Weekly Wrap

The stock market finished a volatile week mostly lower, as a deepening correction in AI-related stocks overshadowed strength across much of the broader market. The S&P 500 declined 0.6%, the Nasdaq Composite fell 2.0%, and the DJIA lost 0.9%. However, the Russell 2000 and S&P Mid Cap 400 both gained 1.3%, reflecting a notable divergence between the major averages and smaller companies.

The week's central theme was the market's increasingly critical assessment of the enormous capital expenditures associated with the AI infrastructure buildout. An early rebound in semiconductor and AI-related stocks gained momentum amid reports of additional investment commitments and encouraging corporate outlooks, including upbeat long-term guidance from Oracle (ORCL). However, that optimism faded as earnings reports from several influential mega-cap companies raised fresh concerns about financing requirements and the ability to translate strong AI demand into profitable returns.

Alphabet (GOOG) was a particularly significant source of pressure following its earnings report, as substantial infrastructure spending and negative free cash flow overshadowed strong cloud revenue growth. Microsoft (MSFT) also faced scrutiny over plans for additional capital expenditure increases, while Amazon (AMZN) added to those concerns with its own spending outlook. The selling intensified Friday, when the PHLX Semiconductor Index plunged 7.3% and closed below its 200-day moving average.

The communication services sector (-8.5%) suffered the largest weekly decline, while the information technology sector (-1.8%) also struggled. The iShares Expanded Tech-Software Sector ETF fell 5.7%, and the PHLX Semiconductor Index declined 0.8% despite its strong early-week rebound. The Vanguard Mega Cap Growth ETF dropped 2.2%, reflecting the pressure on the market's largest growth-oriented stocks.

Outside those areas, however, weekly performance was considerably more constructive. Nine of the 11 S&P 500 sectors finished higher, led by the health care sector (+3.1%). The materials (+2.0%), utilities (+2.0%), industrials (+1.7%), and consumer staples (+1.6%) sectors also outperformed. The S&P 500 Equal Weighted Index gained 0.8%, highlighting the stronger participation beneath the market-cap-weighted index's decline. Friday's broad selling nevertheless demonstrated that strength elsewhere was becoming less effective at offsetting the technology retreat.

Macroeconomic developments also influenced trading. The FOMC left its target range unchanged at 3.75% to 4.00%, with Chair Warsh reaffirming the Fed's commitment to returning inflation to 2.0%. Meanwhile, September PCE inflation showed continued price pressures, even as third-quarter GDP growth exceeded expectations. Crude oil remained elevated amid uncertainty surrounding the U.S.-Iran conflict, finishing just above $104 per barrel after a volatile week. Treasuries benefited from safe-haven demand late in the week, with the 10-year note yield declining six basis points to 4.93%.

Ultimately, the week's losses in the major averages masked a relatively strong showing across most sectors and smaller companies. Still, the sharp reversal in AI-related stocks, particularly following earnings from major technology companies, reinforced growing concerns about the costs and returns of the industry's massive investment commitments. Those concerns remained the dominant influence heading into the following week.

• Russell 2000: +1.3% week-to-date
• S&P Mid Cap 400: +1.3% week-to-date
• S&P 500: -0.6% week-to-date
• DJIA: -0.9% week-to-date
• Nasdaq Composite: -2.0% week-to-date

Monday: 

The stock market started the week on a higher note, with the S&P 500 (+0.7%), Nasdaq Composite (+0.8%), and DJIA (+0.3%) all advancing as renewed buying interest in semiconductor stocks, AI infrastructure companies, and other growth-oriented names provided support. The gains helped the S&P 500 and Nasdaq recover some of last week's losses, while the DJIA built on its gain from last week. The S&P 500 briefly eclipsed its 50-day moving average (7,698) during the session but failed to close above that level.

Today's rebound followed a difficult stretch for the AI trade, particularly Thursday's sharp selloff, when concerns about the financing requirements of expanding AI infrastructure weighed heavily on technology stocks. Reports that Meta Platforms (META 630.56, -12.06, -1.88%) is seeking to raise $95 billion in equity for its AI expansion, alongside SpaceX's (SPCX 146.90, -0.59, -0.40%) $40 billion debt financing for GPU purchases, brought renewed attention to the enormous investments being made in the industry. Anthropic also filed its S-1 registration statement ahead of a potential IPO, reporting rapid revenue growth that reinforced expectations for expanding demand for AI services, even as questions about infrastructure costs and returns on investment persist.

