Weekly Market Minute October 31, 2026: U.S. Economic Growth Accelerates as Federal Reserve Holds Rates Steady
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Source: Charles Schwab, data from 10/26 – 10/30
Weekly Market Minute
🧭 This Week In the Markets
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U.S. Economic Growth Accelerates as Federal Reserve Holds Rates Steady
The U.S. economy expanded faster than expected in the third quarter, with gross domestic product (GDP) growing at an annualized rate of 3.4%, exceeding estimates of 3.1% and accelerating from 2.2% in the second quarter. Growth was supported by resilient consumer spending and increased business investment, particularly in artificial intelligence infrastructure. Consumer spending rose 3.8% during the quarter, while gross private domestic investment surged 19.4%, driven by a 20.9% increase in equipment spending. Despite stronger economic growth, inflation remained elevated in September, with the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) Price Index, increasing 0.5% for the month and 3.6% year over year.
Against this backdrop, the Federal Reserve voted to hold its benchmark interest rate steady at a range of 3.75% to 4.00% during its October meeting, following a quarter-percentage-point increase in September. The decision was not unanimous, with two Federal Reserve officials favoring an additional rate increase of 0.25 percentage points. Fed Chair Kevin Warsh emphasized the strength of the U.S. economy while acknowledging that inflation remains above the central bank’s 2% target. The Fed indicated that future interest rate decisions will depend on incoming economic data as policymakers continue to balance persistent inflationary pressures with strong economic growth.
Big Tech Earnings Highlight Rising Costs of AI Investment
Earnings this week from Microsoft, Alphabet, Amazon, and Meta highlighted the growing financial demands of artificial intelligence infrastructure investment. While these companies continue to invest heavily in data centers and computing capacity, their established businesses remain critical to funding this expansion. Microsoft reported continued strength in its business software and cloud operations, though rising capital expenditures weighed on free cash flow. Amazon experienced slowing growth in its retail and advertising businesses, while Alphabet reported weaker-than-expected advertising results despite strong cloud performance. Meta exceeded revenue expectations and continued making progress with its AI initiatives, but its substantial infrastructure spending has raised concerns about future profitability.
The scale of these investments is increasingly drawing investor attention as capital expenditures outpace cash generation. Microsoft was the only company among the four to report positive free cash flow, while Amazon, Alphabet, and Meta reported negative figures as spending accelerated. Although these companies maintain established businesses and significant financial resources to support their investments, investors are increasingly focused on whether AI-related spending will translate into sustainable revenue growth and long-term returns. This earnings season underscored the balance between pursuing opportunities in AI and maintaining financial discipline.
Anthropic Moves Closer to Record-Breaking IPO
Anthropic filed for what could become the largest initial public offering in history, seeking a valuation between $1.5 trillion and $2 trillion. The artificial intelligence company filed its Form S-1 with the Securities and Exchange Commission on Monday and plans to list on the Nasdaq under the ticker symbol “ANT,” with reports suggesting trading could begin as early as the week of November 16. The potential offering comes amid growing investor interest in AI and increased scrutiny of the industry’s substantial infrastructure spending and long-term profitability.
🏢 Corporate Earnings
- Alphabet (GOOGL) fell short of quarterly earnings expectations, reporting adjusted earnings per share of $2.67 on revenue of $127.58 billion, compared with estimates of $3.02 per share and $128.22 billion, respectively. These results, coupled with approximately $9 billion in negative free cash flow, have raised concerns about the company’s AI-related spending and infrastructure investments.
- Microsoft (MSFT) exceeded earnings expectations, reporting adjusted earnings per share of $4.89 on revenue of $92.28 billion, compared with estimates of $4.73 per share and $90.69 billion, respectively. These results were driven by strong growth in its Azure cloud business, which saw revenue increase 48% year over year, supported by continued demand for AI infrastructure and cloud services.
- Amazon (AMZN) missed third-quarter earnings expectations, reporting earnings per share of $1.89 on revenue of $201.94 billion, compared with estimates of $1.96 per share and $202.31 billion, respectively. Despite strong growth in Amazon Web Services (AWS), results were weighed down by weaker retail and advertising performance.
- Eli Lilly (LLY) surpassed earnings expectations, reporting adjusted earnings per share of $7.48 on revenue of $24.40 billion, compared with estimates of $6.26 per share and $22.61 billion, respectively. These results were driven by strong demand for its diabetes treatment Mounjaro and weight-loss drug Zepbound, which saw year-over-year revenue growth of 65% and 49%, respectively.
- Visa (V) exceeded quarterly earnings expectations, reporting adjusted earnings per share of $3.48 on revenue of $12.1 billion, representing year-over-year increases of 17% and 13%, respectively. These results were driven by continued growth in consumer spending and travel activity, with payments volume increasing 9%, cross-border volume rising 14%, and processed transactions growing 10%.
- Coca-Cola (KO) exceeded quarterly earnings expectations, reporting adjusted earnings per share of $0.91 on revenue of $13.4 billion, compared with estimates of $0.88 per share and $12.92 billion. Strong international demand helped offset flat sales volume in North America, while the company raised its full-year earnings outlook for the third consecutive quarter.
- ExxonMobil (XOM) surpassed third-quarter earnings expectations, reporting adjusted earnings per share of $4.23 on revenue of $113.2 billion, compared with estimates of $4.08 per share and $103.1 billion, respectively. These strong results were driven by elevated diesel fuel prices and increased refining activity, with the company’s Gulf Coast refineries operating at full capacity.
📊 Sector Performance
5-day closing price ($) and change (%)
Source: Select Sector SPDRs, data based on the Sector SPDR ETFs as of 10/30
Latest from EMW
Although we didn’t see a rate hike on Wednesday, we might see one in December. Inflation remains elevated, the labor market tells a more complicated story, and consumer confidence came in stronger than expected.
We had a fun evening at Topgolf this week recognizing all that the team has accomplished and how much we’ve grown this year.
📰 Dollars & Sense: This Week’s Rapid Read
While the Magnificent Seven are often described as a group, they are not a monolith. In fact, they have distinct differences, which help explain why there’s price dispersion.
Source: Charles Schwab
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Sources: CNBC, CNBC, CNBC, CNBC, CNBC
Corporate Earnings: Alphabet, Microsoft, Amazon, Eli Lilly, Visa, Coca-Cola, ExxonMobil
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