By Peter Biebel, Senior Vice President, Senior Investment Strategist
It’s been a dickens of a market. The major averages all closed at their best weekly levels ever, but the number of declining stocks on the New York Stock Exchange (NYSE) last week outnumbered advancing issues by more than a two-to-one ratio. The S&P 500 Index (SPX) registered its sixth consecutive monthly gain, while the NASDAQ Composite Index (COMP) made it seven in a row. SPX ended the month with a gain of a bit more than 2% but nearly 60% of its component stocks had losses for the month. That index is now up 16.3% for 2025 but roughly 45% of its stocks are in the red year-to-date. COMP tacked on about 4.7% for October, bringing its gain for the year to nearly 23%.
For the week, SPX added 0.71%, and COMP had a net gain of 2.24%. It was a week of multiple gap-up openings, hundreds of earnings announcements, a U.S. Federal Reserve (Fed) policy announcement and press conference, and a dearth of economic data. Following on the gap-up opening and new highs on the previous Friday, the averages gapped higher again on last Monday’s opening. The market had great expectations following constructive talks between U.S. and China officials over the weekend. Both SPX and COMP recorded new all-time highs in each of the first three sessions last week. And it would have been an even better week if the averages had been able to hold on to some of those opening gains.
Still, the modest gain in SPX was more than enough for the index to likely set another new “best” this week. As of Friday, SPX has spent 128 consecutive days above its 50-day moving average. By Wednesday of this week, that streak will break the 130-session record that ended on March 9, 2011.
The worst stretch in a good week came during the Fed press conference Wednesday afternoon. The market got the 0.25% cut in the Fed’s target lending rate that it expected, but not the 0.5% cut it had wished for. When Fed Chairman Jerome Powll stated that another rate cut in December “is not a foregone conclusion,” SPX plunged nearly 1% in about 10 minutes. About half of that loss was recovered through the balance of the session, but the mood on Wall Street had soured. The averages made lower lows the following day, and only a gap-up opening Friday morning (fueled by big gains in Apple, Inc. and Amazon.Com, Inc. following their earnings announcements) kept the averages in the black for the week.
On a sector level, only four of the 11 S&P sectors had net gains for the week, and only two of them had a gain of more than 0.1%. The technology sector was the best of the best, climbing 2.42% for the week. The consumer discretionary sector gained a bit less than 1%. The worst of the worst was the real estate sector, which lost just over 4%. Basic materials (-3.75%) and consumer staples (-3.55%) were nearly as weak.
The earnings responses in technology stocks were the benefactors for that sector. Alphabet Inc. and Amazon.Com gained 8% and 9%, respectively, following their reports. Apple Inc. and Microsoft had quieter reactions, but both companies briefly topped $4 trillion in market capitalization during the week. NVDIA Corp., which isn’t due to report for another two weeks, became the first stock with a $5 trillion market cap.
A busy week of earnings announcements was a perfect environment for many more bests and worsts. Both Flowserve Corp. and Teradyne Inc. ended the week with net gains of more than 25% following their quarterly reports during the week. On Wednesday, Caterpillar Inc. had its best day in more than 15 years. Its earnings report cited strong demand for power generators at data centers.
In a tale of two atrocities, Fiserv, Inc. and FMC Corp. both tanked following their quarterly reports. FMC was down a bit more than 50% for the week, while Fiserv lost nearly 47%. Ouch! Of the Magnificent 7 stocks, Meta Platforms, Inc. had the worst reception, though it was primarily due to forward projections as opposed to current results. The stock lost more than 11% on Thursday following its report, its worst response to quarterly results in years.
Following a week in which several mega-cap companies released their results, about 63% of the S&P 500 companies, representing about 69% of the index’s market cap, have now reported. According to Goldman Sachs, “64% of S&P 500 companies that have reported results have beaten consensus EPS forecasts by at least a standard deviation of estimates. In our 25-year data history, this frequency of earnings surprises has been surpassed only during the COVID reopening period in 2020-2021.” So far, revenue growth year-over-year is running at about 6%, two percentage points better than consensus. We’re at just slightly better numbers for year-over-year earnings growth, which is running at about 8% versus a consensus of +6%.
