Risk-On Rotation Meets AI Crosscurrents Before The Bell

Introduction#

U.S. equities head into Wednesday, November 26, 2025 on the back of another broad advance and easing volatility, with cyclicals extending leadership and megacap tech showing mixed follow-through. According to Monexa AI, the S&P 500 closed at 6,765.88 on Tuesday, up +0.91%, while the Dow added +1.43% as breadth improved and volatility gauges drifted lower. Overnight, headlines around Alphabet’s TPU momentum, small-retailer tariff strain, and rising odds of near-term Federal Reserve easing shaped the pre-open narrative, alongside incoming weekly labor data and a high-profile industrial earnings release.

Reuters reported that Meta is in talks to use Google’s custom AI chips in a challenge to Nvidia’s dominance, a development that fed into Tuesday’s divergent tape across semis. Separately, Reuters highlighted tariff-driven supply chain stress for smaller U.S. retailers into the holiday rush, and rate-cut expectations remained elevated into year-end per Reuters and the Financial Times. These crosscurrents, plus weekly jobless claims and Deere’s results, are likely to shape the first prints.

Market Overview#

Yesterday’s Close Recap#

The major U.S. averages extended gains with the Dow leading and volatility easing. According to Monexa AI’s end-of-day data for Tuesday’s close, the indices and volatility benchmarks posted the following moves:

The Dow’s outsized gain reflects a rotation into economically sensitive and rate-exposed groups, corroborated by sector breadth and a notable drop in the Russell 2000 volatility gauge (^RVX), which fell -6.34%. According to Monexa AI, the S&P 500’s advance was broad, with cyclical cohorts like Consumer Cyclical, Industrials, and Financial Services pacing the move. Monexa AI’s heatmap notes that while large-cap GPU/CPU names were mixed to lower—Nvidia NVDA fell -2.59% and Advanced Micro Devices AMD dropped -4.15%—many semiconductor equipment and test vendors surged, including Keysight KEYS at +10.00%, Analog Devices ADI at +5.27%, and Applied Materials AMAT at +5.00%. Communication Services showed positive breadth led by Meta Platforms META at +3.78% and DoorDash DASH at +3.94%, while Netflix NFLX lagged at -2.40% and Alphabet GOOGL held firmer near its recent highs.

Global Overnight Shifts: How They May Drive Today’s Open#

Overnight, global markets broadly tracked Wall Street’s Tuesday advance. A Reuters poll suggested European shares could see another +11% gain in 2026 as low relative valuations and improving macro expectations persist (Reuters. U.S. headlines emphasized continued optimism on policy easing. Rate-cut probabilities into December remained elevated—variously cited in the ~75–85% range in recent Reuters and FT coverage—after a string of softer or delayed data points. Mizuho flagged a potential “Hassett Effect,” with speculation around Kevin Hassett as a possible Fed chair pick weighing on the U.S. dollar’s recent firmness, according to press rundowns citing Mizuho’s commentary.

Tariff stories also resurfaced. Reuters reported that small U.S. retailers are facing holiday supply disruption and higher costs due to the latest tariff regime (Reuters. In policy-adjacent market structure news, event-contract platform Polymarket received CFTC clearance to offer prediction markets through brokerages, highlighting evolving U.S. views on retail-access derivatives and event trading, per multiple overnight reports.

Meanwhile, the AI compute stack remains the marquee global storyline. Reuters and the Wall Street Journal reported that Meta is exploring Google’s TPU accelerators, potentially renting capacity via Google Cloud in the nearer term and deploying hardware in Meta data centers later this decade (Reuters; WSJ. That dynamic is critical for tech leadership and multiple dispersion into year-end.

Macro Analysis#

Economic Indicators to Watch#

The primary domestic data catalyst before the bell is weekly jobless claims, a timely read on labor-market tightness. A material deviation in claims could sway front-end yields, rekindle debate on the pace of easing, and influence early session leadership. As of this morning’s setup, the broad narrative remains that softer data and delayed releases have amplified expectations for a December rate cut, with odds anchored in the ~75–85% zone in recent reporting (Reuters; FT.

Earnings will also matter tactically. Deere DE is slated to report, and given Industrials’ leadership yesterday and the sector’s sensitivity to capex and global manufacturing cycles, tone and guidance from Deere may ripple through machinery, logistics, and materials equities. Reuters has highlighted tariff-related cost pressures and mixed global ag machinery demand as themes to monitor around the print, with broader manufacturing commentary feeding into the rotation thesis.

