Weekly Recap:

by Michael Reinking, CFA & Eric Criscuolo

Published on 10/31/25

It is fitting that the final trading day of the month falls on Halloween, as this month has been full of both tricks and treats. Broad equity indices continued to grind higher to start the month despite the government shutdown.  There was a pickup in M&A activity including the largest LBO in history, the biggest regional bank deal of the year and the first bidding war in healthcare in recent memory (which came later in the month). It was also the start of what seemed to be a never-ending stream of AI deal/partnership announcements. However, there were some credit concerns starting to percolate in the background after bankruptcies by auto parts company, First Brands, and subprime auto lender, Tricolor Holdings.

The volatility shock came on October 10th after China announced new rare earth export controls which drew a sharp response from the administration. This led to a 3% drawdown across major US indices, the largest single day decline since April at the height of the tariff turmoil. Volatility across asset classes spiked as investors scrambled for protection. It was the heaviest options volume day on record and the fourth highest in equity market trading measured in shares and notional value, behind only three days in April. After equity markets closed there was a flash crash in crypto with ~$20B of forced liquidations sending prices sharply lower.  

After some conversations over that weekend the tone around China/US relations softened and set the stage for the long-awaited meeting between Presidents Trump and Xi Jinping, which took place this week (more below). Earnings season got off to a good start with very strong reports from money center banks buoyed by a pickup in capital market and investment banking activity while commentary about the macro environment and consumer spending was cautiously optimistic. The credit concerns briefly moved to the forefront after JP Morgan CEO’s “cockroaches” comment was quickly followed by some new charge-offs at regional banks. Ahead of the open on Friday 10/17 before a slew of regional bank earnings, futures came under significant pressure retesting the previous week’s lows but there were no new red flags and investors quickly deemed these issues to be idiosyncratic.

As expectations for rate cuts continued to ramp up and helped by some news flow there was a momentum meltup. Many of the popular thematic trades like nuclear, rare earths and quantum computing stocks went parabolic along with non-profitable tech and heavily shorted stocks. Precious metals, which had arguably become one of the most crowded momentum trades, also mooned, as the kids like to say. However, just as that FOMO clearly kicked in the weight off that move ultimately brought in an equally violent meltdown.

For the last two weeks the S&P 500 had traded completely within the aforementioned 10/10 range but finally broke out of that last Friday after CPI came in slightly better than expected, cementing a rate cut by the Fed. This set the stage for this week where many of these catalysts/events came to a head.

The trade headwinds have subsided as this seems to be a case of “escalate to de-escalate” with the US and China essentially agreeing to a one-year truce this week. President Trump called yesterday’s meeting with Xi Jinping amazing, a 12 on a scale of 1 - 10. China agreed to resume rare earth exports and agriculture purchases and the US cut the fentanyl related tariffs in half and delayed a rule that would expand restrictions on blacklisted Chinese firms. While in Asia this week President Trump also finalized a trade deal with South Korea and announced partnerships with Japan related to rare earth minerals and nuclear technology. Rumor has it while watching the World Series with new PM Takaichi he pushed for an increase in US hotdog exports to offset the “awesome baseball players” trade imbalance Japan benefits from. However, just as trade concerns seem to be moving to the backburner, the Supreme Court hearings about the legality of tariffs is set to begin next week.

On Wednesday, the Federal Reserve cut rates by 25bps and announced the end of the balance sheet runoff both as widely expected. There were two dissents at this meeting with Stephen Miran, aka the Dissident DOT once again calling for a 50bps cut and Jeffrey Schmidd calling for no action. Anyone listening to recent speeches or paying attention to the DOTS knows the divide runs deeper than that and the Committee clearly decided that investors were starting to get too comfortable with expectations for further easing. So, Chair Powell delivered a bit of a trick instead of treat by bluntly telling markets that the path of monetary policy was not on a preset course saying a cut in December was “not a foregone conclusion, far from it”.  The Chairman highlighted that while there was broad support for this cut but there are decidedly differing views about the path forward, centering around the estimate of the neutral rate and views about inflation. The Chairman did seem to tip his hand as to where he sits on the spectrum, saying he believes the current policy rate is modestly restrictive, describing the labor market as gradually slowing and not sounding overly concerned about tariff induced inflation. However, he did acknowledge the current Fed funds rate was now at the upper end of the estimates of neutral, which are mostly between 3-4%. Chair Powell used the navigating through the fog analogy again, perfect for the holiday, but still in a car not a broomstick. 

