Last week, America was reminded that AI can write a sonnet, diagnose a disease, and create a photorealistic image of Abraham Lincoln riding a capybara. All very impressive. Wall Street would now like to see it perform one quaint little party trick: make money.
- The S&P 500 fell 0.57% and the Nasdaq lost 2.00%. Stocks had the kind of week where being smaller was suddenly an advantage, which was wonderful news for jockeys and terrible news for mega-cap tech. Small- and midcaps gained, while health care led sectors and communication services plunged 8.49%.
- Bonds managed a quiet gain last week. We mean that as a compliment. The Bloomberg U.S. Aggregate Bond Index gained 0.56%, while Treasury yields generally declined. The 10- year Treasury yield fell to 4.91% from 5.00%.
- Commodities sent mixed signals. Crude oil rose to $104.12 a barrel and copper edged higher, while gold fell to $3,899 an ounce and gasoline eased to $4.59 a gallon.
- Not much to see from the U.S. dollar last week. The dollar was little changed against the euro and pound, strengthened against the yen, and rose slightly on a trade-weighted basis.
- The Federal Reserve held rates steady, deciding the economy has provided quite enough plot twists for now. Policymakers kept the federal funds target range at 3.75%– 4.00%, as persistent inflation complicated the outlook for additional easing.
- Third-quarter GDP grew 3.4%, because the U.S. economy continues responding to predictions of its demise by asking, “Sorry, were you talking to me?” Growth accelerated from 2.2% in the second quarter, helped by investment, consumer spending, and government spending.
- Inflation remained above target, showing the kind of staying power normally reserved for glitter and unwanted group texts. September PCE inflation rose 0.5% for the month and 3.6% year-over-year. Core PCE increased 3.1% from a year earlier, while consumer spending rose 0.5%.
- Consumer confidence improved in October, which is nice, although “confidence” may be overselling what is essentially a 7.5-point reduction in dread. The Conference Board index climbed 7.5 points to 91.7 from 84.2, helped in part by some relief at the gas pump.
- New-home sales slipped 0.6%, as prospective buyers toured three bedrooms, two baths, and one absolutely terrifying monthly payment. September sales ran at a 676,000 annual rate, down 5.3% from a year ago, with 8.4 months of supply available.
- The labor market remained stubbornly sturdy, like a mall food-court pizza shop that has somehow outlived the mall, the department stores, and possibly the concept of retail itself. Initial jobless claims fell by 1,000 to 194,000 for the week ended October 24, while continuing claims dropped by 21,000 to 1.701 million for the week ended October 17. Third-quarter employment costs rose 0.8% and 3.4% from a year earlier.
- 3Q26 earnings continued to come in remarkably strong, further complicating the increasingly awkward question of when exactly all this resilience is supposed to stop. With 299 S&P 500 companies reporting, 82% beat estimates and earnings growth was expected at 31.6%. Energy led with 146.2% growth, followed by technology at 68.9%.