A Chip Hangover, a Crude Awakening and a Fed in Waiting

Headline index moves understated how bumpy the ride was. The S&P 500 closed at 7,623.68, down 0.47% on the week, and the Nasdaq Composite fell 0.71% to 25,955.34, its second straight weekly loss. The Dow rose 0.41% to 52,215.16, a third straight weekly gain, and the Russell 2000 jumped 2.00% to 2,775.90, a quiet rebound for small caps. The S&P 500 is up about 11.4% year to date. We could not verify the NYSE Composite close at press time and have left it blank rather than guess.

AI Spending Gets a Reality Check

Thursday was the week's defining session. The Nasdaq dropped 2.60%, its worst day since early June, and the Philadelphia Semiconductor Index fell 6.72%. Meta fell 6.98% after beating revenue estimates, because free cash flow turned negative on roughly $35 billion of quarterly capex and it lifted its 2026 capex floor to $135 billion-$145 billion. Lam Research fell 11.76% after its CFO flagged near-term supply constraints, and Amazon, Alphabet and Microsoft each lost 2% to 5%. Tesla slipped 3.1% even as it trimmed its 2026 capital plan to about $20 billion. Chips rebounded modestly Friday (semiconductor index up about 0.5%), which kept the Nasdaq's Friday loss to 0.2%. The bulls' counterpoint: S&P 500 third-quarter earnings are on pace to grow more than 32%.

Oil and Geopolitics Take the Wheel

Yemen's Houthis claimed fresh strikes on Saudi targets, including sites near Aramco's Shaybah field and Yanbu; Saudi officials said Shaybah operations were not affected. Brent settled at $116.72 (up about 6.2% on the week) and WTI at $103.27 (up about 1.8%), the highest settlements since spring. The energy sector rose 2.4% Friday to a record high, with SLB up 6.7% on earnings. Press reports say Washington and Israel are weighing renewed strikes on Iran after the November 3 midterms. Reasonable observers differ on whether pressure or diplomacy better protects supply; the oil market simply priced the risk and sent the bill to consumers.

Rates, Sentiment and the Dollar

The 10-year Treasury yield ended at 5.00%, about 10 basis points lower on the week, though it rose 5 bps Friday as oil revived inflation fears. The 2-year closed near 4.69% and the 30-year near 5.31%. University of Michigan sentiment edged down near a record low, with one-year inflation expectations up to 4.7% and five-year at 3.5%. Housing starts fell 5.2%, initial jobless claims dropped to a low 194,000, and the euro-area flash composite PMI slowed to 51.9. The dollar index finished near 101.79, flat on the week, while France's bond spread over Germany hit about 170 bps, the widest since 2011. Gold fell roughly 3.8% to about $4,008 as yields firmed, bitcoin held near $81,230, and the VIX closed at 19.45.

Movers Beneath the Surface

Friday's selling was broad, with about three of four S&P 500 stocks lower. AT&T and T-Mobile fell more than 6% and Verizon 1.6% after a report that SpaceX is seeking thousands of cell sites for a fourth wireless carrier; Crown Castle rose 10%. American Express fell 3.9% despite raising its profit outlook because it plans to cut 5% of its workforce. Earlier in the week Lockheed Martin (+7%), Procter & Gamble (+5.6%), Spotify (+11%) and Blackstone (+8%) beat expectations.

The Fed, Big Tech and a Midterm Looming

About one-third of the S&P 500 reports, headlined by Alphabet and Microsoft on Wednesday and Amazon on Thursday, all with capex guidance under a microscope. The FOMC decision is Wednesday October 28 at 2:00 PM ET with Chair Warsh's press conference to follow. Markets see a hold at 3.75-4.00% as near certain, with the debate over a December hike (roughly 71-80% priced, depending on the source). Thursday brings Q3 GDP and September PCE together.

Mon Oct 26 and Tue Oct 27: Quiet Open, Then Housing and Confidence

Monday is light: Verizon reports before the open and a $69 billion 2-year note auction settles at 1:00 PM. Tuesday brings durable goods (8:30 AM), new home sales and consumer confidence (10:00 AM), while the FOMC meeting begins. Coca-Cola, Boeing and UPS report before the open; Visa and Robinhood after the close.

Wed Oct 28 to Fri Oct 30: Fed, Tech Earnings, PCE and Energy

Wednesday has the Fed and, after the close, Alphabet, Microsoft, KLA and ServiceNow. Thursday: GDP (consensus about 3.2%) and PCE (about 3.7% headline, 3.1% core) at 8:30 AM, then Amazon, Intel and Starbucks after the close. Friday brings the Employment Cost Index plus Exxon and Chevron.

The week traded two anxieties in sequence: Thursday's fear that AI spending outruns its payback, then Friday's fear that oil feeds a second round of inflation. The constructive reading is that the S&P 500 lost only 0.5%, small caps and the Dow advanced, earnings growth is above 30% and claims are near multi-decade lows. The cautious reading is that the 10-year sits at 5%, Brent is above $116, consumer inflation expectations are climbing and a Fed that already hiked in September may be pushed again in December. Wednesday's Fed press conference and the Big Tech capex numbers should settle which story the market believes.