Two forces pulled against a strong earnings season this week: doubts about the cost of the artificial intelligence buildout and a renewed surge in oil prices. Meta raised its 2026 spending plan to $145 billion and said it would issue new shares to help fund it, Tesla cut its own capital budget by 20%, and AI-related stocks sold off. Brent crude climbed 6.2% to $116.72 a barrel, its highest settlement since April, as attacks on Saudi Arabian oil facilities intensified. The S&P 500 slipped 0.5% for a second straight weekly loss and the Nasdaq fell 0.7%, while the Dow rose 0.4% and small caps gained 2.0%. Bonds rallied as investors sought safety, pushing the 10-year Treasury yield below 5% for the first time in a month. Underneath the volatility, earnings continued to deliver: 83% of reporting companies have beaten estimates. Next week brings results from about a third of the S&P 500 and a Federal Reserve decision, with the midterm elections ten days away.
A Quarter of the Way Through, the Beats Keep Coming
With 24% of S&P 500 companies reported, the third quarter remains on track to be another strong one for profits. According to FactSet, 83% of reporting companies have beaten earnings estimates and 66% have beaten revenue estimates. The blended earnings growth rate rose to 29.5% this week, which would mark a third consecutive quarter of growth above 25% and an eighth straight quarter of double-digit growth. LSEG data tell a similar story, with 82.6% of companies beating estimates against a long-term average of 67%. Revenue growth stands at 12.7%, and analysts now expect earnings growth of 33% for calendar 2026.
The gains are broadening in places. Financials sector growth rose to 4.6% from 2.9% on positive surprises from Capital One, American Express, and Chubb. There are also signs of strain: the blended net profit margin of 14.9% sits below the prior quarter's level, with higher energy costs among the pressures. And the composition of growth is shifting. FactSet notes that Micron and Nvidia are the two largest contributors to the index's earnings growth this quarter, while analysts expect the so-called Magnificent 7 to grow fourth quarter earnings more slowly than the other 493 companies in the index, 23.6% versus 30.6%. If that holds, it would be the first time the group trails the rest of the market.
Next week brings the bulk of the season's big reports, with about a third of S&P 500 companies scheduled to report, including Microsoft, Alphabet, and Amazon. After this week's reaction to Meta, their capital spending plans may matter more to the market than their quarterly results.
One Spends More, One Spends Less, and Investors Hesitate
This week offered the clearest look yet at how differently companies are approaching the AI buildout. Meta raised its 2026 capital spending plan to $145 billion, the top of its earlier range, and plans to issue new shares to help pay for further expansion. Its stock fell about 7% on Thursday, the kind of reaction that suggests investors want evidence of returns before funding more growth. Tesla moved the other way, cutting its 2026 capital spending outlook by 20% to about $20 billion, and chipmakers sold off after Lam Research issued guidance that disappointed investors. AI networking and data center stocks fell sharply, extending the pressure that began with last week's CoreWeave selloff.
The underlying demand story remains intact in many places. Industrial supplier ABB reported record orders, up 40%, driven by a triple-digit increase in its data center business, and SpaceX said its AI revenue rose nearly tenfold to more than $7.5 billion, largely from renting out data center capacity. But there are also signs of physical limits: Business Insider reported that some of Amazon's new AI server racks are sitting idle because its data centers lack the electricity to run them. OpenAI is reportedly seeking about $30 billion in new funding at a valuation near $1.25 trillion, below its earlier target.
The market is drawing finer distinctions than it did earlier in the year. Companies funding AI from strong cash flow have held up better than those relying on borrowing or new stock to keep spending. The shift shows clearly in this year's style returns: the Russell 1000 Growth index is up just 1.5% for the year, while its value counterpart is up 23.9%.
Oil Climbs on Attacks in Saudi Arabia
Oil prices rose for a third straight week. Brent crude gained 6.2% to settle at $116.72 a barrel on Friday, its highest settlement since April 29, and West Texas Intermediate rose to $103.27. Brent is now up more than 85% this year. The latest increase followed a series of attacks by Iran-backed Houthi forces on Saudi Arabia, including a drone strike on the Shaybah oil field that Saudi state media said killed two people. Saudi Aramco told staff to evacuate its Dhahran headquarters and work remotely, and the United States ordered nonessential embassy personnel to leave the country.
