🔥Weekly Market Update: Record-Breaking Rally as Inflation Cools
Markets are partying like it’s 1999. The Dow Jones just crossed the magical 47,000 mark for the first time ever, while the S&P 500 and Nasdaq Composite are busy breaking their own records. This week wrapped up with an unprecedented win for American equities—all driven by one beautiful word: deflation (well, cooler-than-expected inflation). With the Federal Reserve ready to cut rates and the Magnificent Seven about to unleash their earnings reports, the market is firing on all cylinders heading into the final months of 2025.
📊 WHAT IS HAPPENING?
Let’s break down this week’s key moments:
The Inflation Plot Twist
September’s Consumer Price Index arrived Friday morning like a surprise gift. Headline inflation hit 3% year-over-year—below the 3.1% that analysts predicted. On a month-over-month basis, prices rose just 0.3%, another pleasant surprise. This cooler reading came after weeks of economic data blackouts caused by the government shutdown, making it the most anticipated economic release in ages.
Market Goes Vertical
The reaction was swift and decisive. The Dow surged 472 points (1.01%) to close at 47,207. The S&P 500 climbed 0.79%, while the tech-heavy Nasdaq jumped 1.15%—all reaching fresh all-time highs. The VIX (Wall Street’s fear gauge) plummeted 5%, signaling that investors are feeling confident again.
Earnings Are Still Crushing It
While the market was celebrating inflation data, corporate America was delivering the goods. Of the approximately 145 S&P 500 companies that have reported Q3 results so far, 84% have beaten earnings expectations. The blended earnings growth rate currently stands at 9%, with the Magnificent Seven leading the charge at expected growth of around 12% for the quarter.
Notable Stock Moves
Ford surged 10.7% after crushing Q3 earnings expectations, reporting 45¢ per share versus the expected 36¢
Applied Materials saw a dip after announcing a 4% workforce reduction
Roblox rallied sharply ahead of earnings, up 121% year-to-date
Alphabet gained 2.5% after announcing a massive cloud partnership with AI company Anthropic
🤔 WHY IT MATTERS
The Fed Is About to Cut Rates (Again)
Here’s what has markets buzzing: CME Group data shows a 98.3% probability that the Federal Reserve will cut rates by 25 basis points on October 29. This would bring the federal funds rate to a range of 3.75% to 4.0%—the lowest level since late 2022. Lower rates mean cheaper borrowing costs for businesses and consumers, which typically boosts economic activity and stock valuations. This is music to investors’ ears.
The Magnificent Seven Are About to Report
Five of the so-called Magnificent Seven are set to report earnings this coming week:
Wednesday, October 29: Microsoft, Alphabet, and Meta Platforms
Thursday, October 30: Apple and Amazon
These five companies represent approximately 25% of the total S&P 500 market cap
The earnings quality from these tech giants will essentially determine whether this rally has legs or if we’re due for a pullback. Early indications? Analysts are expecting strong performance, especially from Meta (with an 8.48% Earnings Surprise Predictor) and Microsoft.
Earnings Season Is Surprisingly Strong
The strength of this earnings season—with 84% beat rates and 9% growth—suggests the economy is holding up better than feared. This contradicts earlier recession warnings and shows that despite trade tensions, geopolitical uncertainties, and labor market weakness, corporate profitability remains resilient.
💡 OPPORTUNITY
Before the Fed Decides (October 28-29)
Bank of America has highlighted several stocks they believe have room to run before earnings. The big names include Meta Platforms and Roblox, which they expect will beat and raise guidance. If you’ve been sitting on the sidelines waiting for a pullback, this might be your last chance to buy before the Fed announcement and earnings rush.
The AI Race Continues
The fact that Alphabet, Microsoft, Meta, and other Magnificent Seven members are in an all-in race on artificial intelligence—spending billions on data centers and infrastructure—is creating a multi-year structural tailwind for the entire sector. Companies winning in this space could see sustained earnings growth well into 2026 and beyond.
Breadth is Improving
While the Magnificent Seven have dominated 2025, there are signs that earnings growth is broadening across the broader market. The “Other 493” companies are expected to show 4.8% earnings growth (versus 6.5% for the full S&P 500), and analysts expect this gap to narrow in 2026. This suggests rotation opportunities beyond the mega-cap AI plays.
🎯 BOTTOM LINE
The bulls have seized control heading into the final stretch of October. A softer inflation print, near-certain Fed rate cut, and a strong earnings season have created the perfect storm for another leg higher. With the Magnificent Seven about to report and the Fed about to cut, markets are priced for perfection—but so far, companies are delivering. The real question isn’t whether we’re going higher in the near term (momentum suggests yes), but whether valuations can justify the continued climb once we hit December.
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Disclaimer: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any form. Please do your own research and seek advice from a qualified financial advisor. From time to time, I have positions in all or some of the mentioned stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.