The information technology sector (+1.5%) led the advance, supported by a strong rebound in semiconductor stocks that lifted the PHLX Semiconductor Index 2.8%. NVIDIA (NVDA 216.02, +5.06, +2.40%) was among the notable beneficiaries of renewed interest in the AI trade, while the industrials sector (+1.4%) also received support from AI infrastructure-related names. The consumer discretionary sector (+1.1%) was another standout, helped by a sizable gain in Tesla (TSLA 391.62, +19.40, +5.21%) following an upgrade to Overweight from Equalweight at Barclays.

Lower oil prices also provided a tailwind for a variety of consumer discretionary stocks, with WTI crude futures settling $1.41 lower (-1.4%) at $101.76 per barrel. Late in the session, The Wall Street Journal reported that DoorDash (DASH 168.44, -10.94, -6.10%) is in discussions to acquire Instacart (CART 60.88, +4.44, +7.87%).

Mega-cap growth stocks made an outsized contribution to the broader market's advance, with the Vanguard Mega Cap Growth ETF (+0.9%) outperforming the S&P 500 Equal Weighted Index (+0.3%). Apple (AAPL 343.91, -3.82, -1.10%) was a notable exception to the technology strength, The gains across smaller and mid-sized companies reflected some participation beyond the largest stocks, although leadership remained concentrated in growth-oriented areas.

The communication services sector (-1.4%) was the session's clear laggard, weighed down by weakness in mega-cap constituents Meta Platforms (META 630.56, -12.06, -1.88%) and Alphabet (GOOG 314.19, -3.09, -0.97%), alongside several company-specific declines. Verizon (VZ 43.11, -1.55, -3.47%) fell despite beating earnings expectations and raising its FY26 outlook, as a revenue shortfall and concerns about future wireless competition overshadowed the positive developments. Netflix (NFLX 63.90, -1.95, -2.96%) also struggled following a Bloomberg report about declining time spent on the platform.

Defensive areas generally lagged, with the health care and utilities sectors finishing flat and the consumer staples sector (-0.1%) slipping slightly. Dollar General (DG 128.42, -4.27, -3.22%) was among the notable laggards after the FTC and state partners filed a lawsuit alleging that the retailer charged consumers more than advertised for numerous products.

The energy sector (+0.5%) finished higher despite the decline in crude oil prices, with refiner names outperforming. EQT Corp. (EQT 54.85, -0.78, -1.40%) fell following its agreement to acquire Range Resources (RRC 53.58, +8.06, +17.71%) in an all-stock transaction, while Range Resources rallied.

The early-week advance comes ahead of a considerably busier stretch for both corporate earnings and economic data, beginning tomorrow. According to FactSet, 179 S&P 500 companies are scheduled to report earnings this week, including major technology companies whose results will be closely watched for indications of AI spending trends and profitability.

On the policy front, Wednesday's FOMC decision remains another important event, with markets widely expecting the Fed to leave interest rates unchanged.

U.S. Treasuries started a busy week, which will feature a midweek release of the October FOMC Statement, on a mixed note, with losses in shorter tenors and modest gains on the long end. The early afternoon brought some light pressure on the front end after the U.S. Treasury kicked off this week's note auction slate with a weak 2-year note sale while the long end was essentially unmoved by the result. The 2-year note yield settled up three basis points to 4.71%, and the 10-year note yield finished unchanged at 4.99%.

There was no economic data of note today.

Tuesday: 

The stock market finished mostly higher on Tuesday, extending yesterday's rebound as renewed enthusiasm for AI-related stocks fueled another strong showing from technology and other growth-oriented areas. The S&P 500 (+0.6%) and Nasdaq Composite (+1.2%) posted solid gains, while the DJIA finished little changed as weakness in several components offset strength elsewhere. Notably, the S&P 500 reclaimed its 50-day moving average (7,696), which it had failed to close above yesterday.

The advance was driven largely by continued buying interest in AI infrastructure stocks, building on yesterday's enthusiasm surrounding Anthropic's potential IPO and substantial AI investment commitments. Reports of a $63 billion financing arrangement to support Anthropic's purchases of Broadcom (AVGO 342.33, +13.16, +4.00%) chips and networking equipment provided another catalyst for semiconductor and AI infrastructure names. The information technology sector (+1.5%) led the market, with the PHLX Semiconductor Index (+3.6%) extending its recovery from last week's sharp selloff. Broadcom and Advanced Micro Devices (AMD 560.26, +28.98, +5.45%) were notable outperformers, while Seagate Tech (STX 667.85, +23.64, +3.67%) rallied ahead of its earnings report after the close.

