Markets In Focus: The Week That Was and What’s On Tap
THE WEEK THAT WAS
“Uncertainty isn’t something to fear—it’s where possibility lives.”
— David Booth, Stay Calm: Learn to Embrace Uncertainty in Investing and Life
The S&P 500 fell 0.6% for the week ending October 30, the Nasdaq Composite dropped 2%, and the Russell 2000 rose 1.3% as investors rotated away from mega-cap technology.
The Federal Reserve held rates steady at 3.75%–4% in a 10-2 vote, with two members preferring a quarter-point hike. Chair Kevin Warsh’s statement described economic activity as expanding at a “strong pace,” with resilient spending, solid productivity, and robust capital investment, while noting that inflation “remains elevated.” Markets interpreted the decision as a patient pause ahead of more data.
Thursday’s advance estimate showed third-quarter GDP accelerating to a 3.4% annualized pace from 2.2% in the second quarter, beating expectations. Consumer spending rose 3.8% and business investment was strong, particularly in equipment tied to the AI build-out, while real final sales to private domestic purchasers advanced 4.9%. September PCE inflation ran at 3.6% year-over-year (core 3.1%), confirming price pressures have not fully cooled.
Earnings drove the week’s volatility. Alphabet plunged roughly 13% after missing revenue and profit estimates, with search advertising growth slowing and free cash flow turning deeply negative (~$9 billion) amid $51 billion in quarterly capital spending. Management kept 2026 capex guidance at $195–205 billion and signaled a significant further increase in 2027. Amazon’s results and elevated future spending plans, plus Intel’s nearly 29% drop on weak guidance, intensified concerns that AI infrastructure outlays are outpacing near-term returns. The pressure weighed on the Nasdaq while supporting broader rotation into smaller companies.
Geopolitical overhangs from the Middle East, ongoing tensions involving Iran and risks of renewed strikes, kept oil prices elevated (Brent near $117), supporting energy shares but adding to inflation worries. Month-end selling and positioning ahead of the midterms added to Friday’s sharp tech-led decline. Overall, the week highlighted a resilient economy and strong underlying demand tempered by questions over the timing and profitability of massive AI investment.
As legendary investor Howard Marks reminds us, “No asset is so good that it can’t become a bad investment if bought at too high a price.”
That observation is particularly relevant as investors reassess the extraordinary expectations embedded in AI-related equities. We remain constructive on the long-term transformative potential of artificial intelligence, but recognize that technological leadership and investment attractiveness are not necessarily synonymous. This perspective is central to our investment philosophy at Legacy Bridge, where we seek to identify exceptional businesses with durable competitive advantages, attractive long-term growth prospects, and valuations that offer a compelling balance between opportunity and risk. Ultimately, even the most promising investment must be evaluated against the expectations reflected in its price, as the discipline exercised at the time of purchase remains a critical determinant of long-term returns.
We believe the recent weakness across the AI complex has created compelling opportunities to initiate or add to positions in high-quality businesses with strong earnings growth prospects. While near-term volatility may reflect short-term investor sentiment and heightened scrutiny of potential returns on the massive cap-ex spending, we remain focused on the underlying earnings power of these businesses and the opportunity to acquire exceptional franchises at more attractive prices.
THE WEEK AHEAD
The week is dominated by the October employment report on Friday and a heavy earnings slate, set against the backdrop of U.S. midterm elections on Tuesday and lingering geopolitical risks.
On the macro front, investors will parse Monday’s ISM Manufacturing PMI, Tuesday’s JOLTS and factory orders, Wednesday’s ADP private payrolls and ISM Services PMI, and Thursday’s initial claims. The main event is Friday’s Employment Situation report. Consensus looks for roughly 75,000 nonfarm payrolls and an unchanged 4.2% unemployment rate. A softer print would reinforce expectations of eventual policy easing, while any upside surprise on wages or payrolls could pressure rate-sensitive equities. Preliminary Michigan sentiment is also due Friday.
Earnings remain supportive. More than half the S&P 500 has reported, with an 82% beat rate and blended Q3 earnings growth near 30%. Roughly 140 companies report this week, including high-profile names such as Apple and Palantir on Monday. Guidance and AI-related commentary will be scrutinized for signs of sustained capital spending momentum.
Geopolitically, midterm elections on November 3 introduce event risk, though markets are typically resilient. More durable is the ongoing Middle East tension involving Iran, which continues to elevate oil and shipping costs and raises the risk of further escalation once electoral constraints ease. A sustained oil spike would challenge the soft-landing narrative and favor energy and power-related equities over pure growth.
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DISCLOSURES
The information presented is the opinion of Legacy Bridge, LLC., and does not reflect the view of any other person or entity. The information provided is believed to be from reliable sources, but no liability is accepted for any inaccuracies. This is for information purposes and should not be construed as an investment recommendation. The opinions expressed are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. Past performance is no guarantee of future performance. Investing involves risks. Legacy Bridge LLC., is an investment adviser registered with the U.S. Securities and Exchange Commission.
The S&P 500 generally represents performance of 500 large companies listed on exchanges in the U. S. It is one of the most commonly followed equity indices. The Nasdaq Composite Index is a market-weighted index that measures the performance of more than 3,000 common equities listed on the Nasdaq Composite Market. The Russell 2,000 Index is a market-cap weighted index that measures the performance of approximately 2,000 of the smallest companies in the Russell 3,000 Index. The MSCI ACWI captures Large and Mid-Cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries. With 2,921 constituents, the index covers approximately 85% of the global investable equity opportunity set. FactSet Research System is a financial data and software company that provides research for Wall Street professionals and individual investors.
