The week ahead — October 25, 2026: The Fed is priced; the AI bill is not

Tue 10/27: durable goods (1.8% consensus). Wed 10/28: FOMC at 2:00pm ET, no projections; Alphabet and Microsoft after the close. Thu 10/29: Q3 GDP (3.2%) and core PCE (0.3%), then Amazon and Intel. Fri 10/30: ECI, Exxon, Chevron. Midterms 11/3.

The house view

Ahead this week, a Fed hold near 90% priced is the quiet event, and the loud one is whether Alphabet, Microsoft and Amazon can show cash conversion beside their capital spending. The index enters under its 50-day with December hike odds near 80% and Brent at 116.72.

• SPY closed Friday at 759.97, down 0.43% on the week and under its 50-day; QQQ lost 0.76% and IWM gained 1.96% (Coil bars through October 23).
• CME FedWatch put no change at 90.6% for October 28 as of October 22 (TradingKey), and LSEG-based futures put a hike at about 5% for October and about 80% for December (Reuters, October 23).
• A Reuters poll of economists, run October 16 to 20, had 94 of 100 with a hold on October 28 and every one with a hike in December; 38 of 92 see at least two more (Reuters poll via Mitrade).
• Brent settled at 116.72, up 3.14% on Friday, and WTI at 103.27 (Closing Look, October 23).
• Third-quarter S&P 500 earnings are on pace for growth above 32% (LSEG IBES, October 23), while Meta's quarter showed capex of 34.9 billion and free cash flow of about negative 2.1 billion (TradingKey and Fortune, October 21).

Week horizon: 5 right, 1 wrong, 2 mixed over 8 graded notes. Month, quarter and year: 0 graded, 24 too\_early across those same 8 notes. The archive holds 8 prior notes, dated 2026-08-30, 2026-09-06, 2026-09-13, 2026-09-20, 2026-09-27, 2026-10-04, 2026-10-11 and 2026-10-18; the first had nothing to grade.

The setup

Transition. A Friday close back over the 50-day at 767.81 says the break was a shakeout inside a range. A close under 743 says the range has moved lower. SPY enters the week under its 10, 20 and 50-day averages with a daily stochastic of 5.6, and QQQ sits 2.9% under its 50-day with the same reading, so the tape is oversold with no reclaim yet. IWM is the one index that gained on the week, and it still trades under its 200-day.

What is actually going on

The Federal Reserve is the least uncertain event on the calendar this week, and that is the change worth explaining. A week ago futures put the chance of an October hike near one in two. By Thursday night it was about 5%, per LSEG data in Reuters, and CME's tool read roughly 90.6% for no change, per TradingKey. Nothing in the data softened. The market decided that a committee facing midterm elections on November 3 would not move a week before them, and that any tightening can wait. A Reuters poll of economists run October 16 to 20 found 94 of 100 with a hold and every one with a December hike, up from fewer than half a month earlier.

That changes what a hold can do. A hold that everyone priced is not news, so the information sits in two places: whether the statement keeps its tightening bias, and how many of the three officials who dissented for a hike in July dissent again. PIMCO's Tiffany Wilding names Hammack, Logan and Kashkari as the likely candidates and calls the pause a recalibration. She puts the real rate five years out near 3%, up about 50 basis points since June. If the statement drops the bias, the market has to rethink a December that is now four-fifths settled. If it keeps the bias, little moves, and the equity question goes back to earnings.

The part of the inflation story the Fed cannot reach is still rising. Brent settled at 116.72 on Friday, up 3.1% on the day, and energy stocks closed at a record. WTI was back over the triple-digit mark on renewed fears of a flare-up in the US-Iran conflict, per TradingKey. Oil works through the same door as last month. It lifts headline inflation first, and a committee that has already raised once cannot ignore a second source of price pressure. The University of Michigan's October sentiment gauge sits near its record low, per Reuters, so the consumer is absorbing the bill without a cushion.

The equity story this week is not whether companies earn money. Third-quarter S&P 500 earnings are on pace to grow more than 32%, per LSEG IBES, with a large sample reported. The question is who pays for the build, and whether investors keep granting the benefit of the doubt. Meta is the case study. Revenue rose 26% to 64.6 billion and fourth-quarter guidance topped the consensus. Capital spending reached 34.9 billion in the quarter against 19.4 billion a year earlier, free cash flow turned to about negative 2.1 billion, and the stock sold off Thursday after an early after-hours gain, per Fortune, TradingKey and the Reuters wrap. Nick Giorgi of Alpine Macro said the market is not giving companies that spend heavily on AI the benefit of the doubt. Hyperscaler spending is near 800 billion this year, per Reuters. The number each reporter has to show this week is not the spending line. It is what the line bought.

