Market Continues to Push Higher

1. Growth Rallies Markets. The market continues to push higher, supported by a combination of solid economic growth, a dovish Federal Reserve, and strong corporate earnings. The U.S. economy remains well above trend, with the Atlanta Fed’s GDPNow tracker showing growth at 3.9%. That strength gives the Federal Reserve confidence to begin easing policy. A rate cut this week looks increasingly likely, with another possible in December, following a favorable CPI print of 3.0% year-over-year below expectations of 3.1%.

Earnings season has been another clear positive driver. Corporate profits are running 15% higher, supported by 8% revenue growth and broad margin expansion.^[1] Roughly 30% of S&P 500 companies have reported so far, and results have exceeded expectations. The next wave should keep the momentum going, with five of the “Magnificent Seven”: Alphabet (GOOGL), Meta (META), Microsoft (MSFT), Amazon (AMZN), and Apple (AAPL), all set to report.

2. Volatility Triggers Pullback. Last week brought some volatility to markets, leading to a pullback across several risk-on assets while also extending to gold and silver. Much of that weakness appeared to stem from elevated expectations following record inflows. Over the past ten weeks, gold and silver saw a combined $34 billion of inflows, which is the largest on record, as investors piled into hard assets. Bitcoin also followed suit, retreating alongside precious metals as investors recalibrated expectations and rotated toward more balanced allocations.

3. Earnings Underscore Consumer Resilience. Strong corporate earnings helped propel markets higher last week, supported by continued evidence of consumer resilience. Several major companies, including American Express, Royal Caribbean, General Motors, Ford, and Capital One, highlighted that consumer spending remains robust across key categories. American Express noted double-digit growth in retail spending, which grew 12% and restaurant spending grew 9%, while travel and entertainment volumes also rose meaningfully.^[2] The company further emphasized that delinquencies remain below 2019 levels, reinforcing the strength of household balance sheets. Capital One echoed this sentiment, citing a healthy consumer environment with declining delinquencies. The bank also reported a 39% increase in purchase volumes, which includes contributions from its recent Discover acquisition, and a solid 7% growth rate excluding it.^[3] Together, these results underscore that consumer fundamentals remain a key driver of economic momentum heading into year-end.

4. Momentum in AI and Power Grid. The AI, data center, and power grid theme continues to accelerate, fueled by rising infrastructure demand to support next-generation computing. Vertiv delivered standout results, with orders up 60% year-over-year, backlog expanding 30% to a record $9.5 billion, and a strong book-to-bill ratio of 1.4, prompting the company to beat and raise estimates. Similarly, GE Vernova reported strong momentum with order growth of 50%, a 1.5 book-to-bill ratio, and backlog up 15%. Together, these results underscore the powerful tailwinds driving the AI infrastructure buildout and ongoing grid modernization trend.

5. Upcoming. Looking ahead, next week brings another busy stretch for earnings, roughly 35% of the S&P 500 will report, including major names like Microsoft, Meta, Alphabet, Starbucks, and Chipotle. With fewer economic data releases on the calendar due to ongoing government delays, the focus will remain squarely on fundamentals and corporate guidance.

6. Fixed Income. U.S.Treasury yields initially advanced early last week, buoyed by growing expectations of Federal Reserve rate cuts and increased uncertainty surrounding the ongoing government shutdown. However, escalating tensions between the United States and China later in the week prompted a reversal, resulting in a mixed performance across the yield curve. By the close of the week, the 2-year Treasury yield rose by 2 basis points, while the 10-year and 30-year yields declined by 1 and 2 basis points, respectively. Market focus now turns to the Federal Open Market Committee’s October policy meeting scheduled for this Wednesday, where market participants are pricing in almost a 100% chance of a 25-basis point reduction in the federal funds rate.

Credit markets saw continued strength last week, benefiting from strong earnings and a cooler-than-expected September CPI print, which led to spread tightening back to early October levels. Investment-grade spreads tightened 5 basis points to +112, while high-yield spreads narrowed 11 basis points to +342. U.S. credit quality continued to improve for the eighth consecutive week, with the main rating agencies issuing 27 upgrades versus 22 downgrades. The Financial sector led in upgrades, whereas the Industrial sector saw the highest number of downgrades.

Municipal bond market performance was mixed last week, with tax-exempt yields diverging across the curve. Short-term yields increased by 4 to 10 basis points, while intermediate and long-term yields declined by 4 to 7 basis points. This week’s diminutive $5.6 billion in tax-exempt issuance is expected to be well absorbed by the market, following last week’s successful digestion of $16 billion in supply—the fifth-largest issuance week on record.

Stephanie Link’s TV Schedule:

Return for Selected Indices^[4]

Sources:

^[1] Bloomberg: As of October 2025

^[2] Bloomberg: As of October 2025

^[3] Bloomberg: As of October 2025

^[4] Source: Bloomberg. As of October 27, 2025.

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