Market Summary
U.S. stocks broke new highs last week, powered by strong earnings beats across tech and industrials, while cooling inflation reinforced hopes for a Fed rate cut soon. Heightened U.S.-China tensions and sanctions on Russian energy kept geopolitics in focus, but markets stayed resilient, with investors watching policy signals and ongoing earnings momentum for what comes next.
Markets found support after both headline and core inflation eased to 3.0% year-over-year in September, coming in slightly below expectations. This tempered concerns that the Federal Reserve might need to delay rate cuts and bolstered confidence that the current easing cycle remains on track.
September Core Inflation - 3% YoY
Business-activity indicators also strengthened, with both the manufacturing and services PMIs showing expansion — a sign that the U.S. economy continues to display resilience despite higher borrowing costs.
Geopolitical developments produced headline risk but did not derail markets.
Tensions between the U.S. and China persisted, with ongoing export controls and trade probes in focus. Over the weekend, U.S. and Chinese officials announced on October 26, 2025, that they have reached a preliminary trade deal framework. The framework aims to de-escalate ongoing trade tensions, which saw a recent spike in tariff threats and prompted market volatility earlier in the month.
The U.S. imposed new sanctions on Russian energy companies, pushing oil up nearly 8% for the week and driving energy sector volatility. Washington’s government shutdown entered its 24th day, delaying some economic data and policy signals, but investors remained focused on earnings and macro trends.
Corporate earnings season continued to drive market sentiment, particularly among the mega-cap technology names that dominate the indices.
Third-quarter results showed 87% of S&P 500 companies reporting positive EPS surprises and 83% citing revenue beats—both notably above long-term averages. The blended S&P 500 earnings growth rate for Q3 2025 stood at approximately 9.2%, its ninth consecutive quarter of year-over-year growth.
Week Ahead
This week will be busy with key earnings from majority of the mega-cap companies reporting – Microsoft (MSFT), Meta Platforms (META), Alphabet (GOOG), Apple (AAPL), and Amazon (AMZN). Expectations are high with investor sentiment optimistic for continued profitability stemming from AI development. Hundreds of other companies will also report as a top-heavy market eyes the Fed’s interest rate decision on Wednesday. Expectations are for another 25bps cut with easing Fed policy acting as a core theme behind the market’s rally.
As always, if you have any questions or comments please do not hesitate to reach out.
Michael Neill, CFA
Chart Sources: TradingEconomics (US Census Bureau)