Weekly Recap:

by Eric Criscuolo and Michael Reinking, CFA

Published on 10/10/25

On October 26, 1985 Marty McFly jumped into the plutonium-fueled DeLorean and headed back to 1955. Almost 40 years later, President Trump time traveled back to April 2025, not for Back to the Future Part IV, but for Tariff War Part We Lost Track.   

Coming in to Friday's trading day, the Word of the Week was…"Records". This week saw the S&P 500 set new record highs for both its intraday and closing price. These broke the prior records that were set all the way back…last week. In fact, the S&P had finished 11 of the past 15 weeks at record highs and has set intraday records in each of the past 6 weeks and 13 of the past 15. The fun wasn’t just for the large caps though. The small cap Russell 2000 set record intraday and closing highs this week, though it hasn’t seen the constant push that’s been behind the larger caps. 

Records weren’t just for the equity markets though. Gold continued to set new record highs as it smashed through $4,000 per ounce. There are several reasons for the relentless bid in gold: a general momentum chase, central bank buying activity, lingering inflation and growing debasement concerns, and an underweight allocation for most investors in the commodity. Bitcoin also briefly set records.

Friday morning the S&P was looking at a gain of 0.3% for the week. The index was being propped up by the large caps and Tech as the equal weight was down 1%. There was significant divergence in the small caps with the S&P 600 down almost 2% but the Russell only down 0.3%. The day started in a relatively uneventful manner and we got good news about a ceasefire in the Gaza conflict. Stocks were trading slightly higher with the S&P trying to set another record. With markets at record highs, Monday a sort of holiday (stock markets are open) and the start of earnings season around the corner, I couldn't blame you if you assumed we'd see a calm trading session and a drift lower to close the week.

You know what they say about assumptions.     

Every dip has been bought and weekly records have been set. Volatility indexes were asleep (though they had been creeping higher). AI and anything related to it had kept a constant bid across sectors and groups. If investors were looking for a reason to sell, they weren't getting a clear catalyst (though things were manifesting in areas of the market like credit). The pieces were set in place on Thursday when China added more restrictions on rare earth exports. The WSJ wrote it was "a nearly unprecedented export control that stands to disrupt the global economy, giving Beijing more leverage in trade negotiations and ratcheting up pressure on the Trump administration to respond". That response came Friday morning when Trump took to social media to say it was a "sinister move" and that there seemed to be no reason now to go ahead with a planned meeting with President Xi in two weeks. He was also calculating a massive increase of Chinese tariffs. As Huey Lewis sang, "Gonna Go Back in Time"

Equities sold off sharply. The S&P dropped almost 3%, suffering its worst loss since, yup, the tariff-tinged April. The equal-weight fared only slightly better and small caps were in-line to slightly-worse off. Tech was smashed, especially semis and the major AI names. The S&P ended the week down >2% as the sell-off erased the week's modest gains. After the close, Trump announced the US would impose 100% tariffs on China starting November 1, as well as export controls on software. Futures took a another leg lower after-market.      

Looking at the sectors this week, until Friday Utilities was the leading sector, up about 2%. The group saw several analyst upgrades and continues to benefit from AI infrastructure tailwinds despite interest rates moving higher. Tech was another leading sector, with AMD accounting for much of the strength, but hardware and software names were also generally higher. Semiconductor manufacturing equipment makers traded lower after a report from the Select Committee on China discussed how equipment companies have helped China develop its tech industry. Real Estate was a lagging sector with residential and retail REITs broadly lower and treasury yields moving higher. Another laggard was the Materials sector, with the chemicals and packaging names broadly lower.

Friday brought sharp moves lower to most sectors and to Tech (NYSE FANG+ down ~4%, ICE Semis down ~6%) and Discretionary in particular. Energy got hit as oil fell out bed. The mega caps in Discretionary, Amazon and Tesla, were down 5% on the day. Auto suppliers were a bright spot trading higher after being under pressure this week on supplier bankruptcies. The flight to safety kicked in as Staples managed to post a modest gain in the middle of the carnage, with food and beverage names holding up well in general.   

