(These are the market notes on today’s action by Mike Santoli, CNBC’s Senior Markets Commentator. See today’s video update from Mike above.) Follow-through from the dovish takeaway to Wednesday’s Fed rate cut drives a high-torque rotation into economically sensitive assets, helping to offset another sell-down in secular-growth AI plays. As noted for weeks, the market has been pressing its bets on a reflationary reacceleration of the real economy into 2026, as “run-it-hot” policies kick in, companies lap the initial tariff impacts and the AI capex binge rages on. Whether this ultimately is proven correct by the economic performance next year (a similar bet failed in early 2025), there has been little in the Fed messaging, the earnings outlook or market action to push investors off this view. Which energizes the rush of capital toward value over growth, small-cap over large. It manifested Thursday as cyclical risk-on (banks, cruise lines, industrials up) and speculative risk-off (crypto, no-profit tech down). It’s been enough for the cheapest stocks (S & P 500 Pure Value) to nose ahead of Pure Growth for 2025 to date. Whether the Fed intended to soothe the Street’s anxieties of a “hawkish cut” or not, the net effect of raising 2026 growth estimates but still baking in another cut – and of Jay Powell’s focus on overstated job-growth numbers and rising productivity estimates – enabled investors to conclude that the Fed is not intent on smothering growth or restraining the markets in service of a stale-looking 2% inflation target. The spark of enthusiasm in this part of the market arrived just in time to absorb another crisis-of-faith moment in the AI infrastructure complex, with Oracle ‘s so-so quarter and unpersuasive assurance about the financing of its multi-year AI cloud buildout pressuring the whole group. This debate will be with us indefinitely: Is the new AI economy being wisely capitalized? How much profit will accrue to the enablers versus the customer-facing companies? Will it be a winner-take-most market? Broadcom results enter this discussion today at a time when it has been the preferred vehicle recently, the custom-chip/ Alphabet wing of the buildout. Broadcom market cap is now larger than two of the Mag7 ( Meta Platforms and Tesla ). It has now outperformed Nvidia on a two-year look-back. As I always point out, a broader market is not a safer or more stable one. Rotations out of the Mag7 – which collectively are 35% of the S & P 500 – can grow disorderly without much warning. And leadership by Old Economy sectors will run into valuation concerns more quickly than the open-ended, moon’s-the-limit AI plays. Goldman Sachs screaming higher to 2.5-times book value – a post-financial-crisis high – places the bar pretty high for upside surprise. But perhaps this is next year’s business, when the cyclical excitement gets tested by more timely data and perhaps investor sentiment has more of a chance to grow to a rolling boil of bullishness.