The tape underneath is narrower than the index. The Dow made a third straight weekly gain while the Nasdaq Composite lost for a second week, and on Friday the Nasdaq printed 299 new 52-week lows against 61 highs. The equal-weight index fell more than the cap-weighted one. Small caps are the exception that matters, with IWM up almost 2% on the week, though still under its 200-day. The market keeps trying to broaden and keeps failing to hold it.

Strategists are arguing about whether this is a financing problem or a valuation reset. The bulls, in the words of King Lip at BakerAvenue Wealth Management, need another round of really strong earnings. The bears note that strong earnings were just sold. Both can be right for a few weeks. The test that separates them is free cash flow. If Alphabet, Microsoft and Amazon raise spending and cash conversion holds, the financing argument loses force. If they raise spending and conversion slips, Meta was an early read and not an outlier.

Where this sits against consensus

On the policy path we sit with the street. PIMCO (Tiffany Wilding, October 22) has a hold on October 28 with a tightening bias and a December hike as the most likely next move. The Reuters poll of October 16 to 20 has every economist surveyed with a December hike, and futures put it near 80% (Reuters and LSEG, October 23). Where we part from the consensus is the weight on the hold itself. With 94 of 100 economists and about 90% of futures on one outcome, the decision carries little information, and the statement's wording and dissent count carry more. On equities, BakerAvenue's King Lip (Reuters, October 23) says another round of strong earnings is what the market needs; the past two weeks say strong earnings have been sold. Published year-end S&P 500 levels of 7,900 from Yardeni (September 16) and 8,000 from Fundstrat's Tom Lee (June 26) sit 3.6% and 4.7% over Friday's close. We would be early if the three hyperscaler reports restore the cash-conversion story, and late if a second one follows Meta.

Scenarios

Central — 40%

The Fed holds with the tightening bias intact, Thursday's prints land near consensus, and the hyperscalers raise spending without a second cash-flow surprise. SPY chops between the 20-day low and the 10-day with small caps still under their 200-day.

Trigger. A hold on Wednesday 2026-10-28 with two or fewer dissents and core PCE at or under 0.3% on Thursday 2026-10-29.

Invalidated by. A Friday 2026-10-30 SPY close outside 743.00 to 777.00.

Upside — 25%

The statement drops urgency, core PCE prints cool, and Alphabet, Microsoft and Amazon show cash conversion. SPY reclaims its 50-day and QQQ its 10-day while oil eases.

Trigger. SPY closing a day over 767.81 after Thursday's PCE and Amazon holding its sales guidance range.

Invalidated by. Brent closing over 116 on the same days, or IWM closing under 269.88.

Downside — 35%

Three or more dissents for a hike, core PCE over 0.3% with GDP at 3.2% or better, and Brent holding over 116. A hyperscaler repeats Meta's cash-flow pattern and SPY loses its floor.

Trigger. Core PCE over 0.3% on Thursday 2026-10-29, or any hyperscaler raising spending while cash flow turns negative.

Invalidated by. SPY closing a day over its 10-day near 769 on Thursday or Friday.

The week ahead

• 2026-10-27Durable goods orders (consensus 1.8%) and new home sales (consensus 649,000) per FXEmpire
• 2026-10-28FOMC decision at 2:00 pm ET, press conference at 2:30 pm, no projections; CME FedWatch about 90.6% for no change as of October 22 (TradingKey)
• 2026-10-28Alphabet and Microsoft report after the close (FXEmpire consensus: Alphabet 3.00 on 127.9 billion, Microsoft 4.71)
• 2026-10-29Q3 GDP advance estimate (consensus 3.2% against 2.2%) and core PCE (consensus 0.3% against 0.2%) at 8:30 am ET (FXEmpire, TradingKey)
• 2026-10-29Amazon (company guidance 197 billion to 202 billion in sales) and Intel report after the close; Robinhood's verified calendar has Intel on October 29
• 2026-11-03US midterm elections, cited in Reuters as a reason some investors doubt a hike this week
• 2026-12-09FOMC decision with the next Summary of Economic Projections

The next five sessions

This week

Five events land inside three sessions, and the order matters. Tuesday brings durable goods at a 1.8% consensus and new home sales at 649,000, per FXEmpire. Neither moves the Fed. Wednesday at 2:00 pm Eastern is the decision, with no projections, and the press conference follows at 2:30 pm. Alphabet and Microsoft report after the close that day, Alphabet at 3.00 on 127.9 billion of revenue and Microsoft at 4.71, per FXEmpire. Thursday opens with the advance estimate of third-quarter GDP, forecast at 3.2% against 2.2% last quarter, along with core PCE at 0.3% against 0.2%. Amazon and Intel report after the close.

