Markets In Focus: The Week That Was and What’s On Tap
THE WEEK THAT WAS
The S&P 500 slipped 0.5% and the Nasdaq Composite fell 0.7% for the week ending October 23, while the Russell 2000 advanced a solid 2%.
It was a tale of two markets. Large-cap tech and the AI complex took the brunt of the damage, especially after Thursday’s sharp sell-off, while smaller stocks and more traditional sectors held up better. The big story was renewed anxiety over the cost of the AI boom. Meta’s earnings showed strong advertising growth, but the company’s massive capital-spending plans and negative free cash flow revived worries about how quickly those investments will pay off. Tesla’s results were mixed on the spending front as well, and the broader group of chipmakers and hyperscalerelated names sold off hard. Netflix added to the pressure with softer guidance.
In our view, this AI-theme sell-off looks more sentiment-driven than fundamental. Underlying demand for AI infrastructure remains robust, corporate results continue to show healthy growth, and we believe we are still early in the AI buildout. A lot of the current fear appears misguided and should begin to ease as we move through the midterms. A flurry of earnings reports next week is also expected to help clarify the picture.
At the same time, geopolitics pushed oil sharply higher. Escalating Houthi attacks on Saudi energy infrastructure and related Middle East tensions sent Brent crude above $116 a barrel, its highest levels in months. That lifted energy shares and stirred fresh inflation concerns, even as safe-haven buying helped ease Treasury yields modestly. Economic data was generally constructive, flash PMIs stayed strong and jobless claims remained low, supporting the idea that the underlying economy is still expanding. The split performance reflected a healthy rotation: money moved out of the most crowded AI names and into small caps, energy, and other areas less dependent on the tech spending narrative. Markets remain selective, rewarding visible demand and disciplined capital allocation while punishing uncertainty around the biggest technology bets.
THE WEEK AHEAD
The coming week is pivotal for US equities as policy, growth data, and earnings converge against a still-elevated geopolitical backdrop. The FOMC meets October 27–28, with the rate decision and statement due Wednesday at 2:00 p.m. ET (press conference at 2:30 p.m.). After September’s 25 bp hike that lifted the target range to 3.75–4.00%, markets largely expect a hold, but the statement’s characterization of inflation, the labor market, and the path ahead will drive rates and risk assets. No Summary of Economic Projections is due. Thursday brings the advance Q3 GDP estimate alongside September PCE inflation, the Fed’s preferred gauge, creating a high-stakes sequencing for growth-inflation trade-offs. Earlier in the week, durable goods, consumer confidence, and new home sales will offer incremental reads on activity.
Third-quarter earnings season accelerates, with roughly one-third of S&P 500 companies reporting. The spotlight falls on mega-cap technology: Microsoft and Alphabet after the close Wednesday, followed by Amazon Thursday. These results will be scrutinized for AI-related capital spending, cloud growth, and margin trajectory. Other notable reporters include Eli Lilly, Mastercard, Intel, Caterpillar, Exxon Mobil, and Chevron, providing breadth across healthcare, payments, semis, industrials, and energy.
Geopolitically, Middle East tensions, as Houthi attacks, Strait of Hormuz risks, and elevated oil prices continue to feed inflation concerns and support energy. With US midterms on November 3, policy uncertainty may add a risk premium, particularly if energy volatility persists or fiscal signals intensify. Overall, equities face a data- and earningsdriven week in which Fed tone and Mag7 results are likely to set the near-term direction.
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