As the veil of silence has been lifted we’ve started to hear some of the varying opinions dominated by the Hawks today. Ahead of the open, KC Fed President Schmid laid out the reasoning for his dissent as he believes the labor market is largely in balance while inflation remains above target. He said, “I do not think a 25-basis point reduction in the policy rate will do much to address stresses in the labor market that more likely than not arise from structural changes in technology and demographics”. “However, a cut could have longer-lasting effects on inflation if the Fed’s commitment to its 2% inflation objective comes into question.” Today both Fed Hammack and Logan, who will be voting members next year, also said they did not agree with this week’s cut. The probability for a rate cut in December is now 63% from >90% at the end of last week. This reassessment has caused rates to move higher this week.

That dynamic was partially behind some of the rotation seen in the market this week as the interest rate sensitive and cyclical areas of the market turned lower this week with the equal weight version of the S&P 500 and small/mid-cap indices all falling >2%, giving up October gains. The S&P 500 was able to eke out a gain as technology and AI-related stocks masked much of the weakness beneath the surface. This week earnings across the sector were pretty strong while highlighting that demand is expected to remain strong throughout at least 2026. The OpenAI and Nvidia Halos expanded faster than news of a house giving out full sized candy bars. Nvidia briefly became the first company to crack the $5T market capitalization threshold after Jensen Huang gave the keynote address at the GTC conference announcing partnerships and investments to drive advancement in 6g networking, autonomous vehicles, robotics and supercomputers. This along with an announcement by Qualcomm that it was building its own AI chip and AMD partnering with the government to build two supercomputers helped the ICE Semiconductor index end the week up >3% and >10% for the month. 

While earnings results continue to be solid overall, the vast amount of commentary from management teams provided more nuanced color on the economy. Tech companies continue to spend incredible amounts of capital on AI and will spend even more next year.  That demand continues to spread to a wide number of adjacent industries and companies (e.g. power, electrical equipment, construction). Not every company is that levered to AI spend. While many of the more consumer-facing companies talked about healthy demand, some of highlighted continued/growing strain in the consumer. 

Mastercard: 

C.H. Robinson: 

Chipotle: 

Builders First Source: 

Kimberly-Clark: 

D.R. Horton:

Sherwin Williams:

US economic data continues to be largely relegated to private sources as the shutdown continues.

The Conference Board’s Consumer Confidence survey ticked slightly lower from last month with improvement in current conditions offset by weakening expectations. 1yr inflation expectations ticked up to 5.9% from 5.8%. Preliminary data suggests that holiday spending will be down this year with consumers expecting to spend 3.9% less on gifts.

In housing data, Case Shiller showed a moderation in home price appreciation to 1.6% y/y from 1.8%. Pending Home sales from the National Association of Realtors (NAR) were flat in September versus August and fell 1% year-over-year. While contract signings were the second strongest reading of the year they have not reached the level needed for a healthy market, according to the report. "A record-high stock market and growing housing wealth in September were not enough to offset a likely softening job market," and inventory is at a five-year high.

The Dallas Fed Manufacturing Survey showed a modest improvement from last month, including New Orders, though both measures remained negative. Prices paid and received both declined from last month. Expectations moved lower, however, both overall and for New Orders. 

As Chair Powell said “Boo” at his press conference Treasury yields moved higher. For the week Treasury yields are up 5-10bps with some flattening of the curve. The USD index has moved higher throughout the week back near the early August highs and trading just under the declining 200d ma. 

Another week shut down, another sparsely populated calendar. We'll get some employment data from the ADP and Challenger reports. ISM Manufacturing and Services will provide a look at US economic activity, and the final S&P PMIs will be out as well across the globe. The Fed blackout window ends so the speakers circuit will get busy. The Treasury quarterly refunding notices will be released, coming on the heels of the Fed' ending its balance sheet run-off. There will also be interest rate decisions from the central banks of England, Australia, Mexico and Brazil. Earnings will continue with another full week of reports from across industries. Oral arguments in the IEEPA tariff case in the Supreme Court will begin and elections across the US will happen on Tuesday. Have a great weekend and Happy Halloween! 

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