Rally Pauses on Hawkish Powell, Mega Cap Results

Published as of: October 30, 2025, 9:14 a.m. ET

(Thursday market open) After Federal Reserve Chairman Jerome Powell rattled markets yesterday with hawkish rate talk, investors digested earnings from three of the Magnificent Seven and await two more after today's close. Shares of Microsoft (MSFT) and Meta Platforms (META) dragged major indexes lower in early action despite solid results, and the meeting between Presidents Trump and Xi ended on a positive  note  with the U.S. cutting fentanyl-related tariffs to 10% from 20% and China easing restrictions on rare earth exports.

Powell hasn't lost his ability to make investors flinch. As he spoke yesterday after the Fed's second straight rate cut, chances of a December cut quickly plunged in the futures market and the S&P 500 index turned red from green. Yesterday's 25-basis point cut took the fed funds rate to a three-year low range between 3.75% and 4%, but Powell said in his press conference that the Fed's meeting featured spirited debate about next steps. "There are strongly differing views about how to proceed in December," he said. "A further reduction in rates in December is not a foregone conclusion. Far from it."  

The tech-heavy Nasdaq rolled up new records and closed moderately higher Wednesday, but the S&P 500 index struggled and closed flat. For the second straight day, more sectors fell than rose. And the benchmark 10-year U.S. Treasury note yield soared to 4.1% by this morning, from lows below 4% before the Fed meeting, as longer-term yields remain stubborn despite recent Fed easing. "Overall, we expect the general trend in interest rates will continue to move lower into next year, but the path is likely to be bumpy," said Kathy Jones, chief fixed income strategist at Schwab. "There is still a high level of policy uncertainty affecting the outlook for yields." 

1. Deeper dive ahead of Apple, Amazon: Once earnings arrive from these two, investors will have quarterly results from six of the Magnificent Seven. Nvidia reports in mid-November. Analysts expect combined 14% earnings growth from the seven, a figure on the decline in part due to the pressure on margins generated by AI spending. Apple may be less affected by this, since it's lagging in AI, but its earnings and revenue growth slowed in recent years, too. Amazon has said it plans to spend as much as $100 billion this year on AI as it builds data centers and software, so one question is whether that's changed. Amazon's cloud growth is getting nipped by Alphabet and Microsoft, so any improvement in Amazon Web Services sequentially from last quarter's 18% growth would likely be welcomed. Apple is under pressure to keep the positive news flow going around its recent iPhone 17 launch. Apple shares recently made record highs, helped partly by data from Counterpoint Research saying the iPhone 17 outsold the iPhone 16 by 14% during its first 10 days of availability in the United States and China.
    
2. Breadth check: The AI-fueled rally has major indexes at or near all-time highs, but market breadth is narrowing and could be a concern. The percentage of S&P 500 stocks above their 50-day moving averages was 47% by midday Wednesday, with 60% above the 200-day. For the Nasdaq, it was 45% and 47%, respectively. This isn't exactly a strong undercurrent for a market at these levels. In addition, only four of 11 S&P 500 sectors had 50% of their components trading above their 50-day moving averages, and the latest weekly data show declining shares outpacing advancing ones at a clip of about 1.5 to 1 on both the S&P 500 index and the Nasdaq. All this suggests that the broad participation needed to further buttress the market isn't necessarily there. That doesn't mean there will be a sell-off, but it likely means further concentration risk associated with mega cap firms and their earnings. 
    
3. Tariffs still an issue as earnings approach: Despite today's upbeat meeting between U.S. and Chinese leaders, U.S. tariffs on imports from China remain at 47%, well above the level of a year ago but down from 57% before today. The tariff situation is another element in today's earnings from Amazon and Apple, as it affects their consumer businesses. Many consumer firms saw "pull-forward" buying earlier this year when tariffs were threatened but not yet in place. The question is whether that cannibalized mid-year and holiday shopping. Tariffs also surfaced yesterday in Powell's press conference when he was asked about inflation. Goods inflation is up partly due to tariffs, Powell said, though it may be just a one-time impact. He estimated that the annual Personal Consumption Expenditures, or PCE, price index, which was supposed to come out tomorrow but won't due to the shutdown, would show 2.8% core and headline inflation. Without the tariffs, he added, core inflation—excluding food and energy—might be closer to 2.3% to 2.4%.

• Microsoft slipped 1.8% ahead of the open althoughthe company easily beat Wall Street's earnings and revenue expectations and reported 40% quarterly growth in its Azure cloud computing business. Earnings came the same day as a major Azure outage, distracting from results. Microsoft's earnings per share beat Wall Street's consensus by $0.04 and revenue came in more than $2 billion above expectations, and the company said in its call that demand for infrastructure still exceeds capacity.
   
