WEEKLY MARKET BRIEF

Week ended October 23, 2026   |   Published October 26, 2026

Source: AP market close

Key Takeaways Last Week

U.S. markets finished mix after an early rebound failed on Thursday. The S&P 500 fell -0.47% and the Nasdaq lost -0.71%, while the Dow gained 0.41% and the Russell 2000 rose 2.00% as value, small and defensives outperformed mega-cap growth.

• AI demand remained strong, but financing concerns are mounting. Meta beat revenue and lifted 2026 capex guidance; investors focused instead on negative free cash flow, 2027 spending and scarce capital for the next wave of data centers.
• Breadth improved, but the mix was defensive. Seven out of eleven S&P 500 sectors advanced and small caps gained 2.0%; communication services fell -6.2%, and Friday breadth ended negative with three decliners for every advancer.
• Rates eased despite firmer growth and inflation signals. The 10-year Treasury finished at 5.00%, down -9 bp, while October flash PMI showed strong activity and the fastest selling-price inflation in more than four years.
• Housing weakened sharply. September housing starts fell 5.2% to a 1.22mm annually, and pending sales dropped -7.3%.
• Earnings were strong. With 24% of the S&P 500 reported, 83% beat EPS estimates and Q3 earnings growth was 29.5%; the aggregate surprise decelerated to 2.1%, below recent averages.
• WTI gained 3.7% and Brent moved above $116, tightening the inflation-growth tradeoff ahead of the Fed, GDP and PCE.

U.S. Stock Performance – Index and Sector Moves

Sector leadership remained defensive. Energy and health care each gained 1.5%, real estate 1.1%, utilities 0.8%, financials 0.7%, staples 0.6% and discretionary 0.5%. Communication services fell -6.2%, industrials -1.9%, technology -0.2%.

Sources: JH weekly recap | AP Friday close

S&P 500 Stock Leaders and Laggards

Sources: techcortex,net weekly movers

Breadth & Participation

Participation broadened, but not uniformly. The Russell 2000 gained 2.0%, large-cap value rose 0.7% and large-cap growth fell -1.5%. Seven of eleven S&P 500 sectors advanced. Thursday had 324 S&P 500 advancers even as the index fell, but defensive leadership made that breadth less bullish than the count implied. Friday reversed sharply.

Sources: techcortex.net size and style | JH breadth warning | techcortex.net Friday breadth

International / Global

Global equities lagged the U.S. MSCI EAFE fell -1.5% and emerging markets lost -2.6%. Europe declined -1.7%, including France -2.6%, Germany -1.9% and Italy -3.1%; Japan fell -1.7%. China dropped -4.5%, India -3.2% and Taiwan -2.7%, while Brazil gained 0.4% and Indonesia rose 7.2%. Political stress and higher sovereign yields weighed.

Sources: JH Global returns

Volatility & Risk Sentiment

The VIX eased 2.5% to 19.45. The Nasdaq rose 1.1% Monday and Wednesday, then fell -2.6% on Thursday, its worst session since June, as Meta’s spending profile and AI-financing concerns revived. The Nasdaq ended -6% below its October 6 high.

Sources: JH market-moving news | Reuters market close

Bonds, Credit & Interest Rates

Treasuries rallied despite a strong PMI and rising oil. The Aggregate Bond Index returned 0.5%, Treasuries 0.6%, TIPS 0.6% and MBS 0.8%; high yield returned -0.2% and bank loans -0.2%. Futures ended the week assigning a 90% chance to no change at the October 28 Fed decision, while a December hike remained the dominant next-step risk.

Sources: JH Treasury curve and bond returns | JH Fed expectations

Economic Data, Monetary Policy & Earnings

Housing was soft. September starts fell 5.2% to a 1.22 million annual rate; single-family starts declined 4.6% to the lowest since March 2023. Pending sales fell 7.3% to a series low. Mortgage rates above 7% continue to restrain supply and demand.