Global/Geopolitical Factors#

Tariff policy is resurfacing as a near-term operational headwind for retailers and select manufacturers. Reuters reported that smaller U.S. retailers are encountering supply chaos and elevated costs tied to tariffs into the holiday period (Reuters. That aligns with multiple Q3 retail prints pointing to trade-down dynamics, tighter promotional discipline among value chains, and margin vigilance where tariff pass-through is constrained.

Currency dynamics are in focus as well. Press recaps of Mizuho’s overnight note pointed to the U.S. dollar softening as odds around Fed leadership and the timing of cuts shift. A weaker dollar would typically act as a tailwind for multinationals’ reported results and for commodities, though the energy tape has not yet reflected a clear bid, suggesting idiosyncratic drivers in oil and gas are also at work.

In Europe, a Reuters poll suggested scope for another +11% gain in 2026, driven by a valuation discount to the U.S. and an improving economic outlook. If realized, that setup could reinforce global risk appetite, support U.S. peers exposed to European demand, and extend the cross-Atlantic catch-up trade into 2026.

Sector Analysis#

Sector Performance Table#

According to Monexa AI’s sector performance feed for Tuesday’s close, leadership skewed toward cyclicals and healthcare, with defensive rate-sensitive pockets lagging. Note: there are discrepancies between the quantitative sector feed and the qualitative heatmap observations; we address that below and prioritize the explicit percentage feed for the table.

There is a clear rotation into economically sensitive groups. Industrials and Consumer Cyclical outperformed, reinforcing the risk-on tone. Healthcare’s leadership provided a defensive-growth ballast, consistent with strong moves in big pharma and medtech on the day. Utilities and Real Estate lagged as rate sensitivity weighed; however, Monexa AI’s heatmap suggested data-center REITs were notably softer even as some logistics, timber, and lodging names firmed.

A necessary caveat: Monexa AI’s qualitative heatmap flagged Energy as weak on the day and Real Estate as modestly positive, while the tabular sector feed shows Energy at +0.42% and Real Estate at -1.49%. Given the explicit numerical nature of the sector feed, we use those figures for the table. The divergence likely reflects intraday breadth differences and style tilts within each sector—midstream and refiners versus upstream in Energy, and data centers versus industrial/logistics and lodging in Real Estate—producing mixed signals across sub-industries.

Within Technology, internal dispersion was material. Large-cap GPU leaders—Nvidia NVDA at -2.59% and Advanced Micro Devices AMD at -4.15%—weighed on cap-weighted indices, even as equipment and test names ripped higher. Keysight KEYS jumped +10.00%, Analog Devices ADI rose +5.27% with above-consensus guidance, and Applied Materials AMAT added +5.00%, pointing to renewed capital intensity and demand in the semiconductor equipment and analog stacks.

Communication Services was mixed-to-positive beneath the surface. Meta META advanced +3.78%, DoorDash DASH gained +3.94%, and Alphabet GOOGL grind higher, while Netflix NFLX slipped -2.40%. The push-pull mirrors the ad-led platform resilience and the market’s ongoing re-rating of subscription-heavy streaming models.

Financials participated broadly, with banks, payments, and asset managers all firmer. JPMorgan JPM rose about +1.68%, Visa V and Mastercard MA gained around +1.59% and +1.60%, and Capital One COF advanced +2.69%, underscoring confidence in household balance sheets and transaction volumes amid moderating rate risk. BlackRock BLK added +1.01%, signaling steady flow dynamics.

Consumer Cyclical led decisively. Chipotle CMG spiked +7.09%, Lennar LEN climbed +6.60%, D.R. Horton DHI rose +5.78%, Home Depot HD advanced +4.31%, and Royal Caribbean RCL firmed +4.24%. The move captures the housing complex’s strength, resilient high-end dining, and ongoing normalization in travel and leisure.

Healthcare provided defensive growth, led by Merck MRK at +5.24%, Eli Lilly LLY at +3.72%, Zoetis ZTS at +4.09%, Regeneron REGN at +3.40%, and Boston Scientific BSX at +3.39%. The combination of durable cash flows, product pipelines, and GLP-1 adjacency kept the group in favor during the rotation.

Energy and Utilities were the primary drags at the factor level. ExxonMobil XOM fell -1.26%, ConocoPhillips COP declined -1.07%, and EQT EQT slid -1.36%, while ONEOK OKE eked out +0.93%. Utilities saw pressure in merchant generators and some regulated names, with Vistra VST down -2.46%, NRG Energy NRG down -1.82%, and Sempra SRE down -1.53%, while NextEra NEE gained +0.71%.

