Midday market: Dow and small-caps extend post-Fed bid while tech softens on AI jitters; metals rally, oil and gas retreat

Markets are mixed at midday as investors digest yesterday’s Federal Reserve rate cut alongside fresh sector-specific headlines that are reshaping leadership beneath the surface. The rotation is clear in the tape: the Dow and small-caps are advancing, while the tech-heavy Nasdaq is under pressure amid renewed questions around the AI spending cycle.

At 1:30 p.m. ET, the S&P 500 proxy (SPY) is essentially flat at 687.59 versus 687.57 at Wednesday’s close, reflecting a quiet index-level move as crosscurrents offset. The Nasdaq-100 proxy (QQQ) is softer at 623.29, down roughly 0.7% from its prior close of 627.61, with weakness centered in large tech and AI beneficiaries. In contrast, the Dow proxy (DIA) is up about 1.3% to 487.40 versus 481.35 on Wednesday, and small-caps (IWM) are higher by about 1.0% at 257.49 compared with 254.81. The result is a classic post-policy-day rotation: cyclicals and domestically oriented shares bid, megacap tech unwinds some recent strength.

Macro backdrop: yields, inflation, and expectations

The fixed-income backdrop remains pivotal for equity style dispersion. As of December 9, the Treasury curve shows a 2-year yield of 3.61%, 5-year at 3.78%, 10-year at 4.18%, and 30-year at 4.80%. The curve remains positively sloped from the 2-year to the long end, with term premiums evident at the back of the curve. That long-end dynamic has been a focal point: one analysis flagged the rise in long-end yields as a “mystery” that could signal trouble ahead for risk assets if persistent, underscoring why duration-sensitive segments can remain volatile even as the Fed eases.

Inflation readings (September CPI 324.368 and core CPI 330.542, levels provided) don’t offer a fresh directional signal today, but market-based inflation expectations remain anchored. Five-year breakevens are 2.35% and 10-year at 2.27%, with the 5y5y forward at 2.18% as of November. That combination—anchored long-run expectations with a still-elevated term structure—aligns with a narrative in which the Fed has scope to remain patient after its latest quarter-point cut, even as the market debates how sustained the disinflation path will be in 2026.

Equities and sectors: rotation on display

- SPY: 687.59 vs. 687.57 (flat). A quiet headline index masks pronounced sector churn.
- QQQ: 623.29 vs. 627.61 (about -0.7%). Technology and AI leadership are under pressure midday.
- DIA: 487.40 vs. 481.35 (about +1.3%). Cyclicals and defensives within the Dow are providing ballast.
- IWM: 257.49 vs. 254.81 (about +1.0%). Small-caps are bid, consistent with a pro-cyclical tone after the Fed.

Within sectors, the divergences are notable:
- Financials (XLF) are leading, up roughly 1.7% to 54.80 from 53.89. A steeper curve versus the front end can be supportive for net interest margins, and financials often benefit from rotations that favor value and cyclicality.
- Healthcare (XLV) is also firm, up about 1.0% to 153.70 from 152.14. The group is getting fundamental support from drug and innovation headlines, including Eli Lilly’s update that its newest weight-loss drug reduced knee osteoarthritis pain while delivering significant weight loss in a Phase 3 trial.
- Technology (XLK) is lagging, down roughly 1.0% to 147.29 from 148.73, mirroring the softness in QQQ.
- Utilities: Note a data quirk—the entry labeled “XLE” in the sector data shows the symbol XLU and utility-like pricing. Using the provided symbol (XLU), utilities are up about 0.7% to 43.04 from 42.73, consistent with the bid in longer-duration assets today.

The AI trade is the key intra-day story on the downside. Articles highlighted that Oracle’s latest report and commentary have rekindled questions about the cadence and financing of AI infrastructure buildouts, with one report noting Oracle shares plunged about 14% Thursday morning and that the weakness spilled over to other AI bellwethers. Another piece characterized Oracle’s print as mixed—EPS beat and pipeline growth, but lingering concerns about financing strategy—which has not been enough to settle the debate. Ahead of Broadcom’s earnings, several analysts had reiterated a constructive multi-year view tied to custom AI chips, but today’s price action says the market wants proof points on durability and returns on AI spend.

