From the post-election rally to the pre-election level

This report is from today’s CNBC Daily Open, our international market newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. As you see? You can subscribe here.

The market finished the week in the red
US markets fell on Friday and ended the week lower. At S&P 500 down 1.32%, the Dow Jones Industrial Average down 0.7% and on Nasdaq Composite down 2.24%. Europe Stoxx 600 lost 0.77%, the fourth straight losing week. Separately, the UK economy grew 0.1% in the third quarter, missing the 0.2% mark expected by economists.

Caught in the crossfire
China may be the target of US President-elect Donald Trump’s hawkish trade policies, but US companies could suffer. If Trump imposes tariffs on China, the Chinese government could retaliate by introducing its own tariffs, diversifying imports from the US and increasing scrutiny of US companies operating in China.

The last official meeting of Biden-Xi
US President Joe Biden met with his Chinese counterpart Xi Jinping on Saturday on the sidelines of the Asia-Pacific Economic Cooperation Summit. Biden described his decades-long relationship with Xi, while Xi appeared more focused on Trump’s presidency, saying: “China is ready to work with the new US administration to maintain communication, develop cooperation and manage differences.”

For infinity
Companies in the pure-play space have seen their shares rise over the past week. For example, Share from Rocket LabAerospace manufacturers, rose 41% weekly. When it was ignited by the positive news of the company’s earnings report, analysts said that the trade “Trump-Elon” is also behind the gravity-defying movement of space stocks.

(PRO) Nvidia sets the tone this week
Markets have had a few weeks, as investors digest the results of the US presidential election, the Federal Reserve’s rate cut, inflation readings and Fed Chairman Jerome Powell’s hawkish comments. This week, all eyes will be trained on one major event: Nvidia’s earnings, which come out on Wednesday.

Trump’s decisive victory in the presidential election, as well as his policies considered to be market-friendly, sent the market high.

Last Monday, the S&P closed above 6,000 and the Dow ended the day above 44,000 for the first time. So-called “Trump trades” – bank stocks, small companies and energy, for example – are behind the index’s gains.

As anyone who has overeaten at a party knows, there comes a point when satiety turns to surfeit.

It’s only the beginning of the week, but don’t know if we’re starting at the top.

By the time the market closed on Friday, the S&P had lost 2.1% and the Dow had fallen 1.2% for the week – both ending the week below historical milestones. The Nasdaq is down 3.2% for the week.

A slump in pharmaceutical stocks dragged down the S&P and the Dow. It was triggered by Trump announcing that he intends to nominate Robert F. Kennedy Jr., who has expressed unusual beliefs about health, to lead the US Department of Health and Human Services.

This illustrates how investors should carefully navigate Trump’s policies, which have often shown themselves to be a double-edged sword.

For example, Trump’s proposed tariff and tax cuts will increase small caps and boost corporate profits but may keep inflation hot and interest rates high – which worried markets last week.

“In the near term, we should expect some micro-volatility, especially regarding potential policy changes in the new administration,” said Kristy Akullian, head of investment strategy for iShares, Americas, in BlackRock.

That said, Akullian added that BlackRock “expects the US equity market to continue to improve, but does not expect that the increase will occur in a straight line.”

After surfeit comes digestion and then hunger. And the process starts again.

— CNBC’s Jeff Cox, Brian Evans and Alex Harring contributed to this report.