• Meta plunged 9% in pre-market action, even as earnings surpassed expectations despite an unexpected $16 billion charge. The company gave fourth-quarter guidance in line with Wall Street's consensus, and Meta said it now expects to spend $116 billion to $118 billion this year, up from the previously projected $114 billion to $118 billion. This works into spending on AI data centers. Meta also expects capital expenditures to face upward pressure in 2026, and investors appear nervous about all the spending. 
   
• Alphabet (GOOGL) soared nearly 9% this morning as earnings and revenue far surpassed Wall Street's thinking. It raised capital expenditures guidance, and cloud revenue rose 34% in the quarter, up sequentially from 32% the previous quarter.
   
• Eli Lilly (LLY) climbed almost 4% in pre-market trading after earnings per share and revenue easily topped consensus views and the company raised its full-year guidance. Sales of diabetes treatment Mounjaro rose 109% year over year, and obesity drug Zepbound sales climbed 184%.
   
• Nvidia (NVDA) was flat early today but is up nearly 15% over the last week and eclipsed $5 trillion in market capitalization, or about 16.5% of U.S. nominal gross domestic product. The meeting between Trump and Xi yesterday included discussion of U.S. chip exports, and Trump said China will talk to Nvidia and others about taking chips, CNBC reported.
   
• The Bank of Japan (BoJ) left rates unchanged today and the European Central Bank (ECB) is expected to do the same. Analysts had expected the banks to stand pat. "The BoJ is likely on hold until there is more visibility on fiscal policy," said Michelle Gibley, director of international research at the Schwab Center for Financial Research. This is potentially positive news for U.S. Treasuries, because rate hikes in Japan would likely send yields higher there, causing more competition that could weigh on U.S. Treasury values. In that scenario, yields here might go up. Yields move opposite from Treasuries.
   
• Merck (MRK) fell 2% early Thursday. Earnings per share beat estimates and sales of cancer drug Keytruda rose 10%, and the company narrowed its earnings outlook.
   
• Bitcoin (/BTC) slid 2% this morning, possibly a sign that investors are taking more of a "risk-off" position after the Fed move.
   
• Nike (NKE) fell 3% yesterday and hasn't gotten much of a lift this week from hopes of a trade truce with China, a huge market for the company. Other retailers including lululemon (LULU), Estee Lauder (EL), and Dick's Sporting Goods (DKS), McDonald's (MCD), and Hershey (HSY) also dropped more than 1% Wednesday in a down session for many consumer and staples names. Some of this could reflect investor funds moving into more "risk-on" parts of the market.
   
• Shares of home builders including Lennar (LEN), D.R. Horton (DHI), and Toll Brothers (TOL) fell 3% or more Wednesday on worries that lower rates may not be assured, potentially keeping mortgage rates high. Home supply companies Lowe's (LOW) and Home Depot (HD) fell around 2%.
   
• Chances of a Fed rate cut in December were 68% as of this morning, futures market trading suggests. That's down from 90% earlier this week.

Fed Beige Book primer: The Fed's Beige Book has a "beige" reputation, meaning some say it's boring, but it deserves more respect. The eight yearly releases provide something few reports can: a ground-level view of the U.S. economy, drawn from all 12 Fed districts. Learn more about it and get some tips on reading this long but vivid document in Schwab's newest article.

What to know about market capitalization: With all the headlines about companies achieving this or that trillion in market cap, how well do you understand the meaning? Learn more in Schwab's latest asset allocation article, which explains how market cap is calculated, how to find it on thinkorswim^®, and how to consider using it when you make investment decisions.

Bitcoin futures (/BTC) bounced off the 200-day simple moving average (SMA) (green line) following a sharp selloff from a record high in the first half of October. But the market ran into resistance this week near $117,000, around where the 20-day and 50-day SMAs have converged, and closed at a three-day low on Wednesday. It may again test support at the 200-day SMA in coming days.

Check out the investors' calendar for a summary of the top economic events and earnings reports on tap this week.

October 31: Earnings expected from Exxon Mobil (XOM), Chevron (CVX), AbbVie (ABBV), AON (AON), W.W. Grainger (GWW), Colgate-Palmolive (CL), and Dominion Energy (D).

November 3: October ISM Manufacturing Index and expected earnings from Palantir Technologies (PLTR), Hims & Hers Health (HIMS), Clorox (CLX), and Diamondback Energy (FANG).

November 4: September factory orders, September job openings (JOLTS), and expected earnings from Shopify (SHOP), Uber Technologies (UBER), Eaton Corporation (ETN), Pfizer (PFE), Spotify (SPOT), Advanced Micro Devices (AMD), Arista Networks (ANET), and Amgen (AMGN).

November 5: October ADP employment, October ISM Services PMI^®, and expected earnings from McDonald's (MCD), Novo Nordisk (NVO), AppLovin (APP), Qualcomm (QCOM), Arm Holdings (ARM), and DoorDash (DASH).

November 6: Challenger October job cuts and expected earnings from AstraZeneca (AZN), ConocoPhillips (COP), Cummins (CMI), Airbnb (ABNB), and Datadog (DDOG).