Notable single-name and industry headlines

- Disney and OpenAI: A report says Walt Disney is investing $1 billion in OpenAI and licensing characters for Sora, enabling fans to create short-form clips with Disney IP. While Disney’s stock isn’t in today’s quote set, thematically this leans into the monetization of AI tools across media ecosystems.
- GE Vernova: Articles noted GE Vernova raised its long-term outlook, with shares hitting record levels as the company rides the electrification theme. This dovetails with broader infrastructure and grid investment narratives that often support industrials and certain parts of energy transition supply chains.
- Biopharma: Separate reporting suggested that biotech performance has been more idiosyncratic than macro-driven even after the Fed cut, reinforcing that stock selection remains critical within life sciences. Lilly’s clinical update (weight loss with osteoarthritis pain reduction) is a tangible example of innovation catalysts driving flows in healthcare.
- Retail and subscriptions: Chewy highlighted continued Autoship penetration and the growth of its Chewy+ subscription program, a reminder that recurring revenue models can insulate against volatility in discretionary spending.
- Consumer health insurers and services: CVS signaled stronger-than-expected 2025 results earlier in the week, helping sentiment across parts of managed care and pharmacy services.
- Autos/EVs and autonomy: Articles pointed to Rivian’s efforts to highlight AI and autonomy as future growth drivers, and to the idea that Tesla’s equity story increasingly reflects autonomy and robotics. Those are medium-term catalysts that can introduce volatility around event days.
- Media and platforms: An article raised the question of whether a large Warner Bros. Discovery transaction would signal competitive pressure for streaming leaders, while another noted that SpaceX’s potential valuation is constructive for Google’s prior investment.

Bonds: a modest bid across the curve

Treasury ETFs are modestly higher:
- TLT is up around 0.2% (88.46 last vs. 88.31 prior close).
- IEF is up about 0.15% (96.58 vs. 96.44).
- SHY is fractionally higher (82.89 vs. 82.85).

The gains are consistent with a small decline in yields from yesterday’s cash close, and align with the post-Fed setup where inflation expectations are anchored while growth and policy paths are in focus. Articles also flagged option-related risk in the days ahead that could interact with rates vol—specifically, if equities were to weaken into next week’s expiry, hedging flows could amplify moves. Bond investors will be attentive to any sign that long-end yields resume their recent rise, which one economist characterized as a potential warning sign for risk assets if it persisted without a clear macro driver.

Commodities: metals firm, oil and gas lower

- Gold (GLD) is up about 1.2% to 393.65 from 389.05, continuing to find support in a world of lower policy rates and still-elevated macro uncertainty.
- Silver (SLV) is stronger by roughly 3.8% to 58.22 from 56.07. A separate piece highlighted that silver’s climb toward $60 an ounce is a make-or-break moment for one of 2025’s hottest trades, underscoring momentum and technical significance.
- Crude proxy USO is down about 2.5% to 68.75 from 70.54. This comes despite headlines about a U.S. seizure of an oil tanker off Venezuela and related commentary that such moves could raise geopolitical temperature. Price action suggests broader supply/demand and positioning dynamics are dominating today’s reaction.
- Natural gas (UNG) is sharply lower, down roughly 8.5% to 13.05 from 14.26—an outsized move consistent with the commodity’s well-known volatility.
- Broad commodities (DBC) are slightly lower to 23.06 from 23.13.