Traders are also pricing a higher chance of renewed U.S. strikes on Iran in the coming weeks, although President Trump has said he will not attack before the midterm elections. In the Strait of Hormuz, at least 18 ships were hit over a two-week period, including two tankers that struck mines. Refined products remain tighter than crude: shipments of fuels such as diesel from the region are still constrained even as crude flows have recovered. The national average for regular gasoline stood at $4.29 on Friday, compared with $3.07 a year ago.
For investors, higher oil works against the market on two fronts. It squeezes corporate margins, a pressure already visible in this quarter's results, and it keeps inflation elevated just as the Fed prepares to meet.
A Flight to Safety Pulls Yields Below 5%
Higher oil prices would ordinarily push Treasury yields up. This week the opposite happened, because the selloff in AI stocks drove investors toward the safety of government bonds. After closing at 5.13% on Wednesday, the 10-year Treasury yield fell 17 basis points on Thursday to 4.96%, its first close below 5% since September 22 and one of its largest single-day declines in more than three years. It finished the week at 5.00%, with the 2-year yield at 4.69%. Long-term Treasuries gained 1.6% for the week, and the average 30-year mortgage rate eased to 7.41% from 7.50% in the latest Mortgage Bankers Association survey.
Expectations for next week's Federal Reserve meeting have settled. According to the CME FedWatch Tool, the probability of a rate hike at the October 27 to 28 meeting fell to 7.2%, from 27.7% a week earlier and 55.4% a month ago, while the odds of an increase by December remain around 78%. The Fed is widely expected to hold its benchmark rate at 3.75% to 4.00% on Wednesday, which places the focus on Chair Warsh's press conference and any signal about December. The economic calendar was light this week, but next week brings the first estimate of third quarter GDP and the September reading of the Fed's preferred inflation gauge, both on Thursday.
The Final Stretch Before the Vote
Over the past two weeks we have looked at what history says about markets after a midterm election and about the volatility that often comes before one. With ten days until the vote, it is worth looking at the timing more closely. According to J.P. Morgan Asset Management, the S&P 500 has delivered an average total return of 9.2% in midterm years since 1937, compared with 13.3% in other years, and most of the shortfall has come before the election: the index has averaged slightly negative returns in each of the first three quarters of midterm years.
The reaction once results are known has historically been favorable. Research from Schaeffer's found that the S&P 500 rose on the day after a midterm election in about three of every four cases since 1950, with an average gain of 0.57%. Over the longer term, BNY data show the index has gained an average of 16.6% in the year following a midterm election, higher in all 19 cases since 1950.
This year's starting point is different from the historical pattern in one important way. Midterm years usually reach the election after a meaningful decline, so the post-election rally begins from a low. In 2026, the S&P 500 is up about 11% for the year on a price basis and only modestly below its October 6 record, while valuations remain elevated by historical standards. That does not undo the historical pattern, but it suggests tempering expectations for the size of any post-election move.
Small Caps Lead as Growth and Gold Retreat
Leadership rotated toward smaller companies this week. The Russell 2000 rose 2.0%, with small-cap value up 2.1% and small-cap growth up 1.9%, and mid caps gained 0.9%. Large caps lagged, with the S&P 500 down 0.5% and large-cap growth down 1.5%, while large-cap value rose 0.7%. International markets fell, with developed markets down 1.5% and emerging markets down 2.6%. Bonds gained as yields fell, led by long-term Treasuries at 1.6%, with the Aggregate up 0.5% and municipal bonds up 1.0%. Real estate rose 1.0%. Gold fell 4.0% and is now down 7.5% for the year, the dollar edged up 0.1%, and Bitcoin slipped 1.0%.