AI infrastructure names also rebounded sharply, including Nebius Group N.V. (NBIS 170.47, +17.20, +11.22%) and other holdings of the Roundhill Neocloud ETF (NCLD 16.74, +1.36, +8.84%). Oracle (ORCL 130.53, +4.47, +3.55%) benefited from announcements expanding its AI and cloud infrastructure partnerships, including agreements involving OpenAI and Google.

The consumer discretionary sector (+1.4%) also outperformed, supported by gains in Tesla (TSLA 407.46, +15.84, +4.04%) and Amazon (AMZN 253.10, +4.01, +1.61%), while lower oil prices provided an additional tailwind for consumer-facing stocks. The industrials sector (+0.5%) also advanced amid strength in AI infrastructure-related names, although Boeing (BA 168.18, -20.13, -10.69%) was a significant laggard following disappointing earnings and continued losses in its commercial aircraft business. In contrast, Pentair (PNR 62.29, +7.07, +12.80%) was the S&P 500's top performer following its earnings report.

Participation was mixed despite the gains in the major averages, with six S&P 500 sectors finishing higher. Strength in mega-cap growth stocks, reflected in the Vanguard Mega Cap Growth ETF (+1.1%), helped the market-cap-weighted S&P 500 outperform its equal-weighted counterpart (+0.1%). The Russell 2000 (+1.2%) also posted a solid gain, while the S&P Mid Cap 400 (+0.4%) advanced more modestly.

The energy sector (-2.2%) was the weakest performer as crude oil prices retreated and refiners gave back some of their recent gains. WTI crude futures settled $1.89 lower (-1.9%) at $99.87 per barrel. The consumer staples (-0.9%) and real estate (-0.9%) sectors also lagged amid the renewed preference for technology stocks, with Coca-Cola (KO 91.18, -1.52, -1.64%) declining following its earnings report.

Other earnings reactions were mixed, with SoFi Technologies (SOFI 16.40, +1.94, +13.42%), Royal Caribbean (RCL 295.92, +15.32, +5.46%), and UPS (UPS 106.14, +5.82, +5.80%) posting strong gains following their respective quarterly reports.

The market's technology-led rebound comes ahead of tomorrow's FOMC decision, with the CME FedWatch Tool indicating a 92.8% probability that rates will remain unchanged. Investors will also receive another consequential round of mega-cap earnings tomorrow after the close, providing an important test of the renewed optimism surrounding AI investment and its potential returns.

U.S. Treasuries recorded slim losses on Tuesday, though the overall trading range remained narrow for the third day in a row, leading into tomorrow's release of the October FOMC Statement. Shorter tenors underperformed slightly, but they still held above their morning lows even though today's $70 billion 5-year note sale met weak demand after yesterday's 2-year note auction that was also underwhelming. The 2-year note yield settled up three basis points to 4.78%, and the 10-year note yield settled up one basis point to 4.99%.

The stock market navigated a maze of catalysts today to secure a modestly higher finish for the S&P 500 (+0.3%), Nasdaq Composite (+0.3%), and DJIA (+0.2%). Investors had plenty to digest throughout the session, including a sizable batch of earnings reports that produced some notable stock-specific moves. A sharp rally in Oracle (ORCL 144.34, +13.81, +10.58%) following its long-term guidance coincided with Fed Chair Kevin Warsh's afternoon press conference, with the combination briefly helping propel the major averages to session highs.

Macroeconomic developments commanded considerable attention, with the FOMC leaving interest rates unchanged while reinforcing its commitment to bringing inflation back to target. Meanwhile, crude oil prices surged amid renewed concerns about a potential escalation in the conflict with Iran, contributing to upward pressure on Treasury yields and creating an additional headwind for the broader market.

The session began with renewed enthusiasm for semiconductor and AI infrastructure stocks following another round of encouraging earnings reports. Strong results from SK hynix Inc. (SKHY 164.77, +19.41, +13.35%) helped lift memory stocks, including Micron (MU 983.23, +54.47, +5.86%) and Sandisk (SNDK 1404.77, +99.93, +7.66%), although the early advance gradually lost momentum as weakness among several mega-cap technology names limited the broader market's upside.

The major averages subsequently drifted toward their flat lines ahead of the afternoon's FOMC decision. The FOMC voted to maintain the target range for the fed funds rate at 3.75% to 4.00%, with Fed Governor Cook and Cleveland Fed President Hammack dissenting in favor of a 25-basis-point increase. The accompanying statement emphasized resilient economic activity and persistently elevated inflation. Stocks briefly rallied during Chair Warsh's press conference as he suggested that incoming economic data would help clarify the appropriate path for monetary policy, although his reaffirmation of the Fed's 2.0% inflation target tempered some of that enthusiasm.