FX and crypto: dollar softer versus euro; crypto drifts

- EURUSD is higher on the day relative to its reported open (mark around 1.175 vs. 1.168), indicating a softer dollar midday. The euro’s bid is modest but directionally consistent with the supportive tone for non-yielding assets and cyclicals today.
- Bitcoin (BTCUSD) is little changed to slightly lower versus its reported open (mark near 90,383 vs. open around 90,462). One bank cut its year-end target to $100,000 from $200,000, reflecting tempered optimism after a powerful advance; intraday, crypto price action is muted.
- Ether (ETHUSD) is down modestly (about -0.4% vs. its open) with a similar drift-lower tone.

Labor, policy, and positioning context

Labor data remain a key macro swing factor. A report today noted jobless claims jumped to a three-month high in the wake of the Thanksgiving holiday, though seasonality and holidays may exaggerate that surge, and there’s little evidence of rapidly rising layoffs at this stage. The overall message: a cooling but still-resilient job market, which fits with the Fed’s ability to pause and assess after its latest cut.

Policy and political developments also thread through today’s narrative. The Fed’s decision yesterday—described in a separate summary as packed with intrigue and surprises—was characterized elsewhere as the final cut of 2025, and it helped spur a strong late-day equity rally into the close on Wednesday. Looking ahead, articles flagged the process around selecting the next Fed Chair and ongoing tariff-related legal risk. One bond-market playbook discussed the possibility that a Supreme Court ruling on tariffs could create uncertainty around refunds and provoke a bond market tantrum—another reminder that policy path dependency remains a risk.

Positioning and options dynamics are another near-term watch item. A note highlighted that options positioning could intensify equity selling if the S&P 500 were to pull back toward a cited level next week, due to delta-hedging feedback loops that can exaggerate moves into expiry. That dynamic can compound sector rotations like today’s, particularly when leadership is narrowing within megacap tech.

Bottom line and midday takeaways

- Index-level calm masks a sizable factor rotation: Dow and small-caps are up more than 1% while the Nasdaq is down about 0.7%.
- Financials and healthcare lead; technology lags amid AI-capex scrutiny following Oracle’s report.
- Bonds are modestly bid, metals are firm (silver notably so), and the dollar is softer versus the euro; oil and especially natural gas are lower.
- Macro expectations remain anchored: long-run inflation expectations sit near 2.2%–2.4% while the curve’s long end remains elevated versus the front, consistent with term premium dynamics.

What to watch next

- Earnings and AI confirmation: Broadcom’s results and outlook will be scrutinized for evidence on custom silicon demand, AI monetization, and capex discipline. Any color on customer spending plans will be market-moving given today’s AI-sensitive selloff in tech.
- Options expiry flows: As flagged, options positioning could magnify moves if indices weaken into next week. Monitor liquidity and dealer positioning.
- Yields at the long end: A renewed rise in 10- and 30-year yields without a clear catalyst would pressure duration-sensitive equities and could tighten financial conditions, blunting the post-Fed relief.
- Commodities momentum: Silver’s attempt to sustain a breakout toward the psychologically important $60 mark bears watching; oil’s response to geopolitics vs. fundamentals may continue to diverge day-to-day.
- Policy headlines: Developments on Fed leadership interviews and any tariff-related court updates could spill over into rates and cyclical equities.

Near-term risks

- AI investment pullback risk: If cloud and enterprise capex intentions cool more abruptly than expected, the growth premium embedded in megacap tech could compress further.
- Rates volatility: Persistent or unexplained increases in long-end yields could weigh on equities, especially high-duration sectors, and challenge valuation support.
- Options and liquidity: Into expiry, dealer hedging can amplify downside swings; thin year-end liquidity can exacerbate moves.
- Energy/geopolitics: Shipping or sanctions headlines can produce abrupt commodity price shocks, creating cross-asset volatility.
- Labor data drift: A sharper-than-expected cooling in labor could revive growth concerns and volatility across cyclicals.

Midday positioning thus reflects a market calibrating the Fed’s final 2025 cut against micro catalysts and year-end technicals. The leadership shuffle toward financials and healthcare, the firmness in bonds and precious metals, and softer tech collectively point to a market seeking balance as it awaits the next round of evidence on AI returns, capex durability, and the path of rates into 2026.