Wednesday’s called “hump day” for a reason, and stocks have been struggling to get over recent hurdles.

The problem? The market’s been trapped in a tug-of-war between AI bubble fears and hopes of a Fed rate cut next week. Today was a classic case of mixed messages: Payroll processor ADP reported that private employers cut 32,000 jobs in November, more than economists anticipated. That ups the odds that the Federal Reserve will slash interest rates at its next meeting on December 9 and 10, giving stocks a boost.

On the other hand, worries rippled through Wall Street after a report surfaced that Microsoft lowered sales growth targets for certain artificial intelligence products. Although Microsoft denied these allegations as inaccurate, its stock swung wildly, finishing down 2.5% for the day and spooking investors that the AI trade may still be unsteady.

This heady mix of AI exuberance and job market jitters has everyone scratching their heads and wondering: Which way will this cookie crumble?

We’re about to find out

Although the stock market’s been a hot mess lately, it might finally pull itself together by week’s end. That’s when the Fed’s favorite inflation gauge, the PCE report, returns from its government shutdown-induced blackout to shed some much-needed light on the state of the economy.

Last we heard, the personal consumption expenditures price index rose by 2.7% year over year in August. For Friday’s October reading, analysts expect annual PCE to rise 2.8%. Higher inflation should mean that the Fed hesitates to cut interest rates, but the market seems to think that Jerome Powell & Co. will pull the trigger regardless: Fedwatch odds currently hover at 89% that the FOMC will cut rates next week.

Although Friday’s PCE report will bring some clarity, it will take longer to get the full picture.

“Friday’s PCE release may have modest impact, but investors [seem] instead focused on the softer labor market,” US Bank Asset Management senior investment strategy director Rob Haworth told Brew Markets. “This makes the November jobs report on December 16 an important directional release.”

Even if the Fed cuts rates on December 10, and hints that more cuts may be coming in 2026, that doesn’t mean a market rally is a sure thing. “I think it’s a stretch to say stocks will continue to do well,” added Kevin Gordon, head of macro research and strategy at Schwab Center for Financial Research. “That’s especially true if cut probabilities increase due to weaker labor data, which could raise the risk of recession.”

In other words, Friday may just be another day to end with an IPA and a “I’ll get back to figuring this out on Monday.”—JD

🟢 What’s up

• Bristol Myers Squibb rose 5.62% after the company said it will expand enrollment in a late-stage trial for Cobenfy, its experimental treatment for Alzheimer’s-related psychosis.
• Marvell Technology jumped 7.87% thanks to strong Q3 results and projections that data-center revenue will grow over 25% by 2027, well above prior expectations of 16%.
• Dollar Tree gained 3.61% on strong earnings and a beat in comparable-store sales.
• Microchip Technology climbed 12.17% after raising its fiscal Q3 revenue and profit guidance.
• Delta Air Lines jumped 3.64% despite flagging a $200 million hit to Q4 pretax profit tied to the government shutdown, as the airline said demand and early-2026 bookings remain healthy.
• Eric Trump’s American Bitcoin Corp. recovered 9.13% today after plummeting over 50% in just 30 minutes on Tuesday.

What’s down

• Netflix fell 4.93% while Paramount slid 7.27% as investors weighed the costly reality that either company could end up mounting a multibillion-dollar bid for Warner Bros. Discovery.
• Acadia Healthcare dropped 10.92% as the behavioral healthcare service provider trimmed its earnings guidance thanks to mounting legal expenses.
• Micron slipped 2.23% on news that it will wind down its consumer products unit to concentrate on AI-grade memory chips
• GitLab fell 12.77% after posting a Q3 loss, with ongoing softness in its public-sector business weighing on results.
• Alexandria Real Estate Equities sank 10.05% on a 45% dividend cut that rattled investors.
• Pure Storage plummeted 27.31% despite strong Q3 results as investors focused on its plan to funnel AI hyperscaler revenue back into R&D and sales efforts, a strategy that could leave 2027 margins looking slimmer.

There are plenty of ways to measure an investment’s value, but if you want to see how productive a company really is, one method is to calculate revenue per employee—which is simply total revenue divided by total number of employees.

As you can imagine, big tech companies do pretty well for themselves. Nvidia’s most recent fiscal year revenue of $130.5 billion and its headcount of 36,000 means its ratio is roughly $3.6 million. Apple’s $416 billion in revenue this fiscal year divided by its approximately 166,000 employees gives it a ratio of about $2.5 million.

