Risk Appetite Sags, Stocks Dip Ahead of PCE, Fed

Published as of: December 5, 2025, 9:17 a.m. ET

(Friday market open) The spotlight shifted to Hollywood this morning where Netflix (NFLX) appeared to emerge the winner in bidding to buy Warner Bros Discovery (WBD). Stocks turned lower early as risk-off sentiment moved in ahead of today's Personal Consumption Expenditures (PCE) price data and next week's Federal Reserve meeting. The S&P 500^® index is up slightly for the week and nearly 5% from the November 20 low, closing Thursday at its highest since October 29.

Investors should prepare for potential volatility when September PCE appears at 10 a.m. ET. Especially if it holds any surprises to the upside, though the data are dated due to the government shutdown. Consensus for headline PCE is 0.3%, equal to the August rise. Today's 10 a.m. data ledger also includes September personal spending and personal income, both of which could be too dated to have much impact, along with consumer sentiment. While PCE and sentiment data might provide near-term guideposts, the Fed still is driving in a fog—to use Fed Chairman Jerome Powell's term—without the November jobs report.

Wall Street had an uneventful Thursday, rising for the third straight session amid mixed performance from mega-caps. Though today's data could stir things up, trading might flatten again early next week ahead of the Federal Open Market Committee's (FOMC) rate decision Wednesday afternoon. Odds of a 25-basis point rate cut are 87%, according to the CME FedWatch Tool. "The Fed doesn't tend to go against market odds when they're that extreme in one direction or another," said Liz Ann Sonders, chief investment strategist, Schwab Center for Financial Research (SCFR). "But it wouldn't surprise me if the commentary around a cut was somewhat similar to what happened at the October FOMC meeting when Powell was pretty quick to shoot down the notion that we could just continue to anticipate cuts at every meeting,"  

1. Inflation data could provide direction: For core PCE, which excludes food and energy, analysts expect 0.3%, up from 0.2% in August, Briefing.com said. Another key element is annual core PCE, which analysts see at 2.9% after it rose that same amount in August. That's well above the Fed's 2% target. Keep in mind that housing prices have less influence on PCE than on the Consumer Price Index (CPI), and shelter prices rose a brisk 3.6% annually in September's CPI report. Though analysts expect a 2.9% core PCE rise, Powell said in his last press conference in late October that he expects 2.8%, noting that goods inflation has picked up but disinflation appears to be continuing for services. 
    
2. Gloomy sentiment seen: Preliminary December University of Michigan consumer sentiment is another bellwether number due at 10 a.m. ET. Consensus from Briefing.com is for a headline of 52.0, little improved from 51 in November and still near historic lows. Long-run inflation expectations, an element of the report watched closely by the Fed, fell to 3.4% in November from 3.9% in October. Steadiness or a slide there might help soothe inflation worries and reinforce ideas that the Fed is likely to cut next week. Sentiment and confidence measures have been extremely low this quarter—potentially reflecting a tough jobs market and stubborn inflation—which could be seen as a sign that "hard data" might soften in weeks ahead. 
    
3. Earnings update next: Today brings the latest update on quarterly earnings progress from FactSet after a holiday break last week. Third quarter earnings growth had been 13.4% year over year when FactSet last reported before Thanksgiving, and investors will check for any changes when the new data arrive around midday. Some analysts say they've seen earnings estimates rising. With the fourth quarter earnings season just about six weeks away, those estimates start taking on more importance in the FactSet report. As of late November, 43 S&P 500 companies had issued negative EPS guidance for the fourth quarter and 34 had issued positive guidance, FactSet said. Analysts pegged fourth quarter earnings growth at 7.5%, which could change dramatically considering the quarter isn't over yet. And two major earnings reports are on tap next week when Oracle (ORCL) and Broadcom (AVGO) share results, putting focus squarely on AI spending and demand.

Netflix and Warner Bros Discovery shares went separate ways after the acquisition news, which would provide Netflix with the studio and streaming segments of WBD. Netflix fell more than 3% while WBD rose 4%. Shares of Netflix were already down sharply from this year's post-split high of $134 registered in late June, falling to around $100 this morning. WBD shares have been on a meteoric rise from a low of $7.52 in April to $24.54 yesterday. The deal values WBD at around $27.75 per share.