Real Estate was split. Data center leaders Equinix EQIX at -1.64% and Digital Realty [not provided] lagged on valuation and rate sensitivity, even as Prologis PLD advanced +0.74%, Weyerhaeuser WY gained +2.93%, CBRE CBRE rose +2.63%, and Welltower WELL added +1.13%. The dispersion reinforces the need for selectivity across REIT subsectors in a transitioning rate regime.

Basic Materials participated through select exposures, led by Albemarle ALB at +8.09%, LyondellBasell LYB at +3.64%, Dow DOW at +2.97%, Martin Marietta MLM at +2.21%, and Nucor NUE at +1.69%. Lithium, chemicals, aggregates, and steel all benefited from the cyclical impulse.

Company-Specific Insights#

Earnings and Key Movers#

Analog Devices ADI delivered a cleaner-than-feared quarter and a stronger guide. Monexa AI notes fiscal Q4 revenue of $3.08 billion topped the $3.02 billion consensus, with adjusted EPS of $2.26 beating by three cents. Importantly, ADI guided fiscal Q1 revenue to $3.1 billion (±$100 million) and EPS to $2.29 (±$0.10), above the Street’s $2.97 billion outlook, with automotive strength offsetting industrial softness. Shares rose about +5.27% intra-day on Tuesday, and the beat-and-raise offers a constructive read-through for analog and mixed-signal peers (Monexa AI.

Best Buy BBY advanced after topping fiscal Q3 expectations and lifting portions of its FY2026 outlook, underscoring resilient consumer electronics demand ahead of Black Friday. Monexa AI flags EPS of $1.40 vs. $1.30 consensus, revenue of $9.67 billion vs. $9.57 billion, and comps of +2.7%. The company boosted FY EPS guidance to $6.25–$6.35 and revenue to $41.7–$42.0 billion, both above prior ranges. Reuters separately reported the beats and the market’s constructive reaction heading into peak holiday selling (Reuters.

Abercrombie & Fitch ANF surged over +33.00% after a Q3 beat and a stronger full-year guide, propelled by robust momentum at Hollister. Monexa AI highlights adjusted EPS of $2.36 vs. $2.20 consensus and revenue up +7.00% year over year to a record $1.3 billion, with Hollister sales up +16.00%. Management noted a 210 bps tariff impact absorbed within a 12.00% operating margin, offering a useful read on apparel resilience amid policy headwinds.

Burlington Stores BURL fell roughly -10.00% despite an EPS beat and a raised full-year outlook, as revenue of $2.71 billion came in a hair below the $2.72 billion consensus and tariff sensitivity remained a watchpoint. The divergent reaction across apparel underscores the importance of brand momentum, inventory mix, and exposure to import costs.

Dick’s Sporting Goods DKS gained about +2.00% even as Q3 missed on the bottom line; the company lifted its full-year outlook for the core DICK’S segment, with comparable sales up +5.70% on higher tickets and transactions. Investors prioritized the refreshed guide into the holiday quarter.

NIO NIO posted an EPS beat at -$0.16 vs. -$0.22 expected and deliveries up +40.80% year over year to 87,071 units, with gross margin at a three-year high of 13.90%. Revenue of $3.06 billion missed the $3.11 billion consensus, and overnight commentary out of Asia noted softer Q4 guidance weighing on Hong Kong-listed shares. The improving unit economics are notable, but near-term demand visibility and pricing in China remain key variables.

Walmart WMT maintained defensive leadership within staples. Press reports indicated the retailer is exploring “sponsored prompts” within its Sparky AI shopping assistant, expanding its advertising surface area and potentially enhancing higher-margin revenue streams. Tactically, the company also sits at the nexus of the trade-down trend highlighted by multiple Q3 retail prints.

Alphabet GOOGL remains central to the AI re-rating. Reuters noted the company is nearing a $4 trillion market capitalization as Gemini integration and Cloud AI monetization accelerate, with Google Cloud revenue up +32.00% year over year in Q3 2025 and a backlog around $106 billion with more than half expected to convert to revenue within two years (Reuters; Bloomberg. In parallel, reports that Meta may adopt or rent Google TPUs rattled AI GPU incumbents, with Nvidia NVDA and AMD AMD trading lower on Tuesday (Reuters; WSJ.

Within Energy and Utilities, the lack of a concerted bounce despite a weaker dollar narrative suggests stock-specific and subsector dynamics are in control. Large-cap producers such as ExxonMobil XOM and ConocoPhillips COP stayed under pressure, while one of the steadier performers was midstream player ONEOK OKE. In Utilities, dispersion persisted with NextEra NEE positive and merchant generators like Vistra VST and NRG Energy NRG lagging.

