Weak Jobs, Strong Hopes: Wall Street Bets on Fed Cuts While AI Hype Hits a Speed Bump

Bad Labor Data, Good Market Mood

On Wednesday, Wall Street once again proved it doesn’t mind a bit of bad news, as long as it nudges the Fed toward cheaper money.

The Dow Jones added about 0.85%, while the tech-heavy Nasdaq managed roughly 0.2%, as traders reacted to an ADP report showing a loss of 32,000 private-sector jobs in November, versus expectations for a modest gain of 10,000. That’s a clear signal that the labor market is losing momentum.

Futures markets now price roughly a 90% chance of a 25 bps rate cut at next week’s Fed meeting, up from just under that level before the data. Independent coverage of the ADP release tells the same story: job creation has flattened in the second half of 2025, with particular weakness in manufacturing, professional services, information and construction.

In plain English: hiring is choppy, consumers are cautious, and businesses are in “no sudden moves” mode. That combination is exactly the backdrop in which “bad news is good news” for risk assets – as long as the slowdown is gradual and inflation stays contained.

On the policy front, markets are also looking past next week’s meeting. There is growing chatter that President Donald Trump could nominate Kevin Hassett as Fed chair when Jerome Powell’s term expires in May, a move that would cement a more dovish bias at the central bank. Hassett has openly argued that rates should be cut based on the incoming data, music to equity investors’ ears, but a potential long-term headache if inflation proves sticky.

In FX and commodities, the euro ticked up to around 1.1674 versus the dollar, while WTI crude climbed about 0.5% to just under $59 a barrel, reflecting a softer greenback and the usual pre-OPEC-style positioning rather than any dramatic shift in fundamentals.

AI Cooldown: Microsoft Feels the First Real Pushback

While the macro backdrop gave equities a tailwind, Microsoft (MSFT | -2.5%) was a notable laggard. The stock fell about 2.5% after a report from The Information claimed the company had lowered internal sales targets for some enterprise AI products, particularly offerings tied to its Azure “Foundry” platform and Microsoft 365 AI tools.

The reporting suggests several Azure sales teams struggled to hit an aggressive 50% growth target for Foundry-related spending; the goal was later cut to around 25% growth.

That’s a far cry from the “insatiable demand” narrative investors have been hearing for the last 18 months. Some corporate customers reportedly find it hard to quantify cost savings from AI automation, and remain wary of error-prone systems that can carry a very real price tag when they fail.

To complicate the picture, CNBC later reported that Microsoft has not officially cut quotas, citing an internal email from the company. So we’re in classic early-cycle AI territory: strong strategic commitment, messy execution, and a growing gap between marketing promises and what CFOs are actually willing to sign off on.

For investors, I see two key takeaways:

1. Enterprise AI demand is real, but lumpy. The low-hanging use cases are probably saturated; the next wave requires deeper integration and more change management, which slows the revenue ramp.
2. AI leaders are not immune to narrative shocks. When expectations are this high, even a hint of normal sales friction can trigger a sharp, if temporary, multiple reset.

The Other Side of AI: Marvell’s Photonic Power Play

If Microsoft was the AI buzz-kill of the day, Marvell Technology (MRVL | +7.87%) did its best to restore the mood. The chipmaker jumped nearly 8% after pairing a solid AI-driven outlook with a $3.25 billion deal to acquire Celestial AI, a fast-growing photonics start-up.

Marvell expects revenue from its “custom chips” - critical components for AI data centers - to grow about 20% next year, with CEO Matt Murphy talking up a path to $10 billion in annual revenue over the next fiscal period, well ahead of current street expectations.

Strategically, the Celestial AI acquisition gives Marvell access to Photonic Fabric™ technology, which uses light rather than electrical signals to link AI chips and memory at very high speeds and lower power.

In a world where GPU and accelerator supply has become the choke point for AI growth, better connectivity is not a nice-to-have; it’s core infrastructure.

The message from the tape is clear:

• AI products that are still trying to prove their business value (Microsoft’s enterprise agents) are hitting resistance.

• AI infrastructure that solves real bottlenecks (Marvell’s high-speed connectivity) is where investors are willing to pay up.

