Fixed Income & Equities Markets Week in Review

 
This was arguably one of the most event-packed weeks for the remainder of the year. There were three prominent events for investors to ponder as the historically volatile month of October came to a close. Although there was some volatility, the major domestic indices generally worked their way higher during the month of October: Dow Jones Industrial Average (Dow) +2.5%, S&P 500 +2.1%, Nasdaq Composite +4.1%, Russell Mid Cap Index -1.5%, and Russell 2000 +1.2%.

Focal points for equity investors during the week included:

FOMC meeting. The Federal Reserve (Fed) held its Federal Open Markets Committee (FOMC) policy meeting this week and cut the Fed Funds rate by 0.25% as widely expected. The vote was 10-2 with Governor Miran favoring a 0.50% cut and Kansas City’s Schmid voting for no change. Also, the Fed announced that quantitative tightening (QT) will end on December 1st. The statement indicated that the weakening job market was a reason for the cut, even though inflation remains elevated. However, comments during the press conference by Fed Chair Powell rattled investors. He noted that another rate cut in December is not a foregone conclusion. He commented that a lack of government data is a challenge for understanding the economy, which makes it difficult to say how it will impact the central bank’s December decision, though it could push some members to be more cautious. The comments drove expectations of December rate cut to 57% from the prior 91%.

US - China trade negotiations. President Trump and Chinese President Xi met this week to discuss trade negotiations. The market responded positively to news that the US halved fentanyl-related tariffs to 10% on China’s commitment to reduce the flow of fentanyl ingredients, while it also agreed to pause its proposed export controls on rare earth minerals for a year, and committed to resuming purchases of US soybeans. The two leaders also agreed to suspend port fees for a year.

Third quarter earnings season. The bulk of the “Magnificent Seven” technology companies reported earnings this week, including Microsoft (MSFT), Meta Platforms (META), Apple (AAPL), Alphabet (GOOGL), and Amazon.com (AMZN). In general, the positives were growth from cloud computing and advertising, along with good backlog growth and a ramp in new deals. On the downside, capital spending levels remain significantly elevated, which is crucial for the continued buildout of artificial intelligence (AI). Third quarter cap ex from MSFT, GOOGL, META and AMZN totaled $112 billion, up 80% year/year, with these companies expecting outsized growth to continue in 2026. Alongside this, with demand remaining robust, supply constraints were also a challenge.