Weekly Market Recap: Stocks Retreat as AI Pressure Returns and Bonds Rally

Market Overview

U.S. equities finished the final week of October mostly lower as renewed concerns around artificial intelligence spending and profitability weighed on large-cap technology. Earnings disappointments from Alphabet and Amazon, along with a weaker outlook from Intel, pressured AI-linked shares and pushed the Nasdaq down 1.99%. The S&P 500 declined 0.56% and the Dow fell 0.83%.

Beneath the major indexes, however, market performance was more resilient. The Russell 2000 gained 1.30%, while the Russell 1000 Value Index advanced 0.48% compared with a 1.70% decline for growth stocks. Sector leadership reflected the rotation, with Health Care gaining 3.1%, Utilities and Materials each rising 2.0%, and Industrials adding 1.7%. Communication Services fell 8.5% and Technology declined 1.8%.

International markets were mixed. Developed international equities, measured by MSCI EAFE, gained 0.87%, supported by strength in European markets, while emerging markets declined 0.72% as technology-heavy Asian markets remained under pressure.

Fixed income provided a counterbalance to equity weakness. The Bloomberg U.S. Aggregate Bond Index gained 0.56%, while corporate bonds rose 0.48%, municipal bonds gained 0.85%, and high yield advanced 0.50%. The 10-year Treasury yield declined to 4.94% from 5.00%, while the two-year yield fell to 4.56%, as investors moved toward safer assets during the technology selloff.

Commodities remained volatile. Oil stayed above $100 per barrel amid ongoing U.S.-Iran tensions and tight supplies of refined products. Gold moved lower and recorded its second consecutive monthly decline, while the U.S. dollar was relatively steady.

Federal Reserve Insights and Economic Roundup

The Federal Reserve held its target rate at 3.75%–4.00% following a 10–2 vote, with two policymakers dissenting in favor of an immediate rate increase. Officials emphasized the need for additional economic data before making another policy adjustment, reinforcing expectations that rates could remain elevated for longer.

Inflation remains complicated by both resilient demand and supply constraints. Policymakers are also watching whether productivity improvements can eventually ease inflation pressures, although those benefits may take longer to materialize than markets currently expect.

The Fed also announced a gradual change to its meeting schedule. Beginning in 2027, the FOMC will move toward a “6+2” structure, eventually holding six meetings focused primarily on monetary policy and two centered on broader economic strategy. Fewer opportunities to adjust rates could place greater emphasis on each policy meeting and the economic data leading into it.

Fed Chair Kevin Warsh also announced a November 16 public field hearing for the Fed’s Productivity and Jobs Task Force, signaling continued attention to how productivity, technology, and labor-market developments could influence the longer-term economic outlook.

Despite elevated oil prices, heavy Treasury issuance, and continued uncertainty around AI-related investment, bond markets remained relatively resilient. Treasuries once again demonstrated their ability to provide portfolio ballast when risk assets came under pressure.

The Week Ahead

Monday: ISM Manufacturing and construction spending will provide an early look at factory activity and business investment heading into November.
Tuesday: JOLTS job openings and factory orders will offer additional insight into labor demand and manufacturing conditions.
Wednesday: ADP employment, the September trade balance, and ISM Services will provide a broader read on hiring, trade, and the services economy.
Thursday: Third-quarter productivity and labor costs, along with weekly jobless claims, will help investors assess wage and inflation pressures.
Friday: The October employment report and preliminary consumer sentiment will take center stage as markets reassess the outlook for Federal Reserve policy.