At roughly the same time, Oracle's (ORCL 144.34, +13.81, +10.58%) upbeat long-term outlook provided an additional catalyst, sparking a sharp rally in its shares and lifting other AI infrastructure names, including Nebius Group N.V. (NBIS 182.34, +11.87, +6.96%) and CoreWeave (CRWV 63.93, +4.36, +7.32%). Oracle projected annual revenue growth of more than 35% through FY30, with revenue reaching at least $225 billion, while outlining plans to reduce capital expenditures and generate at least $30 billion in positive free cash flow in FY29. Its expectation that additional capital markets funding would be limited to $20 billion through FY30 also offered some reassurance about the financing demands of its AI infrastructure expansion.

The information technology sector (+0.5%) finished among the stronger performers, supported by a 1.8% advance in the PHLX Semiconductor Index. However, the gains were somewhat restrained by weakness in NVIDIA (NVDA 215.38, -2.56, -1.17%), while Microsoft (MSFT 531.01, -0.32, -0.06%) finished little changed ahead of its earnings report after the close.

Alphabet (GOOG 321.89, +5.06, +1.60%) was a notable mega-cap outperformer ahead of its own results, helping lift the communication services sector (+0.4%).

Elsewhere, the health care sector (+0.3%) benefited from strength in biotechnology stocks, with the iShares Biotechnology ETF (IBB) climbing 2.0%, alongside favorable earnings reactions in select health care names. The industrials sector (+0.3%) also finished higher, supported by earnings-related strength in Vertiv (VRT 243.11, +34.55, +16.57%), while the financials sector (+0.4%) advanced despite a muted response to Visa's (V 401.02, -0.84, -0.21%) earnings report.

Participation had a positive tilt, with seven S&P 500 sectors finishing higher, although gains remained relatively modest. Decliners outpaced advancers by a slim 7-to-6 margin on the NYSE, while advancers held a roughly 4-to-3 edge on the Nasdaq.

The consumer discretionary sector finished unchanged, while the utilities (-0.9%), real estate (-0.7%), and consumer staples (-0.4%) sectors lagged. The weakness in rate-sensitive areas came as Treasury yields climbed alongside crude oil prices.

WTI crude futures settled $2.87 higher (+2.9%) at $102.74 per barrel amid renewed geopolitical concerns. According to Axios, regional mediators led by Qatar are pressing Iran for nuclear concessions as the possibility of U.S. military strikes following the midterm elections looms in the absence of an agreement.

The market ultimately held on to modest gains despite the competing influences of encouraging AI-related developments, a cautious Fed, and rising oil prices and Treasury yields. Attention now turns to another consequential round of mega-cap earnings after the close, with results from Alphabet and Microsoft set to provide an important test of the enthusiasm surrounding AI investment and infrastructure spending.

U.S. Treasuries finished the midweek session on a mixed note with the 2-year yield returning to unchanged (4.74%) in reaction to the October FOMC Statement while the 30-year yield (+6 basis points to 5.36%) climbed to a fresh session high. The 10-year yield (+5 basis points to 5.05%), meanwhile, was caught in the middle, finishing the session just above its early-afternoon high seen before the release of the FOMC Statement.

Reviewing today's data:

• 10/24 MBA Mortgage Applications Index 3.4% (Prior -5.3%)
• Sep Adv. Intl. Trade in Goods -$134.9B (Briefing.com consensus -$128.7B; Prior -$132.1B revised from -$132.6B)
• Sep Adv. Retail Inventories 0.3% (Prior 0.3%)
• Sep Adv. Wholesale Inventories 0.6% (Briefing.com consensus 0.5%; Prior 0.5% revised from 0.7%)
• 10/24 EIA Crude Oil Inventories -1.892M (Prior -3.061M)

Thursday: 

The stock market ended Friday's session with substantial losses as the ongoing correction in AI-related stocks intensified, sending the major averages lower for the week. The S&P 500 (-1.8%), Nasdaq Composite (-2.9%), and DJIA (-1.1%) recovered somewhat from their afternoon lows but remained firmly in negative territory, with the technology-heavy Nasdaq bearing the brunt of the selling.

