AI Struggles but Market Claws Back After Jobs Data

by Joe Mazzola of Charles Schwab, 11/7/25

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(Wednesday market open) Major indexes tried to mount a recovery early today after a private employment measure showed better-than-expected October jobs growth. The data came after stocks struggled Tuesday without help from the chip sector, which plunged and continued to edge down this morning as investors expressed disappointment with results from Advanced Micro Devices (AMD).

Private sector jobs growth last month totaled 42,000, the ADP employment report said, above Briefing.com's consensus of 26,000 and a 29,000 drop in September. ADP doesn't typically correlate with official government data due this Friday, which likely won't be released due to the shutdown. Jobs growth was bifurcated. "Small businesses continue to feel pain as companies with 1–19 employees saw a net-loss of 15,000," said Kevin Gordon, Schwab's head of macro research and strategy. "The largest companies were on top with a 74,000 gain." Yields rose after the news.

Major indexes suffered their worst session in nearly a month Tuesday as tech shares dove on worries about AI valuations. Dip buying failed to emerge. "Markets have been moving higher on the same good news, including trade agreements, a dovish Fed, a strong economy, and the AI secular growth story for months now, and perhaps some mean reversion is needed," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. He noted that Palantir (PLTR) easily beat earnings expectations but fell 8% anyway. "Market psychology comes into play here, because if these types of AI growth stocks are going to sell off on good news, how much are they going to go down on bad news?" Peterson said.

Three things to watch

  1. Tell it to the judge—Supreme Court reviews tariffs: Today the Supreme Court begins hearing arguments challenging President Trump's import tariffs. Treasury Secretary Scott Bessent, who believes the tariffs are critical for U.S. trade policy, will attend. Though it's unclear when the court might rule and the initial market impact is unclear, investors might want to follow the news for hints of how the justices lean. Signs that they're willing to consider overturning the tariffs as an unconstitutional expansion of presidential power might be positive for Wall Street and interest rates. Just last week, Federal Reserve Chairman Jerome Powell said tariffs likely contributed to inflation. And numerous groups from both sides of the political spectrum encouraged the Supreme Court to rule against the administration, arguing that Congress, not the president, is responsible for tariff policy. Though the tariffs—which act as a tax on imports—pose a headwind for U.S. companies and consumers, there are signs some firms are growing used to them, so any shift might raise uncertainty.
  2. Volatility up after weathering storm: The market sailed pretty much unscathed through a gauntlet last week of five mega cap earnings, a Fed meeting, and China trade talks. Despite all that, the Cboe Volatility Index (VIX), had a narrower weekly move than in the prior week. That changed Tuesday in a big way as spot VIX climbed double digits to above 19 and stayed there this morning. More choppiness could be ahead. Starting next month and stretching all the way out to mid-2026, VIX futures trade in contango, mainly between 21 and 22. Those aren't near historic highs but imply that the market faces unsettled times. One possible concern is relatively high stock valuations even after yesterday's tech pullback, as well as the increasing concentration of the long rally. By the end of last week, only 15% of S&P 500 stocks had outperformed the overall index over the last few months, and breadth has been thinning. As a reminder, the market can have narrow breadth without a pullback, but with no catalyst there's less news to support a big move, and any bad news for the few mega-cap stocks leading the charge could have a more widespread impact.
  3. Bitcoin slide accelerates: Bitcoin faced a number of headwinds as it's tumbled more than 20% from a record high above $126,000 a month ago to below $100,000 on Tuesday, slicing through its 200-day simple moving average. First, a historic "flash crash" on October 10 reset leverage. Then the Fed's unexpectedly hawkish stance sapped some risk-on sentiment. Broader market conditions have also played a role, said Jim Ferraioli, director of digital currencies research at the Schwab Center for Financial Research. Higher yields in the wake of the Fed meeting and waning liquidity—due to the government shutdown and the Fed's quantitative tightening (QT)—have weighed on the coin, he said, but the coming end to QT and the government reopening could provide some relief. In all, bitcoin exchange-traded funds (ETF) have seen outflows of about $1.5 billion since that "flash crash."