Everything you need to know about macro and markets
Markets wrapped up a tumultuous week on a positive note, as strong earnings eased fears surrounding tech company valuations and the stability of local banks. There was also a growing sense of optimism about potential easing of trade tensions between the U.S. and China. The Dow Jones Industrial Average (DJIA) rose by 1.56%, while the S&P 500 (SPX) saw a 1.70% increase, and the Nasdaq 100 (NDX) climbed up by 2.46%.
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Spookiest month of the year
October is statistically known as the most volatile month for stocks, with erratic swings traced back to the late 1800s. So far, it’s living up to its reputation. Last week started strong, but it became quite choppy as the U.S. and China seemed to pull back from their earlier trade escalations, coinciding with dovish comments from Federal Reserve officials hinting at future rate cuts. A few major AI deals, including strategic investments in cloud infrastructure, lifted sentiment in tech stocks, contributing to market gains early in the week. As earnings season kicked into high gear, positive results from the largest U.S. banks further bolstered the market rally.
Federal Reserve Chairman Jerome Powell hinted that the Fed may lower short-term interest rates in the near future. He remarked that “downside risks to employment” are shifting the economic risk balance. Additionally, the Fed released its Beige Book report, indicating that economic activity hasn’t changed much since the last update, showcasing mixed conditions across various regions. While employment levels appeared stable and wages increased, consumer spending dipped, prices rose, and more employers announced layoffs.
Stock prices increased on Thursday, following two major regional banks revealing loan issues that raised concerns about risks in the credit market and the health of the regional banking sector. Nonetheless, as other regional banks announced robust financial results, the stock prices bounced back, easing investors’ worries. The mood was further lifted by news that Treasury Secretary Scott Bessent would meet with China’s Treasury Secretary to discuss trade, alongside President Trump’s assertion that high tariffs are not sustainable.
Cockroach under the hood
While major banks reported solid earnings, the scenario was less rosy for local banks. Zions Bank (ZION) and Western Alliance (WAL) reported significant losses, raising alarms about credit quality and broader economic stability. Their lending issues emerged around the same time the bankruptcies of two major players in the auto sector, Tricolor Holdings and First Brands Group, startled investors. Although these banks haven’t been directly impacted, their commercial real estate losses have stirred questions about potential systemic issues in the financial system.
JPMorgan (JPM) CEO Jamie Dimon fueled concerns with his famous remark: “If you see one cockroach, there’s probably more.” JPMorgan Chase has direct exposure to Tricolor Holdings, which incurred a $170 million write-down in the third quarter. Dimon warned that these bankruptcies might be indicative of deeper credit problems lurking beneath the surface, urging caution regarding hidden credit risks in the economy.
While JPMorgan avoided direct losses from First Brands, the bank is keeping a close watch due to significant exposure. Various lenders, including Jefferies (JEF), UBS (UBS), and Fifth Third (FITB), reported substantial exposures to First Brands’ off-balance-sheet loans, alleging fraudulent activity in invoice and account receivable reporting. This has heightened scrutiny of private credit funds and business development companies (BDCs), with many holding considerable debt related to First Brands.
While memories of the local bank crisis in 2023 lingered among investors, fears subsided as banks and analysts noted that this was likely an isolated incident rather than a sector-wide issue. Raymond James (RJF) indicated that Zions’ situation was a “one-off credit issue,” not indicative of a broader credit crisis. Argus Research echoed this sentiment, viewing corporate bankruptcies as isolated events. Both Zions and Western Alliance reaffirmed their financial guidance, emphasizing limited exposure to problematic loans. Meanwhile, Ally Financial (ALLY), Fifth Third Bancorp, and Regions Financial (RF) surpassed analysts’ earnings and revenue estimates, thereby boosting confidence in local banks and propelling a broader market rally leading into the weekend.
Brands in the news
▣ Oracle (ORCL) saw a decline on Friday, reversing its gains from the previous day. The cloud infrastructure company updated its financial outlook, indicating that gross margins for its AI cloud server rental business could reach 30% to 40% by 2030. It raised its 2030 OCI revenue forecast to $166 billion from the prior $144 billion estimate, suggesting a 75% compound annual growth rate over the next five years. The high demand for its services has put its Remaining Performance Obligations (RPO) over $500 billion. Still, Friday proved tough for stocks overall, as traders might have reacted by selling due to lingering questions about short-term profitability and capital spending outlooks.
▣ Alphabet (GOOGL) emerged as the top-performing mega-cap stock last week, climbing 3.7% on investor confidence tied to its AI initiatives, solid fundamentals, and rising analyst price targets. The company’s Google division is gearing up to launch its latest AI model, Gemini 3.0, possibly as early as December. Reports suggest it has undergone significant upgrades and may become a market leader. Additionally, the development team is reportedly working to integrate Gemini into Apple’s (AAPL) operating system.
▣ Meta Platforms (META) has formed a $30 billion agreement with Blue Owl Capital (OWL) to finance its Hyperion data center in Louisiana. Under the deal, both companies will co-own the facility, with Meta retaining a 20% stake. Scheduled to be completed by 2029, this data center is poised to be one of the largest globally, housing approximately 2 million GPUs.
▣ American Express (AXP) reached an all-time high following its strong third-quarter results, which showcased record revenue, increased net income, and solid credit metrics. The performance was largely driven by robust cardmember spending across various segments. AXP has raised its full-year revenue and 2025 EPS guidance, both exceeding analyst expectations.
▣ Shares of Novo Nordisk (NVO) and Eli Lilly (LLY) saw a drop last week after President Trump proposed negotiations to lower prices for diabetes and weight loss drugs like Novo’s Ozempic and Lilly’s Zepbound and Munjaro. Investors reacted by reconsidering the potential for reduced profits on these blockbuster medications, which can cost up to $1,000 for a monthly supply.
▣ Nvidia (NVDA) and Taiwan Semiconductor Manufacturing Co., also known as TSMC (TSM), announced the production of the first U.S.-made wafers for Nvidia’s advanced Blackwell AI chips at TSMC’s Arizona plant. This marks a significant milestone, being the first domestically-made advanced chips for AI applications, helping to lessen dependence on foreign supply chains in the crucial semiconductor sector.
This announcement follows TSMC’s Q3 2025 performance report, which exceeded analyst expectations for revenue and earnings per share. The leading chip foundry experienced a remarkable third-quarter profit growth of 39%, fueled by high demand for AI and 5G chips. The company raised its sales growth forecast for 2025 from about 30% to the mid-30% range and reaffirmed its annual capital spending plan of up to $42 billion. Notably, this quarter marks TSMC’s sixth consecutive quarter of double-digit profit growth, with net income hitting a record high.
Notice regarding future financial results and dividends
The third-quarter income season is in full swing, with several significant announcements slated for next week.
This week, investors will focus on Tesla (TSLA), which is set to report its quarterly results on Wednesday – the first among the “Magnificent Seven” brands this season. They will also track earnings from Netflix (NFLX), Coca-Cola (KO), GE Aerospace (GE), General Motors (GM), Lockheed Martin (LMT), Philip Morris (PM), RTX (RTX), Halliburton (HAL), IBM, Thermo Fisher (TMO), AT&T (T), Lam Research (LRCX), Intel (INTC), Blackstone Group (BX), Procter & Gamble (PG), HCA Healthcare (HCA), General Dynamics (GD), and several others.
Additionally, this week features ex-dividend dates for Owens Corning (OC), Dell Technologies (DELL), Clorox (CLX), CVS Health (CVS), Albertsons Companies (ACI), and other dividend-paying companies.
