We made it through October with solid gains. November is historically the strongest month of the year.
As we enter a record-setting government shutdown, the market remains strong. With over 300 S&P companies reporting their 3Q25 earnings so far, over 80% have beaten estimates. Sales growth has averaged 8% and earnings margins are expanding. While there are certainly concerns being felt about lower-end consumer spending, the momentum of AI data center buildout is sweeping the and market-weight S&P higher. The multi-billion-dollar announcements here are coming almost daily. Today, OpenAI struck a $38B agreement with Amazon to utilize Amazon Web Services, taking AMZN to a new all-time high.
Despite the upward momentum, volatility remains high. This morning, stocks were up solidly premarket, but the shot up immediately to as high as 18.4 and took all but the NASDAQ into the red. The small-cap Russell 2000 is down 1.2% and down 2.9% in a week.
More concerning is that even-weighted S&P is down 1%, -3% in a week. YTD, the gap between the market weight and even weight S&P is now over 10% (+16.2% vs +6.1%), the largest divergence on record, reflecting the huge influence of the outperformance of Mega Tech. Consumer staples is the weakest sector YTD, -3%, the only sector in the red. Restaurants have been particularly weak, down 7.9% YTD. Both of these sectors reflect the stressed consumer, particularly those not getting the wealth effect of higher stock prices.
Interest rates are relatively stable today. The US 2-year is down 1 bp to 3.59%, the 10-year is flat at 4.11%, still elevated from levels before Jerome Powell’s caution of a December rate cut. The is now 99.8, the highest since April, on the prospects of rates staying higher.
On the commodity front, is creeping higher, now above $4,030/oz. Silver is flat and copper is modestly softer. is flat at $61.1/bbl, is 2% higher at $4.20/mcf. Crypto is weaker, Bitcoin is down to $105.7K, down 7.6% in a week, down 12.2% in a month, a risk-off sentiment, well off the all-time high only a month ago.
As the trading day moves on, we’re seeing a bounce off the bottom as the VIX pulled back from an 18.8 high, still up a full point from Friday’s close. The S&P broke below 6,820 and rallied to 6,840, where it closed on Friday. Big tech remains firm; +2.6%, +4.6%, +3%. The Magnificent 7 is +1.3%, semiconductors +0.9%.
Momentum remains positive, but the concentration of returns is very high. Investors overweight in AI are having a much better year.