The October flash Composite PMI slipped to 57.6 from 58.4 but still signaled the second-fastest expansion since March 2022. Employment rose at the quickest pace since June 2022, while selling-price inflation reached a four-year high. The mix supports an October hold while leaving another hike in play.

Earnings remained strong but reactions were negative. FactSet reported 24% of the S&P 500 had released results: 83% beat EPS estimates, blended growth reached 29.5%, and the aggregate surprise was 2.1% versus a 7.5% five-year average. Meta revenue rose 26% to $64.6 billion and 2026 capex guidance narrowed to $135-$145 billion; shares fell as FCF turned negative and 2027 spending remained undefined. Netflix beat EPS but lowered ad-sales guidance; P&G rose 5.6% after beating.

Sources: axios.com Housing | S&P Global PMI | FactSet earnings | Meta results

Consumer Stress Commentary

The consumer remains bifurcated. September retail sales were firm, yet October Michigan sentiment finished at 48.0 versus 48.1 in September, near historic lows. Higher oil and freight threaten real purchasing power as employment remains resilient.

Sources: axios.com Michigan sentiment | axios.com Housing demand

Commodities, Currencies & Macro Assets

Sources: JH cross-asset returns | techcortex.net Friday market levels | AP oil close

Liquidity Conditions

Fed liquidity tightened in the week ended October 21. On Wednesday, securities held outright declined $0.9 billion to $6.470 trillion; reverse repos rose $7.3 billion. The drain is a headwind when market is already being tested.

Sources: Federal Reserve H.4.1

Flows & Positioning

Cash rebuilt. ICI reported money-market assets rose $21.49 billion to $7.945 trillion, led by a $22.11 billion increase in institutional government funds. Global equity funds attracted inflows for a fifth week.

Futures positioning remained cautious. Large speculators were net short 142,671 S&P 500 contracts, 1,676 more short than the prior week, while the Nasdaq-100 net long rose 2,203 contracts to 50,726.

Sources: ICI money markets | whtc,com Global fund flows | Futuresbench.com CFTC positioning

What Matters This Week

Sources: Scotiabank.com Economic calendar | Kiplinger Earnings calendar

Market Dashboard: The Five Factors

• AI funding: Do Alphabet, Microsoft and Amazon show that cloud revenue and utilization justify the step-up in capex, debt and long-dated infrastructure commitments?
• Rates: Does the Fed hold for October while keeping a December live, and can the 10-year remain near or below 5.00%?
• Inflation and oil: Does PCE confirm renewed price pressure.
• Breadth: Can value outperform with communication and semiconductors under pressure, or was rotation defensive?
• Earnings: Can another 179 S&P 500 reports sustain 29.5% growth when the market is rewarding cash conversion and credible AI returns more than headline beats?

Bottom Line

The bull market did not end, but questions rose. The S&P 500 and Nasdaq declined for a second week while small caps, value and seven sectors advanced, showing that the selloff was not broad liquidation. Thursday’s -2.6% Nasdaq decline, communication services’ -6.2% weekly loss and the sharp drawdowns in AI infrastructure names showed that investors are repricing who funds the next phase of the buildout and how quickly that spending becomes cash flow.

Growth remains strong, earnings are rising nearly 30%, and Treasuries rallied; yet oil is above $100, business selling prices are accelerating, housing is weakening and reserves fell as the Treasury rebuilt cash.  Stable yields plus credible AI monetization would support a broader rebound. A renewed rise in oil or rates, or another capex-heavy earnings reaction, would keep the rotation defensive and the Nasdaq vulnerable.

Selected Sources

JH Weekly Market Recap | FactSet Earnings Update | Federal Reserve H.4.1 | ICI Money Market Assets | S&P Global Flash PMI | Meta Q3 Results | AP Market Close | Seeking Alpha Breadth

Informational only. Figures are rounded and may reflect different market cutoffs. Metrics marked n/a could not be confirmed at publication. Commentary distinguishes confirmed market data from interpretation. This brief is not personalized financial advice or a recommendation to buy or sell any security.

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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.