The Addition of Williams to the List of Fed Doves Drives Equity Rebound: Nov. 21, 2025

Stocks were dead-cat bouncing near the open this morning prior to gaining meaningful ground after yesterday’s brutal selloff. This morning’s rally followed earlier comments from NY Fed President Williams, who alluded to labor market vulnerabilities currently overwhelming inflation risks. The comments drove the chances of the Fed cutting its key rate during its last meeting of the year to a daily high of 78%. Economic data also supported the recovery, as Flash PMIs signaled the fastest pace of advancement this month since July, which increased optimism about corporate earnings buoyancy. Treasurys, meanwhile, are rallying in bull-steepening fashion, with the decline across the maturity structure led by the monetary policy sensitive tenors, as firmer growth expectations hampered gains for duration although they kept the greenback positive and north of its critical 100 level on the DXY index.

Markets React

Evidence of a cycle that’s on solid footing amidst soaring easing projections have cyclical equity areas advancing significantly, with the Russell 2000 leading amongst the four major benchmarks with a 3% gain because it stands to benefit disproportionately from a 25-bp reduction. The action now appears to be imminent after Williams, a voting member, opined that the FOMC’s stance is modestly restrictive. Commodities are rising, too, with the exception of crude oil, which is selling off against the backdrop of a US proposed peace deal that incrementally raises the probability of more barrels entering the market from Moscow. Volatility protection instruments saw higher prices before pulling back with investors unwinding hedges in light of risk-on postures.

US PMI Moves Further into Expansion

Economic activity accelerated broadly this month with executives noting an uptick in confidence due to the ending of the government shutdown and optimism of further rate cuts, although the positivity was tempered by persistent cost pressures across both input and selling prices. The S&P Global Flash Purchasing Managers’ Indices (PMI) climbed to 55 in the larger services sector and posted a beat while decelerating to a 51.9 miss in manufacturing. The results compare to October’s 54.8 and 52.5 as well as consensus estimates of 54.6 and 52. Orders were terrific as strong consumer demand bolstered performance, but hiring remained slow and curbed gains as payrolls rose only modestly this November.

December Rate Cut Reignites Hope of Santa Rally

Soaring odds of a December Fed reduction are reigniting hopes of a Santa Claus rally despite the recent significant technical damage within the major stock indices that equity bulls are attempting to repair. The S&P 500 remains significantly below its 20- and 50-day moving averages following Thursday’s horrific selloff but mounting chances of imminent monetary policy accommodation are quelling the fears of valuation hawks. Indeed, lighter costs of short-term capital widen the path for further multiple expansion, as they raise the risk premium across asset classes and serve an assist to worries that the AI sector is in bubblicious territory. Additionally, lower short-term funding expenses help the broadening trade, as cyclically oriented, rate-sensitive shares can offset weakening enthusiasm in the growthier, speculative technology areas, especially against the backdrop of an economic reacceleration. Today’s data from S&P Global added confidence of a pickup in the cycle, as well as yesterday’s payroll beat, subdued initial unemployment claims and robust Dallas Fed index. Robust activity, loosening financial conditions and an ongoing tolerance of above-target inflation can certainly extend the duration of this bull market while raising participation.

International Roundup

Economic Clouds Darken Over Big Ben

The UK’s Flash PMI, retail sales print and consumer sentiment index, released in the past 24 hours, were all negative, pointing to an economy that is barely growing. The dour developments occur just a week before the country proposes its next budget, which is expected to include tax hikes to help plug a potential $30 billion funding shortfall with the country suffering from weaker-than-anticipated economic growth, an inability to cut to social programs and higher financing costs.

UK Economic Activity Slows

The UK S&P Global Flash Purchasing Managers Composite Index dropped from 52.2 in October to 50.5, narrowly staying above the contraction-expansion threshold of 50. The indicator also missed the economist consensus estimate of 51.8. Unlike in recent months, the country’s services sector was the culprit. It sank from 52.3 to 50.5, considerably below the 51.9 estimate. New orders slipped for the first time since July. The manufacturing gauge, at 50.2 was somewhat of a bright spot, climbing from October’s contraction level of 49.7 and surpassing the 49.3 prediction. Total orders increased for the first time in over a year while and the Manufacturing Output PMI hit a 14-month high. More broadly, UK business confidence deteriorated and jobs losses accelerated. Some businesses have attributed the weakness to delayed spending as UK officials prepare for the next budget.

Meanwhile, Consumer Spending Falls

UK retailing volumes shrank in October, but shops are attributing the decline to consumers deferring their spending until Black Friday discounts kick in, according to the Office for National Statistics. Activity was 1.1% lower during October than in the preceding month and only 0.2% higher than in the year-ago period. Economists anticipated a month-over-month (m/m) 0.2% decline and a year over year (y/y) gain of 1.5% after September’s 0.7% and 1% results

House goods stores were the only business to report gains with sales up 2.1% m/m. The extent of declines for other categories were as follows:

• Textile clothing and footwear, 4.9%
• Automotive fuel, 2.4%
• Non-store retailing, 1.7%
• Food stores, 1.1%
• Department stores, 0.2%

While Consumer Sentiment Weakens

Households, however, appear less likely to splurge this holiday season as they brace for an expected tax increase as the UK government plans to plug a fund shortfall in the next budget. The GfK Consumer Confidence Index dropped to -19 from -17 while the economist consensus estimate was -18. In compiling the barometer’s result, GfK found that shoppers say they are less likely to make a major purchase in the near future. Declines also occurred with the other four components, which address past and future personal financial situations as well as perceptions of economic conditions.

Japan’s Manufacturing Decline Slows

Japan’s manufacturing contraction slowed this month with the S&P Global Flash Manufacturing PMI climbing from 48.2 to 48.8 and matching the economist consensus estimate. Meanwhile, the Flash Services PMI was unchanged at 53.1 and the overall indicator advanced from 51.5 to 52.

Factory output fell at the slowest pace in three month and business confidence strengthened across both services companies and goods producers. The improved sentiment contributed to the biggest payroll increase since June. It was the twenty-sixth month of employment gains. Businesses also reported increasing their gate prices, but input costs climbed at the fastest pace in six months.

And Trade Deficit Shrinks

Japan’s trade deficit fell modestly from JPY 234.6 ($1.5 billion) in September to JPY 231 billion last month, according to the Ministry of Finance. After climbing 4.2% y/y in September, exports jumped another 3.6% last month, easily surpassing the 1.1% economist consensus forecast. Imports, meanwhile, climbed only 0.7% y/y, weakening from the 3% spike in September but stronger than the forecast for a 0.7% decline. Regarding shipments abroad, exports to the US slipped 3.7% y/y in response to the US imposing a 15% import tariff on the country’s goods. It was the seventh consecutive monthly decline. Exports to other countries, however, more than offset the impact of the US protectionism. Japan’s imports from the US, meanwhile, soared 20.9% driven by petroleum and food products.