Stocks Posted Record Gains in “Up-tober”
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Our Views
- Looking back at the month, the Oct. 10 swoon (-3%) triggered many to become cautious. But as we have highlighted many times this month, we are in the seasonally strong 4th quarter, so we are buying dips.
- Fundamentally, the U.S. earnings picture remains strong and supported by these 3 factors: AI spending visibility remains strong and Amazon’s strong 3Q25 report is the latest evidence of this; financials are driving innovation via blockchain; the Fed is dovish and lowering interest rates; and QT (quantitative tightening) is ending Dec 1.
- The Fed only started cutting in September. This mirrors Sept 1998 and Sept 2024. In both instances, S&P 500 gained 13% in the 4th quarter. This still remains the “most hated” V-shaped stock rally.
- Despite the lagging in quite a few of the major sectors, until there is sufficient evidence of technology having peaked out, then expecting this week’s minor pullback might not work out as planned for market bears.
- Overall, I am expecting that U.S. stock indices have entered a much choppier trading environment between now and the end of November.
- However, I continue to feel like SPX-6950 appears like a poor risk/reward at a time when breadth has been waning in recent months.
- Broad Risk-Off Day: Crypto and equities both sold off, with digital assets showing an outsized reaction. However, the VIX, high-yield credit, and bond markets painted a more measured picture.
- Liquidity Strains from Shutdown: The ongoing government shutdown may be putting additional near-term pressure on liquidity conditions, reflected in a widening SOFR–RRP spread and increased use of the Fed’s standing repo facility as Treasury payments remain frozen.
- Intra-month Seasonality Effects: Weakness tied to systematic flows and profit-taking should fade as November begins.
- Possible MSTR Catalyst?: Strategy remains S&P 500 eligible for a second consecutive quarter. Potential inclusion could drive significant passive inflows and reignite speculative momentum across the digital asset market
- If a deal is not reached soon, the U.S. could set a new record for longest government shutdown next week.
- The shutdown’s impact on air travel is worsening, possibly adding enough pressure to force lawmakers to work together and find a solution.
- President Trump’s recent meeting with China’s Xi Jinping signals at least a lull in the trade war between the two global economic superpowers.
Wall Street Debrief — Weekly Roundup
Key Takeaways
- The S&P 500 increased 0.7% this week to 6,840.20 points. The Nasdaq Composite rallied 2.2% to end at 23,724.96. Bitcoin was at USD 109,242.60 on Friday afternoon.
- Fundstrat Head of Research Tom Lee expects stocks will extend the rally in November, too, so he reiterated his year-end S&P 500 target of 7,000.
- Head of Technical Strategy Mark Newton is worried about the lack of breadth, which is why he believes the next month could be choppy.
“We're goin' up, up, up, it's our moment. You know together we're glowing. Gonna be, gonna be golden.” — Rumi, KPop Demon Hunters
Good evening,
Nvidia’s market value hit the mind-boggling $5 trillion milestone this week, making it easier for the broader stock market to defy all odds and keep surging.
The broad-based S&P 500 gained 0.7% and hit fresh records this week, finishing October up 2.3%. The tech-focused Nasdaq Composite jumped 2.2% this week. This month, it has advanced 4.7%.
Both the indexes have finished in the green for at least six straight months.
For some investors, it was impressive to see major indexes hold onto their weekly and monthly gains despite the Federal Reserve Chair Jerome Powell saying Wednesday that further easing in monetary policy at the December meeting is “not a foregone conclusion.”
The Fed chair's remarks were disappointing because an extraordinary advance for stocks in recent months has partially hinged on the central bank continuing to lower interest rates.
While the Fed did announce a quarter-percentage point cut at its meeting this week, that cut was largely priced in, so signals about the future ones held more sway over the market’s fortunes. A lack of guarantee there was the reason why the S&P 500 finished flat on Wednesday.
However, Fundstrat Head of Research Tom Lee isn’t worried.
“To me, this is also noise. If the job market continues to stall, the Fed will be dovish,” he wrote after the meeting.