The sequence creates two reaction windows. Wednesday evening, the cloud and search numbers arrive into a market that already knows the Fed's wording. Thursday morning, a hot PCE print lands before Amazon can answer anything about financing. A 3.2% GDP print and a 0.3% core PCE print together describe an economy that does not need to be cooled, and that is the combination that keeps a December hike alive. The same prints one tenth lower on core would let the hold read as a pause.

Amazon is the cleanest test of the financing question because it gave guidance, not just a consensus: third-quarter sales of 197 billion to 202 billion and operating income of 22.5 billion to 26.5 billion, per TradingKey. The 202.2 billion consensus sits at the top of that range. A company priced at the top of its own guidance needs a beat on cash, not only revenue. Because Amazon reports after Thursday's close, Friday's close is where its reaction lands, and that close is the week's graded test.

Options mark where the pins sit. The October 26 expiry carries 86,808 put contracts at 750 and 84,931 at 755, with calls stacked at 780 and 805. The October 27 expiry holds 29,417 puts at 767, now overhead (open interest as of October 22, not gamma). The 750 and 755 strikes sit under spot, so a close under them would be the first time this month the market has traded through that wall.

The next four weeks

This month

Ahead this month, the policy question moves from October to December, and the evidence for December is unusually one-sided. Fed funds futures put it near 80%, per Reuters and LSEG data. A Reuters poll found every economist surveyed with a December hike, up from fewer than half a month earlier, and about 60% of them see the rate peaking at 4.00% to 4.25%. PIMCO sees one or two more hikes in total. When a consensus is that complete, the market has paid for it, and the information left is in the variance around it: a peak at 4.25% to 4.50% would surprise, and so would a peak at 4.00%.

The November 3 midterms sit in the middle of the window. Some investors doubt the committee hikes a week before voting, per Reuters, which is one reason October odds collapsed. The same logic runs the other way for December: after the vote the political reason to wait is gone. October payrolls and CPI land in early November, and neither date is confirmed in the sources we used, so treat the calendar as incomplete.

The second driver is the back half of earnings season. FactSet put blended third-quarter growth at 29.0% on October 16 with only 9% of companies reported, and LSEG now has it above 32% with more than 100 in. Different providers and different sample dates, same direction. The Magnificent 7 stood at 33.2% in FactSet's count against 27.7% for the other 493 companies, so the question is not whether earnings grow. It is whether the next set of companies repeats the pattern of beating and falling.

The historical lens is thin but worth stating. Since 2024 there have been 13 weeks matching this setup, meaning two or more red weeks with SPY under its 10-week average and 8-week EMA. One week later the median move was +0.21% with 8 of 13 higher, and four weeks later the median was +2.59% with 8 of 13 higher, ranging from -12.27% to +12.59%. The sample is small and the window is about 2.5 years. It describes where oversold has led before. It does not forecast.

The next quarter

This quarter

Through year end the quarter turns on three scheduled things. The December 9 meeting adds projections for the first time since September, when 16 of 18 participants had paths implying at least one more hike by December, per the Investing.com rate monitor. October's meeting has none, so December is where the committee's path gets restated. The second is the remaining earnings calls, which carry 2027 capital-spending guidance. The third is the November 3 election and whatever it does to the fiscal and tariff picture.

The quarter has one structural feature that the month and week do not. The leaders are not the index. The Dow made a third straight weekly gain at 52,215.16 while the Nasdaq Composite lost for a second week, and the equal-weight S&P fell more on Friday than the cap-weighted index. The quarter stance is graded on whether the leaders repair, and the index level is secondary.

Small caps are the counter-signal. IWM gained 1.96% on the week and closed 0.9% under its 200-day, up from 2.6% under it a week earlier. If that group reclaims the 200-day while the 50-day at 286.41 stays a long way overhead, the quarter stance is closer to being wrong on the breadth side. The bar we set pairs that reclaim with an SPY close over its high on the same Friday.

