Macro Monday: October 17-21, 2025

RECAPPING LAST WEEK
Despite a sense of relief from the longest government shutdown in U.S. history finally coming to an end, equity indices finished with mixed performance as technology stocks were pressured by valuation concerns and Federal Reserve officials suggested reticence on further rate cuts. The Russell 2000 dropped nearly 2%, while the Nasdaq Composite fell 0.5% and the S&P500 was flat. Sector performance tilted negative, but healthcare jumped nearly 4%, continuing its strong run that began in early October. Gold futures rallied more than 5% before fading modestly to end the week higher by only 2%, while oil prices were little changed. Risk assets jumped to begin the week due to the shutdown’s imminent end, but optimism faded as investors recognized that a number of appropriations bills must be resolved by January 30th in the face of deep political divisions to avoid another stoppage. U.S. Treasury yields rose after 10- and 30-year auctions saw slightly weaker than normal demand, and after several Fed officials took a hawkish tone in comments. There was a growing sense that the central bank could pause rate cuts until more clarity on the economy emerges. The White House said that employment and inflation data for October may never be released, and questions remain about when other delayed reports could be available. Odds for a December rate cut settled near 46%, according to fed funds futures. Turning to economic data, payroll processer ADP estimated that U.S. firms were shedding more than 11,000 jobs a week through late October, pointing to further weakening in the labor market. Small business optimism fell for a second straight month as labor quality remained the top concern for owners. Private analytics firm Circana estimated that U.S. retail sales grew 2% last month. While that figure supports the resilience of consumers facing numerous challenges, their willingness to spend may be tested heading into the important holiday shopping period. Overseas, China’s industrial production and retail sales grew at the slowest pace in more than a year last month, rising 4.9% and 2.9%, respectively. The country’s export-driven economy may experience increased risks to growth as trade issues with the U.S. and weak domestic demand persist. Eurozone GDP expanded at a moderate 0.2% pace in Q3 while the trade surplus surged on a large jump in shipments to the U.S. Finally, the British economy grew just 0.1% in Q3, short of expectations. The UK jobs market cooled noticeably, bolstering anticipation for a Bank of England rate cut next month.

THE WEEK AHEAD
Volatility in technology stocks is likely to continue as investors gear up for Nvidia’s next earnings report on Wednesday after market close. Expectations are high going into the news, given that the world’s largest company by market value has a history of exceeding analyst forecasts and raising future guidance. There are also earnings reports due from U.S. retail giants Home Depot, Target, and Walmart—the last of which just announced the retirement of its CEO. On the economic calendar, there is still much uncertainty around when and if U.S. data releases will resume— information that is critical to the Fed’s rate decision next month. Late last week, the Bureau of Labor Statistics announced that the September jobs report will be released this Thursday. Minutes from the prior FOMC meeting will arrive on Wednesday, but recent comments from committee members have taken precedence on how the central bank’s views are evolving. There are important non-government data points this week for investors to consider, including flash PMI results for early November, regional manufacturing surveys, existing home sales, and revised consumer sentiment figures. On the international side, the flash PMI surveys from Europe and Australia will also garner attention at week’s end. Japan releases its preliminary Q3 GDP number as well as an inflation update. The sinking value of the Japanese yen may pressure the Bank of Japan to raise rates sooner rather than later, so Thursday evening’s CPI report takes on added significance. Wednesday’s UK CPI release is expected to reveal a cooling to 3.6% YoY from 3.8%, a result that would further support a rate cut in December.

CHART OF THE WEEK
End of year waves
U.S. equity markets took a roller coaster ride last week on a classic “buy the rumor sell the news” view of the government reopening. Persistent concerns of an artificial intelligence bubble and cautious sentiment from the Fed added to the volatility. Stock indices jumped higher on Monday and continued to drift up into mid-week before turning lower and filling that gap on Thursday. Ultimately, the S&P500 index (SPX) found technical support near the 50-day exponential moving average (EMA) on Friday and held. Although this price action can seem sporadic, it becomes more orderly when looked at through an Elliott Wave Theory lens. From October 14 to November 7 there was a smaller wave (i and ii) rally from the 50-day EMA and then a retracement back to it. Last week saw the same pattern on one smaller degree of waves, while the MACD indicator stayed above the 25-level correction territory. If SPX remains above the November 7 low, the blue count labeled on the chart stays intact, suggesting further upside in the near term. If SPX breaks that low, the red count comes into play, pointing to potential support near $6,550--although the longer-term trend would remain intact above that level.


Source: thinkpipes
 
Source: Charles Schwab Corporation
 
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