AI, earnings and interest rates: A week of pressure on Wall Street
The Nasdaq had its worst day since June and the Fed left rates unchanged. What does that mean for your portfolio? Here’s what happened on Wall Street this week and what to watch now. Read the full analysis.
Financial markets ended the week lower, particularly in the technology sector. Although major indexes initially advanced, earnings reports from large companies and growing concerns about the cost of artificial intelligence investments shifted investor sentiment. On Friday, selling intensified, sending the Nasdaq to its worst daily performance since June.
The week was also shaped by the Federal Reserve's decision to keep interest rates unchanged and new economic data showing that the U.S. economy remains solid, while inflation continues to run above the central bank's target.
Wall Street ends the week in negative territory
Major U.S. indexes finished the week with mixed results, although pressure on technology-heavy stocks dominated. The S&P 500 fell approximately 0.6%, the Dow Jones lost around 0.9%, and the Nasdaq Composite declined about 2%.
In contrast, the Russell 2000, which tracks smaller-cap companies, gained approximately 1.3% over the week. This divergence showed that losses were concentrated mainly among large technology companies, while other market segments managed to perform better.
Friday was the most difficult session. The S&P 500 fell 1.8%, the Dow Jones lost 1.1%, and the Nasdaq dropped 2.9%. The sell-off was mainly linked to corporate earnings and concerns about the spending required to build artificial intelligence infrastructure.
Artificial Intelligence puts big tech to the test again
The profitability of artificial intelligence investments once again became a major concern for investors. Results from Alphabet, Amazon and Intel intensified questions about how much companies are spending to compete in this industry and how quickly they can recover those investments.
Alphabet was one of the week's biggest stories. Although its third-quarter revenue grew 25% year over year and its Google Cloud business expanded 103%, its shares fell 12.6% on Thursday. The reaction was linked to concerns about its search advertising business and the sharp increase in spending on AI infrastructure.
Amazon also raised concerns. While Amazon Web Services continued to grow significantly, the company projected capital expenditures of approximately $220 billion for 2026. The market focused on the impact of this spending on cash flow and the company's ability to turn its investments into profits.
Intel experienced one of the week's sharpest moves. Its shares plunged nearly 29% on Friday after the company issued a revenue outlook below expectations and warned of challenges related to computer demand and memory component costs.
These moves sent an important message: the market is no longer evaluating only how quickly AI-related companies are growing. Investors are also examining how much they need to invest, how they finance that expansion, and what tangible results they can deliver.
The Federal Reserve holds rates steady, but Inflation remains a challenge
On Wednesday, October 28, the Federal Reserve decided to keep its benchmark interest rate in the 3.75%–4% range. The decision reflected its assessment that economic activity continues to expand at a solid pace, although inflation remains elevated.
One important detail was that the decision was not unanimous. Two committee members voted in favor of a 0.25-percentage-point rate increase, signaling differing views within the institution about how to address inflationary pressures.
The following day, new inflation data were released. The Personal Consumption Expenditures (PCE) price index, one of the Federal Reserve's most closely watched indicators, rose 0.5% in September and increased 3.6% year over year. The core index, which excludes food and energy, rose 0.3% monthly and 3.1% annually.
The combination of persistent inflation and still-elevated interest rates continues to create uncertainty around the next moves in monetary policy. For markets, this means rate cuts are not guaranteed and upcoming economic data will remain important.
The U.S. economy shows resilience
Another important release was the initial estimate of U.S. economic growth for the third quarter. According to the Commerce Department, GDP grew at an annualized rate of 3.4%, above the 2.2% recorded in the second quarter.
Growth was supported by consumer spending, investment and government expenditure, although exports performed negatively.
The figures point to an economy that continues to show resilience despite elevated interest rates. However, they also present a challenge for the Federal Reserve: strong economic activity may make it harder to bring inflation down and limit the room for monetary policy easing.
For investors, the outlook combines two different signals: an economy that continues to grow and a price environment that still calls for caution.
What investors should watch
Attention now turns to how technology stocks perform following last week's sharp declines, particularly companies linked to semiconductors, data centers and cloud services.
Investors will also be watching upcoming U.S. employment and inflation data, as these could reshape expectations for Federal Reserve decisions in the coming months.
Meanwhile, corporate earnings will remain in focus as investors assess whether revenue and profit growth are sufficient to justify the high valuations of some companies.
The key question is whether massive investments in artificial intelligence will begin translating into sustainable profits or whether their costs will continue to weigh on market expectations.
The week made one thing clear: enthusiasm for artificial intelligence is no longer enough to drive stocks higher on its own. In an environment of elevated interest rates and demanding valuations, investors are paying increasingly close attention to profitability, cash flow and corporate financial discipline.
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Sources: Bloomberg, Reuters Energy, CNBC Markets, ISM Manufacturing Report