Bitcoin futures (/BTC) are pulling back from their mid-week recovery, down more than 2% in early trading today, possibly indicating less risk appetite ahead of the inflation data and Fed meeting Shares of crypto-related stocks including Coinbase (COIN), Strategy (MSTR), and Circle Internet Group (CRCL) were also lower.

Nvidia (NVDA) and many other AI-related stocks climbed ahead of the open, mostly less than 1%. Oracle (ORCL), which reports next week, led the way early with a 2.4% gain. Nvidia trades close to its high for December and is up almost 4% this week.

Meta Platforms (META) gained more than 3% Thursday following media reports that the company seeks to cut costs in its metaverse division, where spending and losses have been heavy. Meta shares have been under pressure for weeks amid worries about its surging AI spending.

Intel (INTC) lost 7% Thursday as Reuters reported the firm plans to hang on to its networking and communications unit within the company. This appeared to disappoint investors who wanted the company to focus on cost cutting.

Shares of Nvidia-backed CoreWeave (CRWV) climbed 8% Thursday after Barron's ran a positive article about the company saying that "renting AI chips in the cloud has become one of the hottest areas of the AI rollout."

Hewlitt Packard Enterprises (HPE) plunged more than 9% in early action after the server and cloud-software group posted surprisingly weak revenue as customers face delays in AI product development, MarketWatch reported.

Ulta Beauty (ULTA) climbed 7% ahead of the open after the beauty supply retailer raised its sales outlook for the year and posted better-than-expected earnings.

Treasuries are on pace for their worst week in six months ahead of inflation and sentiment data. The 10-year yield is having its largest weekly gain since June. 

Despite a rise in Treasury yields, the Russell 2000 (RUT) index of small-cap stocks led indexes Thursday with a 0.76% gain. It's been the best-performing index over the last week, in part due to hopes for rate cuts that might help smaller businesses more dependent on borrowing. It also has a heavy weighting toward regional banks, which enjoyed a solid move since mid-November. 

Checking longer-term munis: For investors comfortable with the possibility of taking on some added interest rate risk, high-quality, longer-term municipal bonds currently look attractive, particularly compared with Treasury securities, Schwab's experts write in a new analysis of the muni market. 

2026 Muni outlook: Municipal bonds will continue to offer attractive tax-adjusted yields, and credit quality should remain stable, writes Cooper Howard, director of fixed income research and strategy, SCFR, in his outlook for 2026.

2026 Corporate credit outlook: After a good 2025 for most corporate bond investments, Schwab's "up-in-quality" theme continues for 2026, writes Collin Martin, head of fixed income research and strategy, SCFR, in his outlook for next year. "We are maintaining our 'up-in-quality' theme given low credit spreads, Martin said. "Investment-grade corporate bonds still appear attractive, however, as their yields are generally near the upper end of their 15-year range."

As the Fed ponders what remains a sticky inflation climate, two new inflationary trends have begun to show up on the charts. Copper prices (/HG—candlesticks), which sagged in August to near their lows for the year, soared in recent weeks back toward early summer highs, partly due to surging demand for the industrial metal triggered by the AI data center buildout and worries that U.S. tariffs could limit supplies, Forbes reported. Natural gas futures (/NG-purple line), a prime component of heating, are sizzling, too, at new highs for the year thanks to a sudden December cold spell across much of the U.S. and Canada that caused demand to spike earlier than normal, seasonally.

Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week.

December 8: Expected earnings from Toll Brothers (TOL).

December 9: Q3 Productivity, October Job Openings and Labor Turnover (JOLTS) survey and earnings from AutoZone (AZO), Ferguson Enterprises (FERG), Campbell's (CPB), Casey's General Stores (CASY), and GameStop (GME).

December 10: FOMC rate decision, FOMC projections, and expected earnings from Chewy (CHWY), Oracle (ORCL), Adobe (ADBE), and Synopsys (SNPS).

December 11: November PPI and core PPI and expected earnings from Ciena (CIEN), Broadcom (AVGO), Costco (COST), and lululemon (LULU).

December 12: No major earnings or data expected.