Three consecutive days of modest gains at the start of the week gave way to renewed selling pressure on Thursday and Friday, as weakness among major technology stocks once again dragged down the broader market. By Friday’s close, the NASDAQ had fallen 2.9% for the day and 2.0% for the week. The S&P 500 and Dow also posted weekly declines of nearly 1%.
With earnings season more than halfway complete, full-quarter expectations edged higher despite mixed results from some of the largest technology companies. As of Friday, analysts surveyed by FactSet projected third-quarter earnings growth of 30.2% for S&P 500 companies, up from the previous week’s forecast of 29.5%. If realized, this would represent the third consecutive quarter of earnings growth above 25%.
In a 10-2 vote, the U.S. Federal Reserve decided to leave its benchmark interest rate unchanged, following its September decision to raise rates for the first time since 2023. Looking ahead to the next policy meeting, Friday’s rate futures trading indicated a roughly 73% probability of another quarter-point increase on December 9, compared with a 27% chance that the Fed would leave rates unchanged, according to CME FedWatch.
The recent sell-off in the bond market continued to ease, with the 10-year U.S. Treasury yield remaining below 5.00% after briefly dipping beneath that level the previous week. By Friday afternoon, the yield stood at approximately 4.91%. The 2-year Treasury yield declined to 4.57%, its lowest level in more than six weeks.
For the second consecutive month, performance varied considerably across the major U.S. stock indexes. Weakness in technology stocks and growth-oriented equities weighed heavily on the NASDAQ, which declined 5.3% in October. The S&P 500 fell 0.9%, while the Dow outperformed, gaining 1.7%, supported in part by stronger value-stock performance.
The Federal Reserve’s preferred measure of inflation showed another increase in consumer prices. The Personal Consumption Expenditures Index rose 3.6% annually in September, up from 3.4% in August. Core PCE, which excludes volatile food and energy prices, increased to 3.1% from 3.0% the previous month, remaining well above the Fed’s 2.0% inflation target.
The U.S. government’s preliminary estimate of third-quarter GDP growth exceeded expectations, with the economy expanding at an annualized rate of 3.4%, compared with economists’ consensus forecast of 3.1%. The latest figure also represented an acceleration from the 2.2% growth recorded in the second quarter.
A monthly employment report scheduled for release Friday will indicate whether September’s sluggish job growth continued into October. The September report showed an increase of just 29,000 jobs, well below economists’ expectations. Employment estimates for the previous two months were also revised downward by a combined 60,000 jobs. The unemployment rate rose to 4.2% in September from 4.1% in August.