Finally, Deere DE is in focus this morning. Reuters coverage in recent days has underscored tariff and input-cost headwinds alongside global demand variability. Given Industrials’ leadership and the sensitivity of machinery names to capex cycles and ag fundamentals, color on orders, pricing, and regional demand will be critical for gauging the durability of the cyclical tilt into year-end.

Macro Crosscurrents: Policy, Chips, and Trade#

The interplay between monetary policy expectations, AI hardware competition, and tariff regimes is steering cross-asset signals before the holiday. Elevated odds of a December rate cut have coincided with a multi-session equity rebound—Monexa AI notes more than $2 trillion in market cap gains over the last three sessions—while volatility gauges drifted lower (^VIX at 18.37, -1.02%; ^RVX at 23.36, -6.34%). The decline in small-cap volatility in particular aligns with the outperformance in cyclicals and domestically oriented equities.

At the same time, the AI hardware narrative is in flux. Alphabet’s prospective TPU traction with Meta could, if consummated, modestly rebalance AI compute demand away from incumbent GPU suppliers over a multi-year horizon, potentially reshaping hyperscaler capex mixes. The market reaction on Tuesday—Alphabet firmer and Nvidia/AMD weaker—captures that repricing of risk. For positioning, investors should differentiate between GPU incumbents exposed to pricing and share risk, versus equipment vendors and analog suppliers seeing demand from a broader capex cycle that includes testing, packaging, and power management.

On trade, tariff frictions loom as a margin swing factor into the peak retail season. Apparel and discretionary names with higher import intensity face cost pass-through challenges, while value chains with stronger procurement leverage and private-label penetration are better placed to navigate. Reuters’ report on small retailers’ holiday supply disruptions offers a timely reminder that the tariff channel can become a micro catalyst for stock-level dispersion even when headline macro is improving.

Conclusion#

Morning Recap and Outlook#

Into Wednesday’s open, the setup is defined by three forces: policy optimism, sector rotation, and AI hardware crosscurrents. The index backdrop is constructive—according to Monexa AI, the S&P 500 closed at 6,765.88 (+0.91%), the Dow at 47,112.45 (+1.43%), and the Nasdaq Composite at 23,025.59 (+0.67%), with volatility measures easing (^VIX 18.37, -1.02%; ^RVX 23.36, -6.34%). The sector tape is favoring cyclicals—with Industrials, Consumer Cyclical, and Financials well bid—while Technology leadership is splitting between megacap GPUs under pressure and a resurgent equipment/analog cohort. Healthcare’s steady bid adds ballast, and defensive rate exposures in Utilities and select Real Estate continue to chop.

Key catalysts to watch today are weekly jobless claims, which can sway front-end yields and factor leadership, and Deere’s results for read-throughs on industrial activity and capex, especially after yesterday’s strong industrials tape. On the AI front, any incremental reporting around Meta’s potential adoption of Google TPUs versus continued heavy reliance on GPU incumbents will keep the semis complex volatile and highly sensitive to headlines. In retail, holiday commentary and tariff color will matter, particularly for apparel and import-heavy categories, while value leaders continue to benefit from trade-down behavior.

Actionably, investors preparing for the session may look to maintain cyclical exposure where earnings visibility is improving and operating leverage can accrue if rates ease on schedule, while hedging concentration risk tied to a handful of AI megacaps. Within Technology, the day’s dispersion argues for selectivity: equipment, test, and analog names with positive guides have clearer near-term catalysts than crowded AI GPU leaders re-rating on competitive headlines. In Consumer, tilt toward value and off-price where procurement leverage and traffic advantages are durable; be disciplined on tariff-exposed apparel where inventory and pricing strategies are paramount. In rate-sensitive defensives, a patient stance remains prudent until the path of cuts and long-end yields clarifies.

The net of it: momentum is back, breadth is better, but leadership is changing. That is the opportunity and the risk heading into the final weeks of the year. Stay data-dependent this morning—claims and Deere will set the tone—and let the tape confirm whether the cyclical handoff is durable.

Key Takeaways#

The market’s tone remains cautiously risk-on after Tuesday’s broad advance and volatility easing. According to Monexa AI, cyclicals led while mega-cap chip leaders slipped and equipment/analog names rallied. Overnight headlines around TPUs, tariffs, and rate-cut odds should keep dispersion high at the open. Watch weekly jobless claims, Deere’s earnings, and any incremental AI hardware headlines for early direction. The actionable bias favors selective cyclicals and materials, defensive-growth in healthcare, and a barbell within tech that emphasizes equipment/analog winners while risk-managing exposure to the GPU duopoly as the competitive field evolves.