The honest uncertainty is which rate matters. The real rate five years out is near 3%, up about 50 basis points since June, per PIMCO. The quarter's central risk is that financing costs for the build keep rising even if the committee stops, because the supply of issuance arrives in the same weeks as the guidance.

The next twelve months

This year

Ahead over the year, the argument has narrowed to who pays for the AI build and at what price. Hyperscaler capital spending is near 800 billion this year, per Reuters. Meta's third quarter gives a sample of what that looks like at the company level: spending of 34.9 billion in the quarter against 19.4 billion a year earlier, and a free cash flow figure that turned negative, per TradingKey. Meta also announced a new non-voting share class that coverage ties to funding the buildout. A company that raises money for AI by changing its share structure is a data point about the cost of capital.

On the street the published year-end numbers sit well above the tape. Ed Yardeni cut his S&P 500 target to 7,900 on September 16, per Advisor Perspectives as cited last week, and Fundstrat's Tom Lee raised his to 8,000 on June 26, per Fundstrat. The index closed Friday at 7,623.68, 3.6% under the first and 4.7% under the second. A strategist who cut because yields rose faces yields that fell with stocks falling, and a strategist who raised on 2027 earnings faces estimates that have not yet been tested by the capital-spending calls.

The year-level question is which version of the problem is true. In the discount-rate version, stocks fall when the ten-year rises and recover when it eases. In the financing version, equity pays for the build whatever the ten-year does, because the supply of debt reprices the buyers. This week's tape sits between the two: the ten-year sits near 5%, down from its October 7 high of about 5.36% per Mitrade, and the Nasdaq still had its worst day since June. Until one of the tests prints, the year is a bet on which version is right.

The levels

Into the week SPY at 759.97 sits under its 10, 20 and 50-day averages, with 767.81 the first reclaim ahead. QQQ at 704.40 is 2.9% under its 50-day. IWM at 275.75 faces its 200-day at 278.23 and a 60-day low of 269.88.

• SPYThe 50-day is the first reclaim and the line that separates a shakeout from a range change. The October 26 expiry carries the largest put open interest at 750 and 755, below spot, and 727.01 is the 200-day and the quarter's graded line.
• QQQQQQ closed 2.9% under its 50-day with a daily stochastic of 5.3. The 10-day at 722.64 is the first line a bounce clears, and the 20-day at 735.24 is 4.4% overhead, the distance an oversold reading has to cover to matter.
• IWMIWM sits 0.9% under its 200-day and just over its 10-day, with the 50-day 3.7% overhead. A close over 278.23 is the level that says the small-cap catch-up has turned into a reclaim.

What would change it

Watch whether the statement keeps its tightening bias and how many dissent for a hike. Whether Alphabet, Microsoft and Amazon show cash conversion beside their capex. And whether Brent holds over 116 into Thursday's core PCE.

Leadership

• Leading: Energy producers, with the sector at a record and SLB up 6.7% on a profit beat, Long Treasuries, with TLT up 1.61% on the week, Small caps on the week, with IWM up 1.96% from a low base
• Lagging: Semiconductors and AI-spenders, after the Nasdaq's worst day since June on Thursday, Gold, with GLD down 4.03% on the week, Telecom, with AT&T and T-Mobile each down more than 6% in Friday's session, The equal-weight index, which fell more than the cap-weighted one on Friday

The line has moved from suppliers versus borrowers to those who spend versus those who sell the commodity. The semiconductor index bounced 0.44% on Friday after the rout, which is a pause and not yet a reclaim.

Cross-asset

• oil (oil; USO is a WTI futures proxy and not WTI itself). USO gained 4.8% on the week and 16.4% on the month, now 15.7% over its 50-day. Brent settled at 116.72 Friday and WTI at 103.27, per Closing Look. Energy was the one sector at a record.
• long\_treasuries (20y+ Treasuries, TLT as the vehicle). TLT gained 1.61% on the week and sits 1.0% over its 50-day but 4.1% under its 200-day. Duration rallied for a second week while the Nasdaq-100 proxy fell.
• dollar (US dollar; UUP is a DXY proxy and not DXY itself). UUP gained 0.14% on the week and 0.66% on the month, 3.9% over its 200-day. A firm dollar keeps financial conditions tight for the build.
• gold (gold; GLD is the ETF proxy). GLD fell 4.03% on the week and sits 11.5% under its 200-day. Gold did not take the haven bid that the equity break might suggest, and a rising real rate is the usual headwind.
• volatility (VIX futures ETF, not spot VIX). VIXY gained 1.07% on the week yet sits 25.0% under its 200-day. The selling has been orderly; a break above its 50-day would say that has changed.

