneasy with the pace and structure of its expansion. Meanwhile, shares have fallen more than 40% since September even as the broader tech leaders rallied, raising questions about whether Oracle is overbuilding capacity or simply front-loading spend to win hyperscaler and AI lab workloads.

What to Watch: Whether Oracle can convert record contracts into actual cash flow fast enough to calm debt concerns, how quickly AI demand absorbs its new capacity, and whether other AI infrastructure players show similar cost blowouts. For now, Oracle isn’t just building data centers, it’s building investor anxiety right along with them.
Source: investing.com

1. India Says U.S. Trade Deal Likely by March

The News: India’s Chief Economic Adviser V. Anantha Nageswaran said Wednesday he expects a U.S.–India trade agreement to be finalized by March, as a U.S. delegation led by Deputy USTR Rick Switzer arrived in New Delhi for two days of talks. The deal seeks relief from Washington’s 50% tariffs on key Indian exports — penalties imposed in August over India’s trade surplus with the U.S. and its continued purchases of Russian oil. USTR Jamieson Greer told lawmakers India has offered its “best” proposals to date, though disagreements over agricultural market access remain.

Why It Matters: The stakes are high: the U.S. is India’s largest trading partner, representing 18% of India’s exports and $131.8 billion in bilateral trade last year. Tariffs have already hit Indian shipments hard, exports to the U.S. fell 8.6% in October, pressuring sectors from textiles and jewelry to seafood. A deal could reverse those declines and support India’s “Mission 500” goal of doubling trade to $500 billion by 2030. For Washington, the talks test its ability to balance geopolitical alignment with India against domestic farm-sector demands and the politics of easing tariffs.

What to Watch: Movement on agricultural access, whether tariff relief is phased or immediate, and if negotiations accelerate in early 2026 as both sides chase a pre–fiscal year deadline. A March deal would thaw tensions and give Indian exporters some badly needed oxygen.
Source: economictimes.indiatimes.com

2. Bank of England Chief Says AI Productivity Gains Are Finally Showing

The News: Bank of England Governor Andrew Bailey said Wednesday he’s “more encouraged” that AI is beginning to boost real-world productivity, citing company anecdotes, including “very substantial” telecom cost savings, as early proof. BoE analysis attributes roughly half of U.S. GDP growth in the first half of 2025 to AI investment and says the technology drove two-thirds of the S&P 500’s gains this year. Bailey reiterated that AI could lift the UK’s long-stagnant growth rate, potentially doubling its long-run GDP trajectory from ~1.6% to around 3% by 2035.

Why It Matters: If AI efficiencies are materializing, it supports the investment cycle powering data-center buildouts, cloud spending, and corporate automation and could help ease the UK’s chronic productivity malaise. But Bailey warned markets may be overestimating the speed and size of the payoff. The BoE’s Financial Stability Report flagged that U.S. equity valuations are nearing dot-com levels, while UK valuations are the frothiest since 2008. Deepening ties between AI firms and credit markets also raise systemic-risk concerns if asset prices correct. In other words: AI can transform the economy and still leave investors over their skis.

What to Watch: Corporate guidance on AI-driven cost savings, signs of UK productivity turning up in 2026, and whether valuation pressure spreads to credit markets. Bailey’s message: AI’s real but so is the risk of believing in it too much, too fast.
Source: bloomberg.com

3. IMF Lifts China’s 2025 Growth Outlook to 5% on Stimulus, Softer Tariffs

The News: The IMF raised its China growth forecast for 2025 to 5%, up 0.2 percentage points from October, citing stronger-than-expected resilience, expanded fiscal stimulus, and lower tariff impacts than anticipated. Growth is projected to ease to 4.5% in 2026. Mission chief Sonali Jain-Chandra highlighted ongoing structural challenges: a prolonged property correction, stressed local-government finances, weak domestic demand, and lingering deflation pressures. China’s trade surplus surpassed US$1 trillion in the first 11 months of 2025, underscoring the economy’s continued dependence on exports.

Why It Matters: The upgrade signals that China’s policy mix, easing, household-support measures, and targeted property stabilization, is gaining traction, offering global markets a steadier near-term growth anchor. But the IMF’s message is clear: China must shift toward a consumption-led model as export reliance becomes riskier amid trade frictions. Structural reforms around social protection, household savings, internal trade barriers, and debt cleanup will determine whether China sustains a ~5% trajectory into the late 2020s. For companies exposed to China demand, the forecast offers relief, but not clarity on long-term rebalancing.

What to Watch: Follow-through on Beijing’s promised reforms, property-sector stabilization efforts, and whether domestic consumption rebounds in early 2026. A stronger China helps global growth but an imbalanced one keeps the volatility alive.
Source: scmp.com

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