During the week of November 3-7, 2025, US equities experienced their first decline in four weeks, primarily due to a cooling AI rally, deteriorating consumer sentiment, and ongoing government shutdown concerns. Tech was the lead sector of the selloff, with the Nasdaq falling 3.0% - its worst weekly performance since April. S&P 500 was down 1.6% and the Dow Jones 1.2%. Meanwhile, Treasury yields rose as investors recalibrated their expectations for future Federal Reserve rate cuts.
The primary catalyst was significant weakness in AI-related stocks, with Nvidia shares declining 7.1%, as investors increased scrutiny over capital expenditures and returns on investment. Additional headwinds included the Michigan consumer sentiment hitting a three-year low, and market uncertainty stemming from the ongoing US government shutdown that limited available economic data.
The bond market reflected growing caution about Federal Reserve policy direction, with the 2-year Treasury yield jumping approximately 12bps and the 10-year yield rising around 10bps to finish near 4.11%. Corporate credit spreads were also 2-5bps wider. This repricing was triggered by Fed Chair Powell's recent comments indicating a December rate cut was not guaranteed and revealing differing views within the FOMC.