The record

Last Sunday's note set one test: SPY's Friday close inside 748.00 to 776.00. It closed at 759.97. Grade: right. The band held, but it was wide, and the Intel date we cited had slipped a week. Week horizon: 5 right, 1 wrong, 2 mixed over 8.

• This week — right. We said: Neutral at 0.45 on one test: SPY's Friday 2026-10-23 close inside 748.00 to 776.00, with Tesla, Lam Research and Intel as the swing variables and Brent near its Friday level as the downside channel. What happened: SPY closed Friday at 759.97, inside the 748.00 to 776.00 band, after losing 0.43% on the week. The close sat 11.97 points above the floor and 16.03 under the cap, and QQQ lost another 0.76% while IWM gained 1.96%.
• This month — too early to call. We said: Neutral at 0.50, wrong to the upside on any Friday close through 2026-10-30 under 735.00, wrong to the downside on a Friday close above 781.62. What happened: The two Fridays since the call closed at 763.25 and 759.97, both inside the 735.00 to 781.62 window, so neither trigger fired.
• This quarter — too early to call. We said: Defensive at 0.50, wrong if SPY closes any Friday before 2026-12-31 over 781.62 with IWM over its 200-day the same Friday. Graded 2026-12-31. What happened: SPY closed at 759.97, 2.8% under 781.62, and IWM closed at 275.75, 0.9% under its 200-day of 278.23. Neither condition for being wrong has printed.
• This year — too early to call. We said: Neutral at 0.45, back to constructive if the ten-year closes under 4.80% with 2027 index EPS estimates intact. What happened: The ten-year sat between 5.0% and 5.15% on October 22 and 23, depending on the source, still 20 to 35 basis points over the 4.80% line. Third-quarter index growth reads above 32% per LSEG IBES as of October 23.

Week horizon: 5 right, 1 wrong, 2 mixed over 8 graded notes. Month, quarter and year: 0 graded, 24 too\_early across those same 8 notes. The archive holds 8 prior notes, dated 2026-08-30, 2026-09-06, 2026-09-13, 2026-09-20, 2026-09-27, 2026-10-04, 2026-10-11 and 2026-10-18; the first had nothing to grade.

Sources

• Reuters via Kitco, 2026-10-23, Wall St Week Ahead: Earnings flood, Fed meeting pose pivotal tests for rickety AI market rally
• Closing Look, 2026-10-23, Friday close with WTI, Brent, yields and index levels
• FXEmpire, 2026-10-25, The Week Ahead: Fed, AI Earnings and PCE Data Test Stock Market Strength
• TradingKey, 2026-10-25, The Week Ahead: Fed Rate Decision Looming as Microsoft, Alphabet, and Amazon Report Earnings
• PIMCO Macro Signposts, 2026-10-22, October Fed Meeting Preview: A Pause Is Still a Recalibration (Tiffany Wilding)
• Mitrade, 2026-10-22, citing a Reuters poll of 100 economists run October 16 to 20 and CME FedWatch
• Fortune, 2026-10-21, Meta's revenue surges 26% to 64.6 billion, but settlements and AI spending hit profit and free cash flow
• TradingKey, 2026-10-21, Meta Q3 net profit, capex and after-hours move
• Reuters via Spokesman-Review, 2026-10-23, Dow, S&P 500 fall, tech steadies to end rocky week
• FactSet Insight, 2026-10-16, S&P 500 earnings season update
• Investing.com, 2026-10-12, Fed October 28 decision: why hike odds hover near 20% (September dot distribution)
• Fundstrat, 2026-06-26, Lee, Newton raise year-end targets despite this week's stock slide
• Robinhood earnings calendar and results, retrieved 2026-10-25, Intel and Tesla report dates and EPS
• Advisor Perspectives, 2026-09-16, Yardeni cuts S&P 500 target to 7,900 (cited in prior issues)

Prices, ranges, moving averages and open interest in this note come from our own market-data bars through 2026-10-23. Every external claim names its source above. This note is forward-looking market research: it describes scenarios and the conditions that would confirm or invalidate them. It is not investment advice, not a recommendation, and states no forecast, price target or trade.