Rate Cut Hopes and Solid Earnings Push the Market Higher

Performance for Week Ending 10.10.2025:

The Dow Jones Industrial Average (Dow) added 2.2 percent, the Standard & Poor’s 500 Index (S&P 500) gained 1.9 percent, and the Nasdaq Composite Index (Nasdaq) finished up 2.3 percent. Sector breadth was positive with nine of the 11 S&P sector groups closing higher. The technology sector (2.8 percent) was the best performer followed by energy (2.4 percent) and industrials (2.1 percent).

*See below for Index Definitions

MARKET OBSERVATIONS: 10.20.2025  – 10.24.2025

The S&P 500 finished the week higher and ended the week at a new all-time high as strong earnings reports and cooling consumer inflation outweighed trade concerns and the ongoing government shutdown. The inflation report will likely give the Federal Reserve (Fed) the greenlight to reduce rates at this week’s meeting. Adding to the positive tone was confirmation from the White House that President Trump will meet Chinese President Xi on the sidelines at this week’s Asia-Pacific Economic Cooperation meeting.

Q3 Earnings: As of Friday, 145 members of the S&P 500 have released fiscal third quarter results, with 124 of the 145 (85.5 percent) beating expectations. So far, aggregate earnings for this group are up 15.1 percent from a year ago, solidly ahead of the current 7.7 percent projected year-over-year growth rate for the overall quarter. On the sector level, the biggest upside surprises are coming from materials and utilities. In terms of year-over-year growth, technology, and materials are leading the pack.

Economic Roundup: While the government shutdown continues to impact the bulk of government data releases, the Labor Department did recall workers to produce the consumer price index (CPI) report because it is required to calculate cost of living adjustments to 2026 benefits. According to the report, the September headline CPI showed inflation edging up to 3 percent year-over-year, but was importantly below the 3.1 percent pace economists were expecting. Core CPI, which strips out food and energy, slowed from 3.1 percent to 3 percent, with a monthly increase of just 0.2 percent, also below expectations. The report is expected to keep the Fed on track to reduce rates at this week’s meeting. Meanwhile, U.S. business activity expanded this month at the second-fastest pace of the year on stronger orders growth. The S&P Global flash October composite output index rose nearly 1 point to 54.8, with figures above 50 indicate expansion. The group's composite gauge of new orders climbed to 54.2, the highest this year. The advance was propelled by the strongest growth in bookings at factories since February of last year. New business for service providers expanded the most since the end of 2024. Meanwhile, a report released by the National Association of Realtors (NAR) showed existing home sales in the U.S. increased in line with economist estimates in the month of September. NAR said existing home sales rose by 1.5 percent to an annual rate of 4.06 million in September after dipping by 0.2 percent to an annual rate of 4.00 million in August. The rebound matched expectations.

Market View: We believe the macroeconomic environment remains supportive of additional upside of the remainder of the year. The economy remains resilient, earnings are growing, the Fed is cutting rates, fiscal policy is expected to become a tailwind in the quarters ahead, oil prices are near the lowest level in four years, A.I. capex spending in booming, and seasonals are favorable between now and year-end. Collectively these things should leave the current bull market intact.

The Week Ahead: The focal point of the coming week will be the Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday. At the conclusion of the meeting the Fed is widely expected to reduce its benchmark rate by 25 basis points. Given the lack of fresh data or direction in the data, the after-meeting press conference will be closely watched for views on the path forward. Also, of interest this week will be the meeting between President Trump and Chinese President Xi at the Asia-Pacific Economic Cooperation (APEC) in South Korea. It will be another busy week for earnings, with 162 members of the S&P 500 scheduled to release results during the week. Highlights include Magnificent Seven members Meta Platforms, Microsoft, Alphabet, Apple, and Amazon. Outside of the FOMC meeting, just three Fed speakers are scheduled to make appearances this week. Lastly, the Treasury is set to auction $69 billion in two-year and $70 billion in five-year notes on Monday, and $44 billion in seven-year notes on Tuesday.

— 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.