Week of Oct. 26: The Fed Paused, and the Bill Came Due
The Federal Reserve stopped raising rates on Wednesday, and the 10-year Treasury yield ended the week lower than it started. The Nasdaq still closed out its worst month since March.
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Week of Oct. 26: The Fed Paused, and the Bill Came Due
The Federal Reserve stopped raising rates on Wednesday and the 10-year Treasury yield finished the week below 5 percent, and the Nasdaq still closed out its worst month since March. The gap between those two facts is the story of the week: the market got the policy it had been asking for, and sold the companies that need it most anyway. 12
Where the week landed
| Index | Friday close | Friday | Week | October |
|---|---|---|---|---|
| S&P 500 | 7,580.07 | −1.82% | about −0.6% | −0.9% 3 |
| Nasdaq Composite | 25,437.00 | −2.86%, its worst day since June | about −2.0% | −5.3%, its worst month since March 2025 3 |
| Dow Jones Industrial Average | 51,770.31 | −572.25 points (−1.09%) | about −0.9% | +1.7% 3 |
The week's two key prices both helped the case for owning stocks, and stocks fell anyway. The 10-year Treasury yield closed at 4.933 percent, down from 4.999 percent a week earlier and its lowest in nearly two months, and the 2-year fell below its 50-day moving average for the first time since August 18. 234 Crude went the other way, with West Texas Intermediate near $104 a barrel, up about 2 percent on Friday and roughly 15 percent on the month, and Brent near $117.50. 3
What broke, and what did not
The week in one fact: Meta, Alphabet and Amazon all ran their data-centre build-outs faster than their businesses earned, and all three reported negative free cash flow for the same quarter. 5
Alphabet's was $9.07 billion for the third quarter. The company missed on revenue and the shares fell more than 12 percent on Thursday, the worst day on record for the stock, which also formed a death cross as its 50-day average crossed below its 200-day. 36 Amazon reported the next evening: earnings of $1.89 a share against $1.96 expected, revenue of $201.94 billion against $202.22 billion, negative free cash flow of $42.4 billion, and a capital spending plan it kept unchanged at about $220 billion. 34 Intel guided the fourth quarter to $15 billion to $16 billion of revenue and 25 cents of earnings a share, against $17.1 billion and 43 cents expected, blaming the PC market, and the stock fell 29 percent on Friday. 3
The week had opened the other way, which is what makes Friday's move a verdict rather than a drift. Anthropic filed to list on the Nasdaq, and Bank of America, Citigroup, Morgan Stanley and Blackstone announced $63 billion of financing for Anthropic's purchase of Broadcom technology; Broadcom rose 4 percent and the chips rallied for three days. 7 The iShares Semiconductor ETF then fell 9.1 percent on Friday and finished the week down 2.4 percent, having spent three sessions climbing. 45
The selling stopped at the edge of the build-out. Most of the 11 S&P 500 sectors finished the week higher, with Coca-Cola and Procter & Gamble among the outperformers. 5 On Thursday the equal-weight S&P 500 rose 1.2 percent while the headline index fell 0.3 percent, and over the past month the equal-weight index is up almost 5 percent against a 3.1 percent fall in the Nasdaq-100. 4 Chevron and ExxonMobil both closed at records on Friday after third-quarter profit surges, and Eli Lilly, Johnson & Johnson and Pfizer traded at 52-week highs. 3
Two companies made the rule visible in the same week. Microsoft kept its free cash flow positive and its shares still fell on a plan to raise $25 billion in the investment-grade bond market, a sale that drew reported orders of $115 billion. 48 Oracle promised to hold additional fundraising between fiscal 2027 and 2030 to $20 billion, forecast $225 billion of revenue by fiscal 2030, and rose 11 percent on Wednesday. 1 The Financial Times reported that Blackstone has told investors Anthropic may receive a high junk rating rather than investment grade after its listing. 3
The data pointed the other way
The economy did not cooperate with the bull case or the bear case. Advance third-quarter GDP grew at 3.4 percent annualised against 3.1 percent expected, up from 2.2 percent in the second quarter, with business investment in artificial intelligence doing much of the work. 89 September PCE prices rose 0.5 percent on the month and 3.6 percent on the year, slightly below the 3.7 percent expected but above August, with the core measure up 0.32 percent on the month. 89
The Fed held its target range at 3.75 percent to 4 percent on Wednesday, its first pause after the September increase, with two dissents in favour of a hike. The statement said inflation remains elevated and that "the accumulation of more information will help the Committee." 1 Chair Kevin Warsh said financial conditions have already tightened for some sectors, mainly through higher term rates, and that he does not believe in forward guidance absent a crisis. 89 Pricing puts a quarter-point hike at the December 9 meeting at about 77 percent, or about 82 percent on the year-end forward rate of 4.085 percent; the peak forward rate stays at 4.51 percent in September 2027, above the Fed's own 4.125 percent median projection. 89
Consumers were the one part of this getting better. Conference Board confidence rose 7.5 points to 91.7 in October against 81 expected, which the board tied to petrol prices easing nearly 20 cents a gallon from late September. 7 Mortgage rates fell for a second week to 7.37 percent and applications rose 3.4 percent. 1
What matters next week
Tuesday's midterm elections are the week's first event. Democrats are favoured for the House and given a real chance at the Senate, and the part that reaches equities is not the fiscal arithmetic but scrutiny of data centres: their power draw, their water, their local permits and who pays for the grid. 56
Apple reports on Monday, up 28 percent this year, and AMD, Qualcomm, Arm, Palantir, McDonald's, Amgen and ConocoPhillips follow, with 138 S&P 500 companies reporting in all. 56 On the data side, Monday brings ISM Manufacturing, Tuesday JOLTS and factory orders, Wednesday ADP and ISM Services, Thursday productivity, and Friday the October employment report, expected near 55,000 payrolls with unemployment at 4.2 percent. 58 Fed speakers return from the blackout — Hammack, Barkin and Logan on Thursday, Williams on Friday — and there are no note or bond auctions. 8 The technical line to watch is the S&P 500's 200-day moving average at 7,306, which BTIG notes is about 4 percent below Friday's close. 5
The frame to carry in: October moved the market from one question to another. It is no longer asking whether the chips will sell. It is asking who borrows to buy them, and whether the borrower earns enough to pay. Wednesday's pause answered none of that and Tuesday's vote will not either. A quarter where the spending shows up in cash instead of debt would.
References
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- 2U.S. 10 Year Treasury
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