CNBC Daily Open: From postelection rally to preelection levels

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

What you need to know today

Markets ended week in the red 
U.S. markets slumped on Friday and ended the week lower. The S&P 500 fell 1.32%, the Dow Jones Industrial Average slipped 0.7% and the Nasdaq Composite tumbled 2.24%. Europe's Stoxx 600 lost 0.77%, its fourth straight losing week. Separately, the U.K. 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 U.S. President-elect Donald Trump's hawkish trade policies, but U.S. companies could suffer in the crossfire. If Trump does implement his tariffs on China, the Chinese government could retaliate by introducing its own tariffs, diversifying its imports away from the U.S and increasing scrutiny of U.S. firms operating in China. 

Last official Biden-Xi meeting 
U.S. President Joe Biden met his Chinese counterpart Xi Jinping on Saturday at the sidelines of the Asia-Pacific Economic Cooperation summit. Biden reflected on his relationship with Xi across decades, while Xi seemed more focused on Trump's presidency, saying: "China is ready to work with a new U.S. administration to maintain communication, expand cooperation and manage differences." 

To infinity 
Pure-play space companies have seen their shares soar over the past week. For example, shares of Rocket Lab, an aerospace manufacturer, popped 41% on a weekly basis. While that was ignited by positive news from the company's earnings report, analysts say the "Trump-Elon" trade is also behind the gravity-defying moves of space stocks. 

[PRO] Nvidia sets the tone this week 
Markets had a wild few weeks, during which investors digested the U.S. presidential election results, the Federal Reserve cutting rates, inflation readings and Fed Chair Jerome Powell's hawkish comments. This week, all eyes will be trained on one key event: Nvidia's earnings, coming out Wednesday. 

The bottom line

Trump's decisive victory in the presidential elections, as well as his purportedly market-friendly policies, drove markets to new highs.  

Last Monday, the S&P closed above 6,000 and the Dow finished the day above 44,000 for the first time. The so-called "Trump trade" — shares of banks, small-cap companies and energy, for example — were behind much of the indexes' gains.  

As anyone who has overeaten at a feast knows, however, there's a point when satisfaction passes into satiation into surfeit.  

It was only the start of the week, but little did we know we were beginning at the peak.  

When markets closed on Friday, the S&P lost 2.1% and the Dow had fallen 1.2% for the week — both ending the week below their milestones. The Nasdaq slid 3.2% on a weekly basis. 

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

This illustrates how investors must delicately navigate Trump's policies, which often present themselves as double-edged swords.  

For instance, Trump's proposed tariff and tax cuts will buoy up small caps and expand corporate profits but might also keep inflation hot and interest rates high – which were the worries weighing on markets last week. 

"In the near term we should expect some micro volatility, particularly around potential policy shifts under a new administration," said Kristy Akullian, head of iShares investment strategy, Americas, at BlackRock. 

That said, Akullian added that BlackRock does "expect the U.S. equity market to continue to move higher, but don't expect that rise to happen 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.