The Dow Jones Industrial Average (Dow) gained 0.4 percent, the Standard & Poor’s 500 Index (S&P 500) lost 0.5 percent, and the Nasdaq Composite Index (Nasdaq) fell 0.7 percent for the week ending Oct. 23. Sector breadth was positive, with seven of the S&P sector groups closing higher and four closing lower. The energy sector (1.6 percent) was the strongest performer while the communication services sector (6.2 percent) was the weakest.

*See below for Index Definitions

Market Observations: 10.19.2026–10.23.2026

The S&P 500 finished lower for a second straight week and has now lost ground in three of the past four weeks. Driving the recent losses has been concern over whether massive spending on AI will ultimately bear fruit in light of the magnitude of debt and equity issuance necessary to finance the buildout. Geopolitical worries have also been front and center, reflecting jitters over the prospect that the United States may move aggressively against Iran after the upcoming midterm elections. The uncertainty has lifted oil prices: After falling into the high $80 per barrel range in recent weeks, WTI crude prices closed last week at over $103 per barrel. Despite the recent choppy trading, the S&P 500 is now only 2.5 percent below its all-time high reached earlier this month as strong corporate earnings have partially offset the aforementioned worries.

Q3 Earnings: Through Friday Oct. 23, 122 companies in the S&P 500 have released third quarter results, with just over 80 percent beating expectations. While it is still early in the reporting season, aggregate earnings for this group are up over 38 percent from a year ago, solidly ahead of the 24.6 percent projected growth rate at the end of September. On the sector level, energy and healthcare have posted the biggest upside surprises, while technology and energy have delivered the strongest growth rates. According to Bloomberg, 10 of the 11 S&P sector groups are expected to report year-over-year growth, with four of these forecast to deliver double-digit gains. On the flip side, earnings in the healthcare sector are forecast to decline year over year. Full-year expectations call for S&P 500 earnings to grow by 29.2 percent this year, followed by 19.7 percent in 2027.

Economic Roundup: The closely watched S&P Global Composite Purchasing Managers Index showed the U.S. private sector experienced a modest loss of momentum in October, edging down to 57.6 from 58.4 in September 2026. Despite the decline, the indicator remains well above the 50.0 threshold that separates expansion from contraction, indicating that overall business activity continued to grow at a solid pace. Meanwhile, U.S. consumer sentiment edged down to a five-month low in October as high prices and rising interest rates depressed morale. The University of Michigan’s final sentiment index eased to 48 from 48.1 in September. According to the survey, consumers expect prices to rise 4.7 percent over the next year, up from 4.6 percent in the previous month. They also saw costs climbing at an annual rate of 3.5 percent over the next five to 10 years. Both were the highest since May. In housing, new U.S. residential construction declined in September to one of the weakest levels since the pandemic, highlighting a languishing housing market. Separately, the National Association of Realtors’ index of pending home sales fell 7.3 percent on a month over month basis in September, versus a median estimate of a 0.5 percent decline. The index level fell to 66.0 in September, representing a record low. Applications for unemployment benefits fell to a three-month low last week, underscoring the stability of the labor market. Initial claims fell by 6,000 to 194,000, according to Labor Department data. The four-week moving average of new applications, a figure used to dampen volatility, fell to 197,750, the lowest since 2022.

The Week Ahead: The focal point of the week ahead will be the two day Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday, where the Fed is expected keep its benchmark rate unchanged at a range of 3.75–4.00 percent. On the data front, Friday’s release of the September Personal Consumption and Expenditures data (PCE) will be closely watched. According to Bloomberg, the core PCE—the Federal Reserve’s (Fed) preferred measure of inflation—is expected to rise 0.3 percent from a month ago, and 3.1 percent on a year-over-year basis. Other economic reports of interest include the preliminary third quarter gross domestic product reading, the October Conference Board consumer confidence report, and the September durable goods orders. It will be a busy week in earnings, with 168 members of the S&P 500 scheduled to release third quarter results. Investors are expected to focus on reports from Alphabet, Microsoft, and Amazon to gauge AI capital expenditures. Other highlights include Visa, Mastercard, Coca-Cola, and Caterpillar. Outside of the FOMC meeting, two Fed presidents will make speeches on Friday.

— By Michael Schwager, Chief Market Strategist, Managing Director

Definitions

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since Oct. 1, 1928.

Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Nasdaq Composite Index is a broad-based capitalization-weighted index of stocks in all three Nasdaq tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of Feb. 5, 1971.

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