Broadcom down after earnings, but broader market holding up

Briefing.com Summary:

*Broadcom is down after its earnings report, creating added pressure on the AI trade.

*The broader market is exhibiting relative strength thanks to rebalancing activity.

*Chicago Fed President Goolsbee said he is uncomfortable frontloading too many rate cuts with inflation still high.

It said something yesterday that Oracle (ORCL) declined 10.8% following its earnings report, and yet both the Dow and S&P 500 registered record closing highs. It was not the best of days for the AI trade, but it was a banner day for the broader market.

Might there be deja vu today?

Broadcom (AVGO) is down 5% following its earnings results, which lacked an annual AI revenue forecast and included mention of narrowing margins due to AI product sales, according to Bloomberg. That, again, has tempered some enthusiasm for the AI trade, but it has not sunk the broader market.

The S&P 500 futures are up one point and are trading in line with fair value, the Nasdaq 100 futures are down 87 points and are trading 0.3% below fair value, and the Dow Jones Industrial Average futures are up 116 points and are trading 0.2% above fair value.

Apparently, Oracle’s and Broadcom’s shortcomings have fueled rebalancing efforts into other parts of the market that had previously been left looking up at the AI trade.

The rebalancing has been aided this week by the Fed’s own rebalancing effort, which included an increase in its outlook for real GDP growth in 2026, a decrease in its outlook for PCE inflation, and no change in its forecast for the unemployment rate or median expectation that there will be one rate cut in 2026.

The latter isn’t much, yet it shows the Fed, overall, remains predisposed to cutting rates. Moreover, as we noted yesterday in this column, Fed Chair Powell said he doesn’t think a rate hike is anyone’s base case at this point.

It isn’t Chicago Fed President Goolsbee’s base case, and he voted for no change at the December meeting. He told CNBC this morning that he thinks there is scope for rates to be a fair bit lower than current levels, but he dissented in December because he is uncomfortable about frontloading too many cuts, knowing that inflation is still high and also knowing that the Fed is short on data at this point to help it determine if inflation is moving toward the 2% target.

Mr. Goolsbee’s view is an important one, but it bears mentioning that his view no longer matters as much… to the market, anyway. He does not vote on the FOMC in 2026.

Nonetheless, the Treasury market might be giving some thought to his uncertainty about inflation. The 10-yr note yield is up five basis points to 4.19%, up from a post-FOMC low of 4.11% and up five basis points for the week.

That isn’t creating much interference for stocks as a whole, but it will if long-term rates keep rising.

Separately, cannabis stocks are rising sharply ahead of the open, rallying on a Washington Post report that President Trump is expected to dramatically cut federal restrictions on marijuana and classify it as a Schedule III drug (i.e., less dangerous). The president also signed an order creating a federal AI standard.

lululemon athletica (LULU) is another sharp riser, up 10% after its earnings report, which was better than expected and accompanied by the announcement that CEO Calvin McDonald will be stepping down, effective January 31, 2026.

The stock market won’t rise broadly at the open, because there will be a drag from the AI trade, but the broader market may just show some more moxie on a continued rebalancing effort.

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Originally Posted December 12, 2025 – Broadcom down after earnings, but broader market holding up