Weekend Update, November 2nd, 2026

November 2, 2026

Weekly Market Update

Week ended October 30 2026  |  Prepared October 31 2026

Most indexes finished lower for a third week, but the market broadened beneath them. Small caps and nine of eleven sectors rose while communication services and technology absorbed the damage from renewed scrutiny of AI capital spending. Falling Treasury yields cushioned the rotation, but a hawkish Fed hold, sticky inflation, and late-week credit widening kept the market on its back heels. Friday’s stock talk will recap October and YTD.

Source: Associated Press, Federal Reserve, BEA, FactSet.

Key Takeaways Last Week

  • The S&P 500 fell -0.6%, the Nasdaq Composite lost -2.0% and the Dow declined -0.9%. The Russell 2000 gained 1.3%, extending the rotation into smaller companies and value factors.
  • Nine of 11 sector ETFs rose. Health care, staples, and utilities led; communication services fell- 5.3%.
  • The Fed held the policy range at 3.75%–4.00% by a 10–2 vote. The risk moved to a December hike.
  • Q3 GDP grew 3.4% annualized, but September spending outpaced income and the saving rate fell to 3.8%.
  • Q3 S&P 500 earnings growth improved to 30.2%, yet the market punished heavy AI spending and weak guidance. Alphabet (GOOGL) fell -12.6% for the week and Intel (INTC) fell almost -29% on Friday.
  • The 10-year Treasury yield fell 6 bp to 4.94%, down -40bps in 3 weeks. Gold lost -3%, Bitcoin fell below $77,000 and oil stayed above $100 as geopolitical risk remained.

Source: Associated Press, Federal Reserve, BEA, FactSet.

U.S. Stock Performance Index and Sector Moves

Index table.

Friday did most of the damage: the S&P 500 fell -1.8%, the Nasdaq -2.9% and the Russell 2000 -1.7%. Indexes deteriorated sharply once the semiconductor and mega-cap selloff accelerated. Source: Associated Press

Sector ETF table.

Source: FactSet

Breadth and Participation

Sector breadth improved materially with nine of eleven sector ETFs finished higher, while IWM gained 1.3%, XBI rose 4.3% and the developed ex-U.S. ETF EFA added 0.7%.

Friday. Only 1,107 of 3,605 liquid U.S. stocks advanced, and semiconductors fell -7% in the session.  Source: AP News

International and Global

Europe rebounded, with the STOXX Europe 600 up 1.2%, Germany’s DAX up 2.0% and France’s CAC 40 up 1.9%. Japan’s Nikkei 225 gained 0.2% and Hong Kong’s Hang Seng rose 0.6%. The ECB held its deposit rate at 2.50%, the Bank of Japan held at 1.25%, and the Bank of Canada raised its rate 25 bp to 2.50%.

The global picture remains uneven. Developed ex-U.S. equities held up, but the emerging-markets ETF EEM fell -1.6%. Oil exposure, currency sensitivity and China’s inflow surge remain the main regional differentiators. Source: FactSet

Volatility and Risk Sentiment

The VIX closed at 19.42, unchanged from a week earlier despite a 12.9% Friday jump. Volatility repriced late but did not break into a sustained panic. Bitcoin’s fall below $77,000 and gold’s decline alongside equities also showed that cross-asset hedges were unreliable during the Friday liquidation. Source: FactSet

Bonds Credit and Interest Rates

Market table.

*  Investment-grade and high-yield ETFs still gained 0.4% and 0.5% for the week as Treasury yields fell, but the Thursday widening and continued stress in AI-linked borrowers. Source: U.S. Treasury

Economic Data Monetary Policy and Earnings

The Fed held at 3.75%–4.00% and said activity was expanding at a strong pace while inflation remained elevated. Futures moved to roughly 73% odds of a December increase after the decision and subsequent data.

Real GDP increased 3.4% annualized in Q3, up from 2.2% in Q2, while final sales to private domestic purchasers rose 4.9%. Q3 consumer spending grew 3.8% and business investment jumped 12.7%, led by AI infrastructure. September headline PCE inflation was 3.6% year over year and core PCE was 3.1%; initial claims fell to 194,000.

Earnings: With 60% of S&P 500 companies reported, 82% beat EPS estimates and blended growth reached 30.2%. The aggregate surprise was only 1.9%, well below recent averages, while revenue growth reached 13.4%. The forward P/E was 18.7, below its five- and ten-year averages.