In a week with a lot of new “bests”, one “worst” stood out. On Tuesday, the gap-up opening that morning launched SPX to a new high near 6898 in the first minutes of trading. SPX closed that day with a small net gain near 6891. Not bad, but the number of declining issues among the index’s 503 component tickers outnumbered gainers by 294. In other words, nearly 400 of the stocks in the index had losses that day compared with just over 100 gainers. That day went into the record books as the worst advance/decline ratio for SPX on a day that it had a gain in more than 35 years.
There are also some new “bests,” that are not necessarily good news. One is that the NAAIM exposure index has jumped to its highest level in more than a year. In other words, professional money managers are up to their gills in equity exposure. The only time it was much higher than it is now was at the 2021 market top. Another contrary indicator that is flashing a warning sign is the equity put/call ratio. The ratio compares the relative number of bearish bets to bullish ones using listed options volume. That ratio has dropped to its lowest level of the year, suggesting too much complacency and too little caution.
Those multiple gap-up openings that produced no follow-through and were followed by declining prices and deteriorating breadth might also be a bad omen. The prevailing theory is that retail “dumb money” is active at the market’s opening, and it’s the “smart money” that comes in late in the day. Gap-up openings with no follow-through suggest that the dumb money believes this is the best of times and that the smart money is far more skeptical.
For five consecutive weeks in September, in which SPX hit a new high each week, the NYSE stocks registered 300 to 400 new 52-week highs. In another sign of deteriorating participation, the past two weeks, each of which produced new highs for SPX, saw fewer than 300 NYSE issues hit new 52-week highs. The NYSE also recorded 181 new 52-week lows last week. That is by far the greatest number of new lows since mid-April.
In addition to the warning signs from weakening breadth in the advance, another potential negative from a technical perspective is the gaps that SPX and COMP left on their charts last week. Both indices left similar gaps back in May in the early weeks of what has turned into the best six-month rally in years. Those May gaps can now clearly be classified as “breakaway” or “continuation” gaps. Unfortunately, given the size and duration of the rally, there’s a real risk that last week’s gaps are “exhaustion” gaps. If that’s the case, then we should expect the beginning of at least a consolidation phase over the next couple weeks. We’re all wishing that the spring of hope doesn’t turn into the winter of despair.
The market is very richly valued, and the number and significance of the warning signs are getting larger. While there are certainly causes for concern, there’s been no reason yet to make a rush for the exit. Nevertheless, you might want to talk to your advisor about shifting some of your cap-weighted exposure to a buffered or equal-weight fund. Likewise, you might consider shifting some of your technology and high-beta exposure to more defensive sectors, especially in tax-deferred accounts.
SPX ended last week at 6840, about 200 points above its 50-day moving average. The index would need to fall by about 3% before any short-term technical alarms would be triggered. However, dropping into that range, especially taking out the October lows in the 6550 area, would be a cause for concern.
Sadly, in the midst of the continuing government shutdown, many standard economic reports will be unavailable.
Economic Calendar (11/3/25 – 11/7/25)
| Previous | Censensus | ||
| Monday 11/3/2025 | U.S. Manufacturing PMI, October | 52.2 | 52.2 |
| ISM Manufacturing, October | 49.1% | 49.5 | |
| Construction Spending, September | |||
| Auto Sales, October, SAAR | 16.4mm | 15.5mm | |
| Tuesday 11/4/2025 | U.S. Trade Deficit, September | ||
| JOLTS Job Openings, September | 7.2mm | ||
| Wednesday 11/5/2025 | ADP Employment, October, M/M | -32,000 | +30,000 |
| U.S. Services PMI, October | 55.3 | 55.2 | |
| ISM Services, October | 50.0% | 50.8 | |
| Thursday 11/6/2025 | Initial Jobless Claims | +218K est. | 224K |
| Continuing Claims | 1,949K est. | 1,942K | |
| Wholesale Inventories, September, M/M | NA | ||
| Friday 11/7/2025 | Non-Farm Payrolls, October, M/M | ||
| Unemployment Rate, October |
Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Market Commentary/Market