| TQ Morning Briefing | Markets Split as AI Weakens, Cyclicals Hold, and the Rally Faces Its First Real Test After the Fed Cut | | | | | | The tape enters Friday carrying a tension that was predictable in theory but sharper in practice.
The Fed cut, the market surged, and the glow lasted… about twelve hours. Now the rally must prove it can breathe on its own. | Yesterday's session delivered a textbook whiplash. Tech cracked, cyclicals stepped up, and the S&P 500 clawed back from overnight losses to finish at an all-time closing high. | The Dow and Russell 2000 pressed cleanly into new records. Breadth was the strongest in months and nearly every sector outside tech participated. | But the story today is the divergence within that strength.
The AI complex is stumbling for the third straight session. Oracle's miss reopened the question of whether demand can keep pace with spending. Broadcom's results deepened it, showing contracts, margins, and backlog dynamics that forced investors to reconcile hype with cash flow. | This is where the tape stands this morning: a market that absorbed the Fed cut, expanded breadth, and shifted leadership… while the most powerful trade of the year starts to creak.
The question for traders is whether this is rotation or fracture. The answer will define the final move of 2025. |
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| | | | | | Futures are pointing in two directions, a mirror of the tape's internal conflict. Dow futures are up roughly 0.2 percent, S&P futures slightly negative, and Nasdaq futures down nearly half a percent as AI weakness drives the morning tone. | Broadcom is the center of gravity, falling around 5 percent pre-market after analysts pressed on margins and backlog quality. Oracle, Nvidia, Micron, and CoreWeave remain under pressure. AI suppliers as a group are now logging their weakest three-day stretch since early November. | Meanwhile cyclicals are holding their ground.
Visa, Nike, the banks, and parts of industrials continue to firm after yesterday's charge. The value-versus-growth spread is widening again and the Russell 2000 is on pace for its best weekly performance since October. | Gold is inching higher and sits within reach of its record. Bitcoin is soft but steady. Crude remains under pressure, with traders focused on Ukraine negotiations and supply overhangs. | Treasury yields are firm but orderly. The 10-year sits around 4.14 percent and the dollar continues to leak lower as rate-cut expectations settle in. | The market is starting to price a world where the Fed has eased, the labor market is cooling, and leadership is shifting away from megacap tech. Futures are treating it not as panic but as hierarchy. | |
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| | | | The center of gravity in global monetary policy is shifting again, and the signal is clearer today than it has been in weeks. | The Fed's third straight cut landed less as a stimulus push and more as a defensive maneuver, revealing an institution that is divided on pace, unified in direction, and quietly preparing markets for a slower, data-dependent path. | Powell leaned hard into labor-market risk, openly questioning whether recent job gains even exist once the likely overcount is stripped out. That recalibration makes additional easing in 2026 less a matter of inflation progress and more a question of how quickly employment softens. | The politics around the Fed are no longer background noise. Trump's public frustration with the pace of cuts, the narrowing of the shortlist to Kevin Hassett, and broad concern over how independence looks in practice all hang over the next few meetings. | Hassett's supply-side optimism gives him a coherent case for lower rates, but his proximity to the White House ensures markets will parse every signal for signs of pressure. | Abroad, the BOJ is preparing to push another hike through a still-fragile economy, signaling that Japan's policy normalization is neither paused nor tentative. With real borrowing costs still deeply negative, officials are stressing that even a move to 0.75 percent keeps conditions accommodative. | Divergence remains the dominant theme: a Fed edging toward caution and a BOJ still stepping on the brake. |
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| | | | | Trade Winds & Global Shifts |
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| | | The geopolitical map is tilting again, and this time the pressure points are sharper and more economically consequential. | The U.S. tanker seizure off Venezuela wasn't just an escalation in sanctions enforcement. It struck directly at the revenue engine keeping Nicolás Maduro's regime afloat, freezing roughly $80 million in crude that represents a meaningful slice of the country's monthly import capacity. | The threat of further seizures has already paralyzed tanker traffic at Venezuela's ports, forcing steep discounts, draining reserves, and tightening a crisis that now reaches from black-market fleets to Chinese refiners. | Washington is signaling that financial suffocation, not limited strikes, is the new lever. | In Ukraine, reality on the ground looks nothing like the narrative being pushed from political podiums. Russian advances remain incremental, costly, and far from decisive, even as Trump frames Kyiv as "losing" to justify a harder line in negotiations. | Ukrainian commanders and Western officials describe a battlefield of attrition rather than collapse, where manpower shortages and drone adaptation shape the winter but do not signal an imminent break. The danger is that diplomatic momentum starts pricing in concessions Moscow hasn't earned. | Europe, meanwhile, is preparing its own economic counterstrike: an indefinite freeze on €210 billion of Russian assets. By removing the need for unanimous renewals, the EU is clearing the path to fund a Ukraine loan backed by eventual reparations. | Moscow is already suing Euroclear and warning of retaliation, but Brussels appears willing to risk the legal fight to lock in long-term leverage. |
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| | | | | | | D.C. in the Driver's Seat |
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| | | Domestic politics turned sharply consequential this week as healthcare fractures inside the GOP widened. Both the Senate and the House failed to advance measures to extend ACA subsidies, leaving roughly twenty-four million Americans exposed to premium spikes beginning January 1. | A group of House Republicans from swing districts is now preparing a discharge petition to force a vote, highlighting the degree of internal pressure facing leadership. | The White House moved aggressively on tech regulation. President Trump signed an executive order establishing a single national AI regulatory standard that overrides state-level frameworks. | | The order directs the creation of an AI Litigation Task Force to challenge non-compliant states and ties future BEAD broadband funding to adherence. This is a direct win for large AI firms seeking uniform rules and an explicit rollback of California-style oversight. | Separately, the House passed the INVEST Act with broad bipartisan support, expanding accredited investor pathways and easing capital-formation constraints for private markets. If enacted, it would open additional liquidity channels across early-stage and growth-stage equity. |
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| | | | Fed Speakers: Paulson, Hammock, Goolsbee |
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| | | | | | Asia: Nikkei +1.37%, Shanghai +0.41%
Europe: FTSE 100 +0.26, DAX +0.20% |
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| | | | Markets open Friday with a rally that has broadened breadth but lost its centerpiece.
Tech weakness and AI fatigue now sit opposite strong cyclicals and fresh index highs.
The Fed cut is digested. The liquidity backdrop is known. What traders must determine now is whether leadership is rotating in a healthy way or whether the market is quietly losing its engine. | Today is not about the cut. It is about whether the rally can move without the trade that built it. |
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