| Index | Last Week | YTD 2026 |
|---|---|---|
| Bloomberg US Treasury Bills 1-3 Month | +0.1% | +3.0% |
| Bloomberg US Government/Credit 1-3 Year | +0.1% | +1.2% |
| Bloomberg US Aggregate | +0.5% | -1.1% |
| Bloomberg Municipal 1-15 Year | +1.0% | -0.8% |
| Bloomberg Municipal Bond High Yield | +1.3% | +1.5% |
| Bloomberg US TIPS (Series-L) | +0.6% | -0.1% |
| Bloomberg Global Aggregate | +0.3% | -1.6% |
| Bloomberg US Corporate High Yield | -0.1% | -0.1% |
| ICE US Treasury 20+ Year Index Total Return | +1.6% | -3.4% |
| S&P/TSX North American Preferred Stock Index | -1.3% | +2.3% |
| Bitcoin | -1.0% | -8.3% |
| Invesco DB US Dollar Index Bullish Fund | +0.1% | +7.1% |
| SPDR Gold Shares | -4.0% | -7.5% |
| Index | Last Week | YTD 2026 |
|---|---|---|
| MSCI ACWI IMI Net Total Return | -0.8% | +11.5% |
| MSCI ACWI Net Total Return | -0.9% | +11.5% |
| Russell 3000 Total Return | -0.3% | +12.2% |
| S&P 500 Total Return | -0.5% | +12.4% |
| Russell 1000 Value Total Return | +0.7% | +23.9% |
| Russell 1000 Growth Total Return | -1.5% | +1.5% |
| Russell Midcap Total Return | +0.9% | +14.8% |
| Russell Midcap Value Total Return | +1.5% | +20.8% |
| Russell Midcap Growth Total Return | -0.9% | -2.6% |
| Russell 2000 Total Return | +2.0% | +12.9% |
| Russell 2000 Value Total Return | +2.1% | +19.0% |
| Russell 2000 Growth Total Return | +1.9% | +7.2% |
| MSCI EAFE Net Total Return | -1.5% | +8.6% |
| MSCI Emerging Markets Net Total Return | -2.6% | +14.3% |
| S&P 1500 Real Estate (Sector) Total Return | +1.0% | +9.0% |
Bitcoin weekly return from Bloomberg closing levels of $81,328.21 on October 23, 2026 and $82,155.54 on October 16, 2026. Bitcoin year-to-date return calculated by Vistamark from the October 23, 2026 close and the January 1, 2026 reference price of $88,722. All other figures are total returns through the October 23, 2026 close, sourced from Vistamark Bloomberg internal data systems.
Big Tech, the Fed, and GDP in One Week
The coming week packs a crowded earnings slate, a Fed decision, and the first look at third quarter growth into five trading days, the last full week before the midterm elections.
What It All Means for Investors
The week captured the market's current tension in miniature. Corporate profits are growing at close to 30%, and most companies continue to beat expectations. But investors are asking harder questions about the cost of AI, oil prices are climbing again on Middle East attacks, and the Fed has not finished with rate hikes. The result was a modest decline for the large-cap indexes and a meaningful rotation underneath, with small caps and value stocks gaining while large growth stocks, international markets, and gold fell.
That rotation is a reminder of why balance matters. The large-cap growth stocks that led for much of the past two years are up only 1.5% this year, while value stocks are up nearly 24%. Next week's combination of big technology earnings, a Fed decision, GDP and inflation data, and an election a week later will likely bring more volatility. A diversified portfolio is built to participate in strong earnings without depending on any single outcome among them.
Balance Through a Busy Calendar
A week with a Fed decision, a crowded earnings slate, and an election close behind is when discipline matters most. VistaBuilder™ constructs allocations designed to hold up across market regimes rather than depend on any one trend, and VistaBalancer™ keeps those allocations on target as leadership rotates. If this year's shifts have left your portfolio more concentrated than you intended, we would welcome a conversation.
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Founder and CIO of Vistamark; as CIO of Fiducient Advisors, oversaw investment strategy for more than $260 billion in client assets. More about Matthew →
This article is for informational and educational purposes only and does not constitute investment, legal, tax or accounting advice, or an offer or solicitation to buy or sell any security. Views are those of the author as of the publication date and are subject to change. Vistamark Investments is an SEC-registered investment adviser; see our disclosures.