Besides, optimism about artificial intelligence has overshadowed any concerns about rate cuts once again.
After market close Wednesday, earnings from Alphabet were celebrated by investors, though the same enthusiasm didn’t extend to Microsoft and Meta despite both of them beating revenue and earnings expectations.
Investors appeared disappointed that Microsoft's seeing more demand for AI than it can keep up with, requiring additional capex spending. Meta, on the other hand, fell after analysts suggested that the company had spent a lot on building out artificial intelligence without having a clear path to monetizing it.
But on Thursday, earnings from Apple and Amazon — laggards in the AI race — helped the market rebound. Apple beat earnings expectations, and Chief Executive Tim Cook said he expects revenue in the fourth quarter will increase by at least 10%. Meanwhile, revenue expectations for Amazon’s AWS segment came in better than expected, sending shares up 9.6% on Friday.
“AI spending visibility remains strong, and Amazon’s strong third quarter report is the latest evidence of that,” Lee said.
The overall earnings season has been going well, too. About half of the companies in the S&P 500 have reported earnings. More than 83% of them are beating expectations, implying a quarterly profit growth rate of 12% from a year ago.
“There are many sectors posting double digit growth, so this is not only an AI story but rather demonstrates U.S. corporates and multinationals are able to generate strong earnings gains despite some of the largest tariff increases in U.S. history,” Lee said.
Our Chart of the Week has more details:
Head of Technical Strategy Mark Newton isn’t as optimistic. He is worried that tech stocks’ strong gains are camouflaging weakness everywhere else in the market.
“It’s not all that problematic if trends are intact but when that starts to change, then that’s certainly going to be something we all want to pay attention to as a reason why markets are falling,” he said during our weekly huddle.
He expects that the market's going to be choppy mid-November.
“The next month is going to be tricky because there's not a lot of pieces in the market right now that are working. It’s been largely just tech,” he said.
Tom has a different view there.
“For November, while there may be some understandable chop, to digest the strong gains of October, we expect November to be an up month.” Lee said. His base case remains that the S&P 500 finishes the year at 7,000 points.
Elsewhere
The non-profit OpenAI is eyeing an initial public offering that could come as soon as the second half of 2026. It could value the company at $1 trillion. The move would help the ChatGPT maker be more efficient with capital raising, especially as it fuels a large-scale build out of AI Infrastructure. Its Chief Executive Sam Altman said during a livestream Tuesday, “I think it's fair to say it is the most likely path for us, given the capital needs that we'll have.”
Bill Gates had an important message this week on climate change. He wrote in an essay that a focus on climate change has poured investments into expensive and questionable efforts. He thinks instead that philanthropists must target that money toward preventing disease and hunger. “Although climate change will have serious consequences – particularly for people in the poorest countries – it will not lead to humanity’s demise,” Gates wrote.
The New York mayoral race is heating up. Assemblyman Zohran Mamdani is not just leading, but leading by a lot, according to two new polls released Thursday. Former Gov. Andrew M. Cuomo is second, followed by the Republican nominee Curtis Sliwa. An Emerson poll found that among New Yorkers who had already voted, close to 60% had cast their ballots for Mamdani.
Jamaica is still dealing from the disaster that was Hurricane Melissa. But there’s hope that the financial fallout won’t be as bad as many were worried about. That’s because Jamaica has created a “multilayered financial plan” to respond to natural disasters. The first line of defense is a pool of money that is already funded and then the next layers involve making claims against an insurance pool and activating preapproved loans from international organizations.
And finally: Nvidia Chief Executive Jensen Huang had a fun Thursday night. He grabbed fried chicken and beer with Samsung Electronics’ executive chairman, Lee Jae-yong; and Hyundai Motor Group’s executive chairman, Euisun Chung, just like regular people do. The next day, the three companies and the South Korean government announced a partnership where Nvidia will supply them with chips that would help with autonomous driving, semiconductor manufacturing, and robotics.
Important Events
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