November 7, 2026 | Unsubscribe
Good Morning!
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Now let’s break down what actually moved markets this past week and what to watch next.
Market Recap
This was one of the most volatile weeks of the year. All of the major indexes fell, with the S&P 500 down about 2.7%, the Nasdaq down 3.4%, and the Russell 2000 down about 2%. Beneath the selloff, though, two important things improved: oil had its biggest weekly drop in years, and the labor market came in much stronger than expected.
The big event was a sharp selloff on Thursday, when the S&P 500 fell about 4.4%, its worst day since April 2025. The trigger was a reassessment of the AI trade after this week’s elections, as investors worried about the possibility of tighter regulation of the AI industry. That came on top of a month of growing doubts about how much companies are spending on AI. Technology stocks fell about 8% for the week, and the Nasdaq has now declined four weeks in a row. Stocks rebounded modestly on Friday, ending what had become a worldwide slide.
The most important positive development was oil. Prices collapsed this week on growing hopes for de-escalation in the Middle East. The international benchmark fell roughly 13% for the week, its steepest weekly drop since the start of the pandemic, and is now back below $100, with U.S. crude near $91. Oil has been the single biggest driver of inflation all year, so a sustained decline would be a meaningful relief for consumers, businesses, and the Fed. Energy stocks, which were October’s big winners, fell about 12% this week as a result.
Friday’s jobs report was a surprise in the other direction. The economy added 165,000 jobs in October, nearly triple the forecast, and the unemployment rate fell to 4.1%. Prior months were also revised higher. It is a clear sign the economy is not slowing meaningfully. One weak spot: long-term unemployment rose to its highest share since 2021, so people who lose jobs are having a harder time finding new ones.
For the Fed, the strong report adds to the case for a rate hike in December. Treasury yields rose on Friday after the release, though the 10-year yield still fell for the fifth straight week and now sits below 4.9%, its longest stretch of declines since early 2025.
For small caps, this week was a setback, as the broad selloff pulled them down with everything else. The bigger picture is improving, though: falling oil and lower long-term yields are exactly what smaller companies need, and the Russell 2000 is still up about 11% for the year, ahead of the S&P 500 and Nasdaq.
What’s Coming Next Week
The October inflation report on Tuesday is the key event. It will be the first reading to show whether the Fed’s September hike and this fall’s energy pressures are affecting prices. A hot number, combined with this week’s strong jobs report, would make a December hike very likely. A cooler number, especially with oil now falling sharply, could start to shift the conversation away from more hikes.
Earnings season is largely behind us, with most S&P 500 companies already reported, though a few more technology names report next week and will keep the AI debate in focus.
Most importantly, watch oil. If this week’s drop holds, it is the strongest tailwind for inflation, yields, and small caps in months. If tensions flare again, prices could reverse quickly.
The bottom line: a rough week for stocks, especially tech, but oil’s collapse and a strong job market are real positives under the surface. Tuesday’s inflation report will set the tone heading into the Fed’s December decision.
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SmallCapStocks Team
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