Mega-cap reactions said revenue growth must justify capital intensity. Alphabet’s quarterly capex more than doubled to $51.36 billion and its shares fell -12.6% for the week. Amazon reiterated roughly $220 billion of 2026 capex, and Intel’s weak outlook triggered its worst one-day drop since 1974. Source: Federal Reserve, BEA, FactSet

Consumer Stress Commentary

Household demand is expanding. September nominal consumer spending rose 0.5% while personal income rose only 0.2%; real spending was flat for the month and the saving rate fell to 3.8%, the lowest in four years.

Labor costs are moderating but purchasing power remains pressured. The Employment Cost Index rose 0.8% in Q3 and 3.4% year over year; wages and salaries rose 3.1% year over year, while inflation-adjusted private-industry wages fell 0.6%. Elevated fuel costs and a 7.24% 30-year mortgage rate remain drags on budgets. Source: Bureau of Labor Statistics

Commodities Currencies and Macro Assets

Asset table.

WTI held above $100 and Brent above $110, keeping pressure on transport, manufacturing and household fuel costs. Gold and bitcoin did not provide downside protection; both fell as Treasury bonds rallied. Source: FactSet

Liquidity Conditions

Reserve balances fell last week, while the Treasury General Account rose $47.7 bil to $1.000 trillion. Fed net-liquidity measure fell $56 bil to $5.746 trillion. Money-markets declined $43.29 bil.

The weekly move was a headwind. The question is whether reserves stabilize after the TGA build and whether lower Treasury yields translate into easier financial conditions without a renewed inflation shock. Source: Federal Reserve

Flows and Positioning

BofA’s flow data showed $56.2 bil into global equities, including a 4th straight U.S. inflow of $14.9 bil. Tech funds took in $5.3 bil despite the selloff, while investment-grade bonds drew $5.0 billion and high yield recorded its first inflow in five weeks at $1.8 bil. China equity funds drew $25.7 bil, their largest inflow since April 2025.

Private-client equity allocation stood at 66.0%, while BofA’s Bull and Bear indicator slipped to a neutral 7.1 because global breadth weakened and lower-quality credit spreads widened.  Source: Bank of America

What Matters This Week

What matters this week table.

Source: Kiplinger

Five tests stand out:

  • Does the October employment report keep a December hike in play without signaling a labor slowdown?
  • Can small caps and the nine-sector advance persist if technology remains under pressure?
  • Do Apple and AMD show a positive link between AI investment, revenue growth and free cash flow?
  • Does the midterm result move the fiscal outlook enough to reverse the Treasury rally?
  • Do WTI above $100 and Brent above $110 continue to feed inflation consumer stress?

Source: Kiplinger

Bottom Line

The market broadened, but it did not de-risk entirely. Small caps, health care and value factors outperformed while mega-cap technology and communication services fell due to the consequences of high expectations and enormous AI spending. Strong GDP and earnings growth argue against an economic break, but a split Fed, 3%–4% inflation, depleted savings and selective credit stress keep the hurdle for long-duration growth assets high. Source: AP News, Federal Reserve, BEA, FactSet

Stock Talk

The market broadened, but it did not de-risk cleanly. Small caps, health care and cyclicals outperformed while mega-cap technology and communication services absorbed the consequences of high expectations and enormous AI spending. Strong GDP and earnings growth argue against an imminent economic break, but a split Fed, 3%–4% inflation, depleted household savings and selective credit stress keep the hurdle for long-duration growth assets high.

Why are AI stocks Falling as Earnings are Rising? Is this a reset in the AI investment cycle, or something more precarious in the credit markets?

Selected Sources

Method note  Weekly returns compare Friday closes unless noted. Sector moves use liquid SPDR sector ETFs. Credit spreads are latest available through October 29. Figures described as about are rounded across closing-price sources. This report is informational and is not personalized financial advice.

Past performance is no guarantee of future results. Indexes are unmanaged and one cannot invest directly in an index. They do not reflect any fees, expenses or sales charges. The preceding discussion is for informational purposes only. Investing involves risk and no reference to any security listed above should be considered a buy or sell recommendation. Advisory services are provided through Oak Harvest Investment Services, LLC, a registered investment adviser.