Hello, I'm Michael Reinking, Senior Market Strategist at the NYSE, and this is Market Storylines. Every week we are here to keep you to date on the key trends and events driving global markets. We are recording on a very rainy Halloween Eve in a week chock full of tricks and treats, so let’s dive into this week’s market storylines.

Last week Eric talked about the stabilization in markets after the recent volatility shock as credit concerns quickly faded and as both China and the US tempered rhetoric ahead of trade meetings that began over the weekend. For nine consecutive sessions the S&P 500 traded completely within the range of October 10th ‘s session. Well, that streak came to an end last Friday after CPI came in a tenth below estimate, cementing a rate cut by the Federal Reserve this week. Looking beneath the surface there were signs of goods inflation in tariff related categories like furniture, appliances and footwear but this was offset by a long-awaited moderation in shelter inflation. Most major US indices ended the week up between 2% - 3% with the S&P 500 closing at a new all-time high, heading into a very important week for markets.

There are four primary drivers of trading this week. Trade negotiations, the FOMC rate decision, earnings and AI optimism which has continued to be fed by the never-ending stream of news flow. Markets picked up where they left off to start the week as there were positive readouts from the weekend’s trade negotiations in Malaysia setting the stage for the meeting between President Trump and Xi Jinping, which I’ll cover in more detail in a moment. There was broad based strength at the open but we started to see some rotational activity as small and mid-caps stocks faded throughout the session. However, once again tech picked up the slack as Qualcomm announced a new AI chip, the Department of Energy formed a $1B partnership with AMD to build two new supercomputers and Optimus robots handed out candy in Times Square.

The headlines kept coming in what could have been called Tech Tuesday as the OpenAI and Nvidia halo effect continued to expand astronomically. OpenAI updated its partnership agreement with Microsoft and added Paypal’s digital payments wallet within ChatGPT. Then Jensen Huang gave the keynote address at the GTC conference announcing partnerships and investments to drive advancement in 6g networking, autonomous vehicles, robotics and supercomputers. This continued to drive gains across the AI complex with Nvidia pushing to fresh highs and becoming the first company to cross the $5T market capitalization.

This seems like a good segway into earnings. Overall, the reporting season has been solid and over the last week we’ve transitioned away from financial companies to a broader range of companies. From a macro perspective management teams still sound cautiously optimistic, highlighting a still resilient consumer. But not surprisingly the biggest theme is the strong AI infrastructure-related demand which is driving very strong earnings across sub-sectors in tech, industrials and energy. Last night we got earnings from three hyperscalers Microsoft, Alphabet and Meta which collectively invested nearly $80B in AI infrastructure last quarter. The earnings were strong though the reactions have been mixed. All three companies confirmed that the spending would increase in 2026. After the close today earnings from Apple and Amazon will be in focus.

Let’s talk about trade. As President Trump is making his way through Asia a trade deal with South Korea was finalized and Japan agreed to partnerships related to rare earth minerals and nuclear technology. President Trump said the meeting with Xi Jingpin was amazing a 12 on a scale of 1 - 10. The two sides essentially agreed to a one-year truce with China resuming rare earth exports and agriculture purchases and the US cutting the fentanyl related tariffs and delayed a rule that would expand restrictions on blacklisted Chinese firms. This is not necessarily the widespread agreement markets have hoped for but does remove some of the trade overhang. However, keep in mind, the Supreme Court hearings about the legality of tariffs is set to begin next week.

Let’s close it out with the Fed. Markets widely anticipated the 25bps rate cut and the end of the balance sheet runoff but the Committee clearly decided that investors were starting to get too comfortable with expectations for further easing. So Chair Powell delivered a bit of a trick instead of treat by bluntly telling markets that the path of monetary policy was not on a preset course saying a cut in December was “not a foregone conclusion, far from it”. There were two dissents at this meeting with Stephen Miran once again calling for a 50bps cut and Jeffrey Schmidd calling for no action. The Chairman highlighted that while there was broad support for yesterday’s cut but there are decidedly differing views about the path forward, centering around the estimate of the neutral rate and views about inflation. The Chairman did seem to tip his hand. He believes the current policy rate is modestly restrictive and he described the labor market as gradually slowing and not sounding overly concerned about tariff induced inflation. But he did acknowledge the current Fed funds rate was now at the upper end of the estimates of neutral, which are mostly between 3-4%, and used the navigating through the fog carefully analogy again perfect for the holiday.

The initial response was swift within equity markets with the S&P 500 falling 1% intraday but the index ended around unchanged as this seemed to reinforce some of the rotational activity we mentioned earlier with tech holding up but cyclical areas of the market coming under additional pressure closing near the lows of the day. As we’re recording the S&P 500 is still up ~1% for the week but the equal-weight version of the index and small and midcap indices are down between 1% to 2.5%. Yields moved up 10bps across the curve as rate expectations reset and the USD index is hitting its highest level since early August.

Looking out to next week the focus will be on earnings, private sector economic data including the ISM surveys and the ADP job report and the tariff court case.

That’s going to do it for this week thanks for spending some time with us. If you liked today’s episode, please tell a friend or leave a comment wherever you listen to your podcasts. Enjoy trick or treating thanks for joining me I’m Michael Reinking and we’ll talk to you again next week.