Q3 Earnings Season Moves to the Front Burner This Week

Performance for Week Ending 10.10.2025:

The Dow Jones Industrial Average (Dow) lost 2.7 percent, the Standard & Poor’s 500 Index (S&P 500) fell 2.4 percent, and the Nasdaq Composite Index (Nasdaq) finished off 2.5 percent. Sector breadth was negative, with nine of the eleven S&P sector groups closing lower. The utilities sector (+1.4 percent) was the best performer, while energy (-4.0 percent) was the weakest.

*See below for Index Definitions

MARKET OBSERVATIONS: 10.6.2025  – 10.10.2025

The S&P 500 finished the week lower as a sharp sell-off on Friday erased gains from earlier in the week. The late-week drawdown came after a social media post from President Trump threatened a “massive increase” of tariffs on Chinese goods and said he saw “no reason” to meet with Chinese President Xi Jinping later this month at the Asia-Pacific Economic Cooperation Summit. The uptick in uncertainty ignited a rally in U.S. Treasuries, which in turn pushed the yield on the benchmark 10-year note to 4.03 percent, the lowest level since mid-September.

Fed Meeting Minutes: Ahead of its next monetary policy meeting at the end of this month, the Federal Reserve released the minutes from its September meeting. At the meeting, the Fed announced its widely expected decision to lower interest rates by 25 basis points to 4.0 percent to 4.25 percent, citing a shift in the balance of risks. The minutes revealed that most participants observed it was appropriate to lower rates toward a more neutral setting because downside risks to employment had increased and upside risks to inflation had either diminished or not increased. With regard to the outlook for monetary policy following the rate cut, the minutes revealed participants expressed a range of views about the degree to which the current stance of policy was restrictive and about the likely future path of policy. However, most judged that it would likely be appropriate to ease policy further over the remainder of this year, although some noted financial conditions warrant a cautious approach in the consideration of future policy changes.

Fed Speak: Minneapolis Fed President Neel Kashkari said that while he doesn't believe artificial intelligence will quickly replace U.S. workers, massive investment in AI data centers will tend to drive borrowing costs higher, even if the Fed reduces its short-term policy rate. Kashkari said he believes the central bank should make same-sized reductions at its next two rate-setting meetings to protect the U.S. labor market from weakening. Fed Governor Michael Barr called for a cautious approach toward further interest-rate cuts, emphasizing the possibility that tariffs will create persistent inflation. Kansas City President Jeff Schmid said officials need to keep pressing against inflation, which has remained stubbornly high. He reiterated that rates are only “slightly restrictive,” which he said is appropriate. But he’s also suggested the Fed may not need to lower rates again in the near term, with inflation still running too high. In an interview with the New York Times, New York Fed President John Williams says that his concerns about the labor market would likely lead him to support further rate cuts this year.

Q3 Earnings Season Kickof: The focus in the coming weeks will shift from the macro to the micro when third quarter earnings season shifts into high gear. This week, big banks and financial firms JPMorgan Chase, Goldman Sachs, BlackRock, Bank of America, and American Express are due to report results. So are mega-caps in other sectors, such as Johnson & Johnson, ASML Holding, Taiwan Semiconductor Manufacturing, CSX, and United Airlines. According to data from Bloomberg, Wall Street is expecting a 7.2 percent year-over-year earnings increase for the S&P 500, but down from the 11% pace in Q2. So far, 23 members of the S&P 500 have released fiscal third quarter results, and so far, so good. Of the 23 companies that have already reported 18 (78 percent) have surprised to the upside. While it’s still very early, aggregate earnings growth for this group is up 9.7 percent, solidly ahead of expectations.

Economic Roundup: The government shut down continues to create a void in official economic data, putting the attention on private sector data and a heightened focus of commentary from Fed officials. The Federal Reserve reported that U.S. consumer borrowing rose in August at the slowest pace in six months, restrained by a pullback in credit-card balances. According to data from the New York Federal Reserve’s survey of consumer expectations, one-year inflation expectations rose to 3.38 percent in September from the previous month’s 3.20 percent. Applications for mortgages to buy a home or refinance both fell for a second week, marking a swift reversal of what had been a hopeful sign of a revival in the U.S. housing market. The Mortgage Bankers Association’s index of home-purchase applications declined 1.2 percent in the week ended Oct. 3, while a gauge of refinancing fell 7.7 percent. Lastly, a labor model designed the Carlyle Group to capture monthly payrolls, estimated that just 17,000 jobs were created during September, among the weakest results since the U.S. economy emerged from the 2020 recession. The U.S. Labor Department’s September employment report, whose scheduled release on Oct. 3 was among those that have been postponed since the shutdown, was expected by economists in a Bloomberg poll to show a 54,000 increase.

The Week Ahead: The government shutdown will continue to be the key market focus this week, as the ongoing shutdown will continue to disrupt economic data releases. The most important missed release this week will be the U.S. CPI print, which would otherwise have come out on Wednesday. As it stands, there is still no sign of a compromise between Republicans and Democrats that would end the shutdown. Alternative economic data that is scheduled to be released include the NY Fed’s Empire Manufacturing Index, the Philadelphia Fed’s Business outlook Index, The NAHB Housing Market Index, and industrial production. It will be another busy week in terms of Fed speakers with over a dozen speeches scheduled, including Fed Chair Powell on Tuesday. The Fed is also scheduled to release it’s Beige Book report on Wednesday. The earnings calendar will begin to pick up with 36 members of the S&P 500 scheduled to release results during the week.

— 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 October 1, 1928.

Wilshire 5000 Total Market Index^SM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.

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 February 5, 1971.

This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.