But there’s one little known tech company out there that has evolved into a profit powerhouse: Valve. The gaming industry has swollen since 2020, raking in approximately $184 billion in annual revenue, compared to the movie industry’s $33.9 billion. Valve has become a dominant force in gaming, earning about $16.2 billion this year from selling games on its popular Steam platform.

With an estimated 350 employees, that means Valve is making a whopping $46 million per worker. Perhaps even more impressively, Valve’s corporate structure is completely flat—it has no C-suite or even official managers—and the company endorses returning money to employees, touting industry-leading compensation packages.

Valve isn’t publicly traded, so unfortunately you can’t invest in this gaming behemoth. But what you can do is pay attention to what it does so well—running a lean, focused company that has established a dominant position in a growing industry while maximizing employee efficiency—and search for potential investments that do the same.—MR

American Eagle Outfitters spread its wings this quarter, and the numbers took off.

The retailer crushed expectations, beating earnings and revenue forecasts for its fiscal third quarter while raising guidance. Revenue climbed 6% year-over-year, same-store sales rose 4%, and the company now expects holiday comparable sales to grow 8% to 9%.

The strength came from a “record-breaking Thanksgiving weekend,” powered by its Aerie and Offline brands. Aerie alone posted an 11% jump in comparable sales and saw revenue climb roughly 13%.

The battle for denim dollars

Forget the AI war—the real arms race is the denim war. The value of the jeans market has soared 28% since 2020 to $101 billion, and companies are eager to snap up market share. That’s why brands are burning millions on celebrity-driven ad campaigns to win market share in a brutally competitive category.

The denim spending spree started when Levi Strauss partnered with Beyoncé last fall. Gap fired back in August with K-pop group Katseye and its viral “Milkshake” campaign.

But American Eagle pulled out the big guns over the summer, enlisting Sydney Sweeney and Travis Kelce, whose combined campaigns generated more than 44 billion impressions in total. The Sweeney spot even briefly turned AE into a meme stock, with shares popping 20% in a day after Donald Trump called it “the hottest ad out there.”

The price of the game

The spending behind these campaigns is significant. Levi’s SG&A expenses jumped by nearly $200 million in 2024, the same year it launched its Beyoncé partnership. More than half of that increase landed in the quarter the campaign debuted. For Levi’s, the gamble paid off: the campaign racked up 85 million views.

That partly translated into a return of 29.68% this year for Levi Strauss stock. Gap, too, has made good on its investment: Shares are up 13.63% YTD.

As for American Eagle, its stock is now up 15.07% this year. Most of the gains arrived after last quarter’s earnings confirmed the celebrity campaigns were lifting sales, driving 700,000 newly acquired customers. Before that report in September, the stock had sunk 18% YTD.

Zoom out: If you feel like you’ve been flooded with jeans ads lately, you’re not alone. Nearly 70% more denim advertisements aired on TV this year, per EDO and Euromonitor International. With the stakes rising, brands almost have to place big, splashy bets just to keep pace.

For American Eagle, all this momentum creates a helpful tailwind. Its high-profile campaigns give the brand added visibility heading into the holiday season, setting up a potential halo effect during its busiest stretch of the year.—SY

• Forget the AI bubble—BlackRock and Bank of America say it’s more of an “air pocket.”
• Big oof: Harvard bet $500 million on bitcoin last quarter, just ahead of its brutal selloff.
• President Trump plans to roll back Biden-era fuel economy standards, which would be a boon for US automakers.
• Meta Platforms poached Apple’s head of UI in the latest escalation of the war for talent between big tech companies.
• The Nasdaq allows far more small-cap companies to IPO than the NYSE, but regulators are starting to crack down on signs of market manipulation.
• Nvidia is desperately trying to keep new requirements that US customers get first dibs on its most advanced chips out of the latest defense spending bill.
• Anthropic is racing toward an IPO as it tries to stay one step ahead of OpenAI.

It’s nice to see you again, old friend: The weekly initial jobless claims report returns to its usual Thursday spot after a government shutdown and the Thanksgiving holiday pushed it all over the calendar. We’ll also get a dollop of Fedspeak when we hear from Fed Vice Chair for Supervision Michelle Bowman.

As for earnings, we’ve got the latest reports from Dollar General, Kroger, Ulta Beauty, Hormel Foods, and DocuSign.