Weekly Market Outlook: AI Stocks, Fed Rates & Elections | Lunaro

Friday Closing Prices (30 October 2026)

S&P 500 7,580 (-1.82%) Nasdaq 25,437 (-2.86%)

Gold $3,875 (-3.61%) Brent Crude Oil $112.27 (+0.71%)

Central banks took center stage this week, with the Federal Reserve (Fed), European Central Bank (ECB), and Bank of Japan (BoJ) all opting to leave interest rates unchanged. Despite the decisions to hold, policymakers kept the door open to further tightening in December.

The Fed maintained a hawkish tone, with officials indicating that additional rate increases could be required to bring inflation under control. The ECB also stood pat, keeping its deposit rate at 2.5%, although news of President Lagarde’s unexpected early departure introduced another layer of uncertainty to the outlook. Meanwhile, the BoJ held rates at 1.25%, with Governor Ueda suggesting that underlying inflation had reached the central bank’s 2% target, reinforcing expectations of a potential December hike.

The economic data offered little encouragement. China’s manufacturing PMI fell back into contractionary territory at 49.3, while the French economy unexpectedly contracted 0.1% in Q3, adding to the country’s existing political and fiscal difficulties. Canadian growth figures also came in below expectations, highlighting broader concerns about slowing economic activity.

Equity markets came under renewed pressure towards the end of the week, with technology stocks leading the decline. The S&P 500 lost 1.3% over the week, while the Nasdaq dropped 3%, pushing the tech-heavy index close to correction territory.

The AI Hangover

Disappointing earnings from several major technology companies added to the selling pressure, with Alphabet, Amazon, and Intel among the names weighing most heavily on sentiment.

Alphabet delivered the biggest disappointment, with shares tumbling 13% on Thursday and wiping approximately $500bn from its market capitalisation. Revenue rose 25% to $127.6bn, but search advertising fell short of expectations. At the same time, quarterly capital expenditure climbed to $51.3bn, pushing free cash flow into negative territory. This marked only the second quarter of negative free cash flow since Alphabet went public in 2004.

Amazon also struggled to impress investors, reporting capital expenditure almost $20bn above forecasts alongside weaker-than-anticipated revenue guidance for the fourth quarter. Intel added to the negative sentiment, with shares plunging 29% on Friday following disappointing guidance. Microsoft provided a rare bright spot, reporting cloud revenue growth of nearly 50% and free cash flow of $18.6bn.

The message from investors is becoming increasingly apparent. Rapid growth in AI demand appears no longer to be sufficient on its own to justify elevated valuations. As capital expenditure continues to rise and financing remains expensive, markets are placing greater emphasis on cash generation, profitability, and the returns companies can deliver on their investments.

US Midterm Elections Arrive

The US midterm elections take place on Tuesday, with all 435 seats in the House of Representatives and 35 Senate seats up for grabs. Polls will begin closing at 6pm ET, with most results expected to emerge overnight into Wednesday. However, closely contested races could mean that control of Congress remains unresolved for longer.

Political analysts generally anticipate that Democrats could gaincontrol of at least one chamber, creating a divided government and restricting the administration’s ability to advance its legislative agenda. This could potentially limit President Trump’s plans for further fiscal expansion and make additional changes to tax policy more difficult to implement.

The implications for financial markets are less straightforward. Bond investors may respond positively to a divided Congress if it reduces the prospect of further deficit-funded spending. Equities, however, could face pressure if the election outcome increases the likelihood of tighter AI regulation. Delays to cryptocurrency legislation could also prove a headwind for sentiment.

With markets already anticipating some degree of divided government, the biggest reaction would likely follow an outcome that challenges this consensus. An unexpected Republican sweep or a decisive Democratic victory across both chambers could force investors to reassess their assumptions about the policy outlook.

Notable Week Ahead Earnings

Corporate earnings will remain firmly in focus next week, particularly after the recent weakness in technology stocks brought fresh attention to the returns companies are generating from their substantial AI investments.

Apple and Palantir are scheduled to report on Monday, followed by AMD, Arista Networks, and Super Micro Computer on Tuesday. Their results should provide further insight into demand across the AI infrastructure market and whether the significant sums being invested are translating into sustainable revenue growth.

Wednesday’s reporting calendar covers a broader range of industries, from semiconductor demand through Qualcomm to consumer spending trends at McDonald’s. Shopify, Pfizer, and Amgen are also due to release results over the course of the week.

In the author’s view, expectations remain especially demanding for technology companies. Revenue growth alone may no longer be enough to reassure investors, with margins, free cash flow, and the ability to fund future investment becoming increasingly important. Given the fragility of current sentiment, weaker guidance could deepen the recent selloff. Conversely, results that demonstrate improving profitability and stronger cash generation may help restore some confidence in a market that has become increasingly sceptical.

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This material is a marketing communication and is provided for general information and educational purposes only. It does not take into account your personal circumstances, objectives or needs. Any opinions are those of the author at the time of writing and may change without notice. Nothing in this material constitutes (or should be construed as) financial, investment, legal, regulatory or tax advice, or a recommendation to engage in any investment activity. You should not rely on this material when making investment or trading decisions.