As I assess the financial markets on December 7th, 2025, I’m struck by a noticeable shift in overall sentiment. Today’s data from Investing.com reflects a delicate balancing act across equities, commodities, and currencies, as investors weigh softer U.S. labor data against still-stubborn inflationary pressures and increasingly divergent central bank narratives.
The most striking development was the market’s reaction to the newly released U.S. Non-Farm Payrolls data, which came in at 135,000 — below expectations of 160,000. This miss is relatively modest but comes after two months of weaker-than-expected job creation, reinforcing the recent narrative that the U.S. labor market may finally be cooling down after two years of resilience. The unemployment rate rose slightly to 4.1%, its highest in 18 months. While this might raise red flags about slowing economic momentum, equity markets took it as a sign that the Fed’s prolonged tightening cycle may have peaked.
The S&P 500 rose by 0.8% intraday and seems to be positioning for a potential breakout above the psychologically important 4,700 mark. The Nasdaq Composite gained 1.2%, continuing its momentum from earlier this week, driven largely by mega-cap tech stocks and semiconductor names riding the AI investment wave. Nvidia, Microsoft, and AMD all posted strong gains today, with Nvidia leading the charge after a JPMorgan analyst upgraded the stock, citing strong data center demand coming from AI training expansion.
However, I’m cautious about this rally. Inflation, although moderating, remains sticky. The Core PCE came in last week at 3.3%, still well above the Fed’s 2% target. Today’s messaging from various Fed officials only fueled this tension. While Atlanta Fed President Raphael Bostic suggested that rate hikes are likely done, Governor Michelle Bowman warned markets not to rule out further tightening should inflation reverse course. There’s division within the FOMC, and that uncertainty is being priced in day by day.
Meanwhile, the bond market responded swiftly to the softer labor data — yields on the 10-year Treasury note fell to 4.10%, the lowest since early October. This decline reflects expectations that rate cuts may begin as early as Q2 2026, though the Fed’s own dot plot projects a more cautious pace. The inversion in the 2s-10s curve has moderated slightly, now at -35bps, suggesting mounting confidence in a soft landing rather than a deep recession. But that transition isn’t guaranteed.
On the currency side, the dollar index (DXY) eased to 104.35, continuing its downward trend from last week. Capital is flowing out of the dollar toward risk assets, while the euro gained modestly after ECB President Christine Lagarde indicated rates are likely to stay on hold for longer than the market anticipates. Emerging market currencies like the Brazilian real and Indian rupee also rose amid renewed risk appetite.
Commodities saw mixed performance. Oil prices declined further, with WTI crude futures settling below $72 per barrel despite OPEC+ reiterating production cut extensions. It’s clear that the market is skeptical of OPEC’s cohesion amid rising U.S. shale output and weak Chinese demand. Gold, however, rallied to $2,070/oz, touching near-record highs, as investors juggle inflation hedges, weaker dollar, and geopolitical uncertainty — particularly following renewed tensions in the Red Sea region.
Today’s moves underscore the increasing bifurcation between macroeconomic data and market optimism. While investors are eagerly anticipating a Fed pivot, I remain concerned that markets might be pricing in cuts prematurely. A single soft employment report does not constitute a clear trend, particularly when inflation remains over target and corporate earnings guidance remains mixed. Risk assets may continue to rally through the year-end on momentum alone, but I’ll be closely monitoring next week’s CPI and retail sales data for confirmation of this nascent trend.