For portfolio construction, that argues for staying overweight picks-and-shovels AI names with clear demand visibility, and being more selective on software stories that still lean heavily on “total addressable market” slides.

Crypto Breathes Again, but Risk Appetite Still Fragile

Another notable rebound came from the crypto corner. After a sharp washout earlier in the week, Bitcoin bounced back to around $93,000 on Wednesday, having dipped briefly below $85,000 on Monday.

The move coincided with the broader relief rally in equities and bonds, but analyst commentary framed it more as a pause in the deleveraging than the start of a fresh risk-on wave. In other words: short-term players covered, but long-term conviction hasn’t suddenly returned.

For equity investors, the crypto action is mainly a sentiment gauge: when Bitcoin can rebound on a single soft data point and rising rate-cut odds, it tells me that risk appetite is wounded, not dead.

Stock Stories: Retail Joy, Storage Pain, and Mixed Signals in Software

Beneath the index level, Wednesday’s tape was a reminder that this is still a stock-picker’s market. A few highlights:

American Eagle Outfitters (AEO | +15.07%)

The apparel retailer surged after raising its full-year revenue outlook on the back of a strong start to the holiday season. A well-timed marketing push featuring actress Sydney Sweeney and NFL star Travis Kelce appears to be paying off, giving AEO some rare pricing power in a brutally competitive space.

CrowdStrike (CRWD | +1.48%)

The cybersecurity name posted a larger quarterly loss than a year ago but tightened and raised its full-year revenue guidance. Markets chose to focus on top-line momentum and the long-term shift to cloud-delivered security, nudging the stock modestly higher.

GitLab (GTLB | -12.77%)

GitLab delivered 25% revenue growth but paired it with a wider loss, and the stock was punished accordingly, dropping nearly 13%. When growth software trades at premium multiples, “beat but burn more cash” is not the story investors want to hear in a slowing macro environment.

Microchip Technology (MCHP | +12.17%)

On the other side of the ledger, Microchip rallied about 12% after raising its outlook, helped by stronger-than-expected orders. That’s a useful data point for investors watching the broader semiconductor cycle: pockets of traditional industrial and auto-linked demand are still very much alive.

Pure Storage (PSTG | -27.31%)

Data-storage specialist Pure Storage was the day’s punching bag, plunging 27% after reporting a profit hit from higher operating costs and offering a softer margin profile than the market hoped for. It’s a reminder that even in data-heavy markets, not every storage play is a secular winner at any price.

After the close, the market got two more high-beta datapoints from the cloud complex:

Salesforce (CRM | +1.79% after hours) popped nearly 5% in late trading after reporting strong profit and margin expansion, a sign that mature SaaS can still produce cash when management leans into efficiency.

Snowflake (SNOW | -7.91% after hours) slid roughly 8% post-market after its latest update disappointed investors, highlighting how crowded and expectation-heavy the data-infrastructure trade has become.

Taken together, the day’s winners and losers fit a familiar pattern: profit visibility, operating leverage and clear demand drivers are rewarded; weak margins and “trust us, growth is coming” narratives are not.

How I’d Read This Tape as an Investor

Stepping back, here’s how I interpret Wednesday’s action:

Macro: The US economy is slowing, but not collapsing. Labor data is soft enough to justify more easing, which supports equities. The real risk is if growth decelerates faster than earnings expectations are revised.

Rates: With the market almost fully priced for a December cut, upside from “more dovish than expected” is limited. The bigger swing factor from here is how aggressively the Fed signals 2026 and beyond.

AI: We’re transitioning from “AI can only surprise to the upside” to “AI has to earn its keep.” Infrastructure names like Marvell Technology look better positioned than software names that still depend on experimental use cases.

Equities overall: This remains a selective, rotational tape. Quality balance sheets, clear cash-flow paths, and genuinely mission-critical products are your friends. Anything that needs perfect execution or peak multiples to work probably deserves a discount.

If you’re managing a portfolio into this environment, I’d be wary of chasing every AI headline, bullish or bearish. The signal is in the fundamentals and the guidance, not the slogans.

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Kristoff - ChartMill

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