The information technology sector (-4.3%) was the worst performer by a wide margin, with the PHLX Semiconductor Index plunging 7.3% and closing below its 200-day moving average. Intel (INTC 65.76, -26.31, -28.58%) suffered a particularly severe post-earnings decline after issuing disappointing Q4 guidance, citing weakening PC demand amid rising memory prices and supply constraints that are limiting its ability to meet robust data center demand. The outlook also weighed heavily on PC manufacturers HP Inc. (HPQ 28.78, -3.05, -9.58%) and Dell (DELL 424.16, -51.35, -10.80%).

Sandisk (SNDK 1151.43, -178.62, -13.43%) was another major semiconductor laggard despite reporting better-than-expected earnings, as relatively modest revenue guidance upside and caution about seasonal demand trends overshadowed exceptional data center growth. NVIDIA (NVDA 204.78, -8.88, -4.16%) also retreated sharply, adding to the pressure on the semiconductor space and reinforcing concerns about increasingly demanding expectations for AI-related companies.

The weakness extended across mega-cap growth stocks, with the Vanguard Mega Cap Growth ETF (-3.1%) reflecting the continued unwinding of the AI trade. Amazon (AMZN 240.35, -3.44, -1.41%) weighed on the consumer discretionary sector (-0.9%) following an earnings miss and negative free cash flow despite accelerating AWS growth and record operating profitability. The company's plans for even greater infrastructure spending in 2027 added to concerns about the returns on massive AI investments.

The communication services sector (-1.1%) also struggled, with Alphabet (GOOG 278.22, -4.10, -1.45%)extending its post-earnings retreat and Reddit (RDDT 91.67, -37.93, -29.27%) suffering a sharp earnings-driven decline. Meanwhile, the industrials sector (-1.6%) faced significant pressure as weakness spread to AI infrastructure-related companies.

Selling pressure intensified steadily throughout the afternoon, briefly pushing the Nasdaq Composite down nearly 4.0% and extending its retreat from its October peak near 27,700 to roughly 9.0%. The index remained decisively below its 50-day moving average near 26,570, while the semiconductor index's break below its 200-day moving average underscored the deterioration in technical momentum.

Unlike Thursday's session, when widespread strength outside mega-cap technology stocks helped offset losses in the major averages, Friday's retreat was considerably broader. The S&P 500 Equal Weighted Index (-0.8%) also finished lower, while small- and mid-cap stocks faced meaningful selling pressure, leaving defensive strength insufficient to counterbalance the losses elsewhere.

The energy sector (+1.9%) was a notable exception, benefiting from continued strength in crude oil prices. WTI crude settled just above $104 per barrel, adding just under $1.00 for the week, while Chevron (CVX 235.48, +4.02, +1.74%) provided additional support after reporting better-than-expected earnings.

Defensive buying also supported the consumer staples sector (+1.4%), with Walmart (WMT 123.51, +2.26, +1.86%), Coca-Cola (KO 94.08, +1.26, +1.36%), and Mondelez Int'l (MDLZ 64.92, +2.39, +3.82%) among the standouts. The utilities (+0.6%), health care (+0.4%), and real estate (+0.2%) sectors managed more modest gains, with strong earnings reactions in Regeneron Pharma (REGN 927.89, +109.12, +13.33%) and Eli Lilly (LLY 1417.54, +43.84, +3.19%) contributing to the resilience of health care stocks.

Treasuries attracted some safe-haven buying despite elevated crude oil prices, providing a measure of support for interest-rate-sensitive areas of the market.

The week's disappointing finish highlighted a deepening correction in the AI trade, with investors increasingly questioning the pace of infrastructure spending, the sustainability of elevated growth expectations, and the ability of companies to translate strong demand into profitable returns. While defensive sectors continued to attract interest, Friday's widespread selling demonstrated that the rotation away from technology stocks is no longer providing enough support to prevent substantial losses across the broader market.

U.S. Treasuries finished the week on a firmly higher note, turning longer tenors positive for the week while shorter tenors extended this week's gains. The 2-year note yield settled down seven basis points to 4.59% (-9 basis points this week), and the 10-year note yield settled down six basis points to 4.93% (-6 basis points this week)

Reviewing today's data:

• The Q3 Employment Cost Index increased 0.8% (Briefing.com consensus 0.8%) to follow a 0.9% increase in Q2, with wages and salaries rising 0.7% while benefits rose 0.9%.
  • The key takeaway is that wages and salaries for civilian workers were up 3.1% year-over-year, maintaining a trend that continues undershooting inflation. This will feed ongoing concerns about pressure on discretionary spending activity.
• Oct Chicago PMI 55.3 (Briefing.com consensus 55.9; Prior 58.8)