Before going off track on Friday the AI freight train was rolling along. On Monday AMD and OpenAI announced a partnership which includes OpenAI purchasing 6 gigawatts of AI chips from AMD while receiving warrants to purchase up 160 million AMD shares, or 10% of the company. AMD surged over 20% on the news that day and continued to climb beyond that, at one point up ~40% for the week. Elon Musks’ xAI was reported to be close to raising $20B to acquire more AI infrastructure, including GPUs.  And as has become standard procedure in these agreements, Nvidia will be part of the investment group, helping fund the purchase of its own chips. Oracle came under modest pressure after an article in The Information said the company’s business of renting out Nvidia chips was negatively impacting profitability, though the report’s veracity was debated.  The circularity of the AI ecosystem, with suppliers investing in customers and everyone investing in each other, is coming under greater scrutiny, but had not yet been enough to derail the investment theme which has launched markets to record highs. The ability of these news releases to continue to drive prices higher, after today's decline and renewed/revisited concerns, will be a vital question to answer.

Another area where cracks were beginning to emerge was credit. More specifically the recent bankruptcies of subprime auto lender Tricolor and auto parts supplier First Brands. The smoldering from their collapses was spreading across lenders and financial institutions. Consumer credit providers like Synchrony and Capital One were already down over 5% this week. Private equity/credit stocks like Blackstone, KKR and Apollo were down similarly.

The S&P closed the week by essentially tagging its 50d ma. It came near this support line in early September and before that hadn't really gotten near it since May. The overbought RSI reading finally collapsed. With equities extended well above their averages, the daily records and bids across not only risky equities but also across assets, we were constantly set up for a pullback. We'll see if we consolidate from here or take out the lower averages/levels- futures right now are saying the later.

The government shutdown continues but several Fed speakers were on the schedule, despite not having much federal government data to talk about. The BLS announced it would publish the September CPI report on October 24. Thankfully, the Federal Reserve is self-funded and Fed data continues to come out. Consumer Inflation Expectations from the NY Fed were relatively unchanged from last month but unemployment expectations moved higher. In another Fed report, consumer credit rose by just 0.1% y.y in August, a sharp pullback from July’s 4.3% increase. It was the lowest increase since February. Revolving credit (i.e. credit cards) drove the decline, falling 5.5%. The consumer has held up relatively well overall but the lower-income groups have been under persistent and significant strain. Results and commentary from the upcoming earnings cycle will be keenly watched for signs of expansion of stress upward and/or an actual cracking of the lower cohorts.  

The Univ. of Michigan Consumer Sentiment survey came in at 55.0, beating expectations and essentially unchanged from last month. Current sentiment rose from 60.4 to 61.0 while Expectations fell from 51.7 to 51.2. Inflation expectations were essentially unchanged time horizons.

The September Logistics Manager’s Index fell to 57.4, from 59.3 in August, for the lowest reading since March. Transportation Utilization was flat (50), the first time the subindex registered this low in September, generally a busy season in the freight market. That dovetails with the lack of hiring in last week’s Challenger Job report, when seasonal hiring should be ramping up for the holidays.

The FOMC minutes for the September meeting didn’t contain any big surprises and didn’t try to hide that it was Stephen Miran who wanted bigger cuts. The likely path of rates is lower: “most participants observed that it was appropriate to move the target range for the federal funds rate toward a more neutral setting because they judged that downside risks to employment had increased over the intermeeting period and that upside risks to inflation had either diminished or not increased”. However, there’s still some distance between member’s views of where the risk to each part of the duel mandate currently resides: “A few participants stated there was merit in keeping the federal funds rate unchanged at this meeting or that they could have supported such a decision.”

Treasuries were bid on Friday with yields down 8-10bp across the curve as we headed to the close. Before that yields were tracking modestly higher. Fed rate cut expectations for the October meeting were already at ~95% and odds for a further cut in November rose to >90%. The China news put the Dollar's momentum on ice at least temporarily. After four straight days of gains that pushed the US Dollar Index above 99 for the first time since August 1, the index slipped on Friday but still registered strong gains for the week.       

In between college football and the NFL slate, we'll be now be on the lookout for updates on the China situation. We don't expect much news on the shutdown as the Senate is in recess until Tuesday. The CPI is scheduled for October 24. Federal Reserve data will continue to be released and we'll see a lot of Fed speakers before the blackout starts at the end of the week. Monday is Columbus Day but equity markets will be open. Q4 earnings season kicks off with the Financials taking their customary place at the tip of the spear. Oracle and Salesforce will hold their big tech/customer conferences next week, so expect more AI news if you weren't already for some reason. Most importantly for next week, Happy Birthday Devon!!!!        

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