S&P 500 Sits 2.5% Below Its Record Ahead of the Fed and Big Tech
A second straight weekly loss sets up a Fed decision on October 28, with Alphabet, Microsoft and Amazon reporting the same week
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The S&P 500 slipped 0.47% to 7,623.68, 2.5% below its record, as the Fed meets October 28 and Alphabet, Microsoft and Amazon report.
The tape: a second weekly loss, 195 points off the high
The S&P 500 closed Friday at 7,623.68, down 0.47% on the week. That sits 2.5% under the record close of 7,818.93 set on October 6, a gap of 195.25 points. It's the second consecutive weekly decline for both the S&P and the Nasdaq Composite, which fell 0.7% to 25,955.34.
The averages did not move together. The Dow gained 0.4% for the week and the Russell 2000 rose 2.0%, while the Dow shed more than 600 points, or 1.2%, on Friday alone. Energy was the strong group. Utilities, financials and tech all saw selling, and the damage was concentrated in mega cap tech and semiconductors, which sold off hard on Thursday. A semiconductor gauge has sunk to a three month low.
That split matters. An index down under half a percent on the week looks calm. Underneath, the leadership that carried the index to its October 6 record is being sold while small caps catch a bid.
Why the Fed is the whole story this week
The FOMC meets October 27 and 28, and Fed officials went quiet in the pre meeting blackout, which left markets with little new information. Pricing barely moved. Futures put the odds of a hold at roughly 90%, which makes the statement and press conference the real event, not the rate decision itself.
The pressure is on December. CME pricing points to a quarter point hike at the December 9 meeting, and one read of the market has those odds near 80%. Minutes from the September meeting showed most policymakers see another increase as likely appropriate by year end. A hawkish pause is the base case from here. Traders will be listening for whether the committee leans into that December path or leaves room to wait.
The bond market sets the tone. The 10 year yield closed the week around 4.99%, after reaching its highest level since early 2002 earlier in October. The 2 year fell to 4.68%. A close above 5.00% on the 10 year has been the line equities keep running into.
Oil and AI spending are the two pressure points
Two concerns drove the late week slide, and neither is new. Oil jumped on conflict in the Middle East, with WTI closing just above $103 on Friday and Brent trading above $116 during the week. That feeds directly into inflation expectations. One year expectations ticked up to 4.7%, and core inflation is forecast at 3.1% for September.
The second is capex. Investors have grown more sensitive to how much the large tech platforms are spending on AI infrastructure, and the selling in tech last week was a vote on that spending, not on demand. Crude pulled back from a six month high on Monday and index futures rose about 0.4%, which gives the bulls a small head start.
Earnings: Alphabet, Microsoft and Amazon carry the week
About one third of S&P 500 companies report this week, and the three that matter most for the index are Alphabet, Microsoft and Amazon. Alphabet and Microsoft report Wednesday, the same day as the Fed decision. That is a lot of event risk landing inside a few hours, and it can produce a violent session in either direction.
The read on each will come down to capex guidance against cloud growth and backlog. Spending that is matched by accelerating revenue should calm the nervousness that hit semiconductors last week. Spending without the growth is what the market has been selling. Check the [earnings calendar](/earnings-calendar) for exact timing, and treat the first reaction with caution, because the real signal is whether the opening hour holds.
Thursday adds the PCE inflation report, a fresh test of the hot inflation narrative before the week closes.
What to watch next
The first level is 5.00% on the 10 year. Staying under it gives equities room to work with earnings. A break above it, paired with a hawkish Fed on Wednesday, puts the 7,600 area on the S&P in play, with the 7,623.68 close as the line the index needs to defend.
The second is the reaction to Alphabet and Microsoft on Thursday morning. Gap-and-hold strength in both would be the first real evidence that the two week tech slide has run its course. Failed gaps would say the market is still repricing the cost of AI. The December 9 FOMC is the next hard date for rates, and the Whale Alerts dashboard at [/whalealerts](/whalealerts) will show whether large players position for the Fed or for the earnings.