Happy Friday! Only two weeks to Halloween, giving my kids around 37 more chances to change their mind on which costume they want. Let’s recap the week, starting with the banks.
📊 Weekly Market Recap
- S&P 500 return Year-to-date were approximately 12.94%
- S&P 500 3 month return were approximately 5.27%
- S&P 500 return over the past month were approximately 0.32%
- S&P 500 return over the past 7 days were approximately -1.59%
This Week in the Markets- 3 Things to know
- Banks Deliver, But the Optimism Feels Thin– Wall Street’s biggest banks just closed out earnings week, and the message was clear: results are strong, but confidence is cautious. Bank of America, Wells Fargo, and Morgan Stanley all topped expectations boosted by solid trading income, improving investment banking pipelines, and higher net interest margins. After months of pressure, this was the first real sign that the sector can still generate meaningful profits even with slowing loan growth. Still, executives aren’t celebrating just yet. Deposit costs continue to climb, credit demand is softening, and commercial real estate risks are lingering especially for regional banks. Many CFOs hinted that loan loss provisions could rise next quarter as the economy cools further. The system looks stable for now, but no one’s pretending it’s “stress-free”. This was a relief rally, not a comeback. With two potential rate cuts on deck before year-end, investors are already looking ahead to see whether lower rates can sustain profitability or just compress margins faster.
- Tariffs, Tension, and Tweets– The trade war narrative made a full comeback this week and markets felt it instantly. When former President Trump tweeted about imposing an additional 100% tariff on Chinese imports last Friday, stocks took a sharp dip, with industrial, semiconductors, and retailers leading the slide. The threat added a sudden layer of geopolitical risk at a time when investors were already on edge over soft labor data and slowing global growth. Beijing’s response was measured but firm, signaling that any aggressive move from Washington would be met with proportional retaliation.
Commodities reacted fast, copper, aluminum, and oil all pushed higher as traders priced in potential supply shocks. At the same time, the Federal Reserve now faces one of its toughest balancing acts yet. With economic data weakening and financial conditions tightening, an October rate cut is squarely on the table, but rising tariff threats could reignite inflation just as the Fed tries to ease. Policymakers are threading a needle between supporting growth and preventing another price surge. For investors, this mix of trade tension and dovish expectations has created the most unpredictable setup we’ve seen all year.
3. AI’s Next Chapter: Innovation Meets a Turning Economy– AI continues to be the heartbeat of market optimism, but it’s entering a more complex phase. Buzz is growing that OpenAI could be preparing to go public, in what some say would be one of the largest IPOs in history. That kind of move would almost certainly reignite investor enthusiasm for tech, especially after months of rotation into value and defensive sectors. However, the macro backdrop is shifting fast. The labor market’s softening and a likely October rate cut mean that the growth environment is both supportive and fragile. Lower rates could lift valuations for big tech and AI leaders, but slower business spending could weigh on real adoption. We’re past the phase where “AI mentions” drive rallies now investors want proof of earnings impact. The next leg of this story belongs to companies that can turn innovation into revenue, not just headlines.
The Federal Reserve is still flying partly blind as the government shutdown drags on, cutting off key reports on jobs, inflation, and spending. Without those official numbers, policymakers are leaning on private data and market trends — both less reliable and more unpredictable. After months of hinting at a softer stance, the Fed is now under real pressure to deliver a rate cut by October to support an economy that’s clearly losing steam. Private payrolls, credit usage, and consumer sentiment are all slowing down. Banks are tightening lending, small businesses are seeing weaker demand, and even big employers are hiring less. The lack of government data makes decision-making messy inflation still lingers in some areas while cooling fast in others, and no one’s sure which trend will win out.
As Wall Street looks ahead, two main paths are on the table. In one, the Fed cuts rates once or twice before the end of the year to boost growth and confidence without reigniting inflation. That could trigger a late-year rally in stocks, especially in tech and real estate, and give some breathing room to borrowers. In the other scenario, the Fed keeps rates steady through December, choosing to protect its credibility rather than rush into stimulus with limited data. That would likely keep markets choppy, with investors swinging between hope and hesitation as they try to read the Fed’s next move. With the job market showing its weakest stretch in years and tariffs plus trade tensions weighing on profits the stakes for the Fed’s next decision are higher than they’ve been in a long time.
This final quarter is shaping up to be one of the most unpredictable finishes in recent memory. With the shutdown blocking access to key data and markets trading largely on emotion, the story of “what happens next” could hinge more on confidence than numbers. If the Fed acts decisively, a rate cut could inject stability and reinforce investor trust in the central bank’s ability to adapt. But hesitation or mixed messaging could deepen market anxiety, especially as global growth cools and geopolitical tensions rise. Either way, the Fed’s October and December meetings will likely define how 2025 closes.
S&P 500 SECTOR SNAPSHOT- Past Week
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