A Week That Tilted Risk Toward the Bulls
US indexes delivered a mixed but ultimately bullish week: momentum came from lighter US–China rhetoric, powerful single-name reports, and a softer CPI into Friday. The S&P 500 and Nasdaq 100 notched fresh record highs on Friday, while the Dow flirted with local records. The market balanced several narratives at once: risk-on around Beijing talks and blue-chip beats, risk-off midweek on Texas Instruments’ cautious outlook and Netflix weakness, then risk-on again as the inflation surprise and sub-4% Treasury yields took hold.
US–China Trade Rhetoric: Fewer Threats, More Upside
Tone improved as Washington signaled that “things will be fine” with China and later confirmed plans for a leaders’ meeting on APEC sidelines. Markets are conditioned to this standoff, so even a nuance in phrasing quickly translates into multiple expansion. In parallel, warnings about potential tariffs absent a deal and headlines on possible software export limits briefly revived volatility. The weekly verdict is cautious optimism with the understanding that a single soundbite can still widen risk spreads.
Oil and Sanctions: Energy Back at the Epicenter
A WTI spike of more than five percent followed US restrictions on Rosneft and Lukoil. For markets, that is akin to a short-term tightening of supply, immediately lifting oil & gas producers and services. Energy became a key alpha donor this week, offsetting weakness elsewhere when earnings or China news weighed on sentiment.
CPI and Fed Path: “A Touch Cooler” Is Equity-Friendly
September CPI missed by a tenth, giving equities that “sliver of light” for an easier policy glidepath. Core inflation remains above the Fed’s target, but a sequence of small positive surprises is nudging rhetoric toward a 25 bp cut on October 28–29. The 10-year hovered near 4%, swayed by oil and breakevens. Equities responded in textbook fashion: duration segments re-rated, with flows into megacaps and tech benchmarks.
Shutdown as a Data-Visibility Risk
The extended government shutdown injected “noise” into the data calendar. Delays in releases and labor metrics blunt nowcast models and raise forecast dispersion. Paradoxically, the absence of fresh negatives can act like a positive, but the longer the pause, the pricier surprises become when revisions hit.
Earnings Season: Strong Averages, Wide Dispersion
Q3 continues to show a late-cycle pattern: high beat rates alongside heightened sensitivity to any guidance wobble. Autos and industrials impressed with upgraded outlooks, consumer staples printed convincing margin metrics, and semis delivered both extremes—beta-driven rebound into Friday and sharp selloffs after cautious outlooks from select names. Med-tech kept generating growth stories, with investors preferring visible operating traction over “pure narrative.”
Semiconductors: From Selloff to Beta-Driven Rally
Midweek pressure followed a weak forecast from a key analog player, rippling across the chip complex. By Friday, the market digested the news and refocused on cyclical demand recovery, AI infrastructure, and manageable back-end yields. Sector volatility is inevitable, but chips remain the risk-appetite barometer for the Nasdaq 100—and the week’s close reaffirmed that.
Precious Metals and Crypto: Safe-Haven Swings
Gold and silver, fresh off record prints, retraced on profit-taking and a partial rotation out of havens as trade headlines improved. Still, sporadic demand returned whenever geopolitics resurfaced. Crypto moved in step with beta risk: with stable yields and soft CPI, interest revived, and upgrades across adjacent public names served as catalysts.
Rates: Balancing Inflation and Growth
Treasuries traced a classic “swing” week. Oil-driven inflation worries weighed on prices, but softer CPI and growth concerns amid the shutdown brought buyers back. Net result: 10-year yields near 4% and a still-inverted curve pointing to cautious growth expectations. For equities, that preserves the familiar trade-off: any abrupt yield back-up challenges duration stories; any cool inflation surprise opens a window for multiple expansion.
Europe and Asia
European benchmarks set highs, Asia provided a cautiously positive tone, and China’s better-than-expected growth and industrial prints revived the global-demand-without-overheat narrative. The ECB, via swaps, remains in patient-watch mode, while softer UK inflation added arguments for restraint. For the US, that translates into less external pressure and more room for its own easing trajectory.
The Fed, Oil, and Rhetoric Will Call the Tune
The immediate catalyst is the Oct 28–29 FOMC. Markets have largely “priced in” a quarter-point cut; any surprise in dots or press-conference tone will hit duration assets first. Second, oil: sustained prices after sanctions and geopolitics could lift breakevens and complicate the Fed’s task. Third, US–China rhetoric: even amid cautious progress, a single hardline remark can widen credit spreads and cool risk appetite. Investors head into the new week with guarded optimism, eyes glued to headlines and data, mindful of how quickly the setup can flip.
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Twitter: @BigStakeTrades