Weekly Market Note

The typical stock rises while the largest companies fall on AI spending worries

October 23, 2026 · Week of October 19 – 23

The S&P 500 fell 0.5% this week, to about 7,624, its second straight weekly loss, and ended Friday 2.5% below the record close it set on October 6. The Nasdaq Composite, which leans more heavily on technology companies, fell 0.7%. The losses came from a small number of very large companies, as results from Meta and others building out artificial intelligence revived questions about how much they are spending and how soon that spending will pay off. Smaller companies and the typical stock in the S&P 500 rose. The Russell 2000, an index of smaller U.S. companies, gained 2.0%, and the Dow rose 0.4%. Bonds gained for a third straight week, and oil rose after attacks in Saudi Arabia.

Worries about AI spending returned

Chip stocks started the week higher, and the PHLX Semiconductor Index, which tracks 30 large chip companies, ended an eight-session losing streak on Monday. Strong results on Tuesday evening from SpaceX, whose third-quarter revenue more than doubled from a year earlier, and from Super Micro Computer, which builds servers for data centers, lifted both stocks sharply on Wednesday.

Sentiment changed after Wednesday’s close. Meta, the owner of Facebook and Instagram, spent $34.9 billion on data centers and other equipment in the third quarter, more than the $32.8 billion in cash its business brought in, and raised the low end of its spending plan for 2026 to $135 billion. Lam Research, which makes equipment used to manufacture chips, forecast sales slightly above analysts’ estimates but short of what many investors had hoped for. Tesla lowered its 2026 spending plan to more than $20 billion, from more than $25 billion, which led investors to question its plans in AI and robotics.

On Thursday the S&P 500 fell 1.2%, its worst day since July, and the Nasdaq fell 2.6%. Meta fell 7.0%, Lam Research 11.8%, and the chip index 6.7%. LPL Research notes that interest rates on the bonds of AI-related companies rose relative to Treasuries, which added to the selling. On Friday, as oil prices climbed, nearly three of every four stocks in the S&P 500 fell, and the Dow lost about 650 points.

The selling in communication services went beyond Meta. The sector, which includes Meta and Alphabet, fell 5.9% through Friday afternoon. Alphabet fell 6.0% ahead of its results this week, Netflix fell 6.6% after lowering its forecast for advertising revenue, and AT&T and T-Mobile fell on Friday after Bloomberg reported that SpaceX is in talks to lease U.S. cell sites for a mobile network. Eight of the 11 sectors rose, led by energy and health care.

The typical stock rose

The selling was concentrated in a few of the largest companies. In the S&P 500, each company counts in proportion to its stock market value, so a handful of giant technology companies make up a large share of the index. The S&P 500 Equal Weight Index holds the same companies but gives each one the same weight, so it shows how the typical company did. On Thursday, as the S&P 500 fell 1.2%, the equal-weight index rose 0.8%. For the week, it rose 1.1% while the S&P 500 fell 0.5%.

Since the S&P 500’s record on October 6, the equal-weight index has gained 2.0% while the S&P 500 has lost 2.5%. The equal-weight index is now ahead for the year, up 13.0% to the S&P 500’s 11.4%, after trailing by about 3 points as recently as October 9.

Bonds gained for a third week

The 10-year Treasury yield fell to 4.96% on Thursday from 5.13% as the drop in AI-related stocks revived concerns about economic growth, according to LPL Research. It ended the week at 5.00%, down from 5.09%. The Bloomberg U.S. Aggregate Index rose 0.7% through Friday afternoon, its third straight weekly gain. LPL Research notes that high-quality bonds are again showing their value as a diversifier, even with inflation still elevated.

The Federal Reserve meets on Tuesday and Wednesday. It raised its benchmark interest rate by a quarter point in September, to a range of 3.75% to 4.00%. Trading in interest-rate futures points to no change this week and another increase by December. LPL Research notes that markets also expect further increases in 2027, and that a meaningful weakening in expectations for economic growth, particularly one driven by concerns about AI investment, could change those expectations and bring Treasury yields down.

Markets abroad

Europe’s STOXX 600, an index of 600 large European companies, fell about 1.4%, its largest weekly decline since early September, as protests over fuel prices and the cost of living continued in France and oil prices rose. Weak demand in China hurt several companies. Kering, the owner of Gucci, fell 16.6% on Friday after Gucci’s sales fell 6% from a year earlier on a comparable basis, and Volvo Cars, which is controlled by China’s Geely, fell about 24% to a record low after reporting a quarterly loss and about 2,500 more job cuts.

France drew particular attention. An S&P Global survey showed French business activity shrinking in October, at 48.4, down from 51.1 in September, on a scale where readings below 50 indicate contraction. France’s government debt reached a record 119.0% of its yearly economic output at the end of June, and the yield on its 10-year government bond reached 5% on Wednesday for the first time since 2002 and closed above it on Thursday. France is the third-largest country in the MSCI EAFE index of developed stock markets abroad.

In Asia, MSCI’s index of Asia-Pacific stocks outside Japan fell 2.7%, its fourth straight weekly decline. Japan’s Nikkei 225 fell 4.0%, and Hong Kong’s Hang Seng fell 4.5%. In mainland China, the CSI 300, an index of the 300 largest companies listed in Shanghai and Shenzhen, closed Thursday 20.2% below its June high, past the 20% decline that defines a bear market. It rebounded 1.7% on Friday amid heavy trading in index funds used by state-backed investors.

Oil rose after attacks in Saudi Arabia

Brent crude, the international oil benchmark, rose about 6% for the week to $116.72 a barrel, its highest close since April 29. U.S. crude rose about 2%, to $103.27, and is up about 80% this year. On Wednesday, Saudi authorities said two workers died at the Shaybah oil field when debris from an intercepted drone fell there, without affecting output, and two people died in an attack on the airport in Dammam. Yemen’s Houthi rebels, who are backed by Iran, also claimed attacks on Saudi oil facilities, including at the port of Yanbu, which Saudi Arabia said were not damaged. The State Department ordered nonemergency staff and their families to leave U.S. diplomatic posts in Saudi Arabia, and the New York Times reported that U.S. and Israeli military planners have drawn up plans to resume strikes on Iran after the November 3 midterm elections, with no decision made.

Natural gas futures fell about 15% on forecasts of milder weather and rising inventories. Gold fell about 4%, its worst week since June, as higher oil prices added to expectations that interest rates will stay high.

Economic reports were mixed

Weekly claims for unemployment benefits fell to 194,000, the lowest since July, and S&P Global’s early October surveys showed U.S. businesses still growing at a solid pace. The University of Michigan’s final October reading of consumer sentiment was 48.0, better than its early-month reading but the lowest in five months. Housing stayed weak, with construction starting on 5.2% fewer homes in September than in August.

The week ahead

Tuesday brings the Conference Board’s October survey of consumer confidence and September orders for durable goods, products meant to last three years or more. The Federal Reserve announces its rate decision on Wednesday at 2 p.m. ET, followed by a press conference. Thursday brings the government’s first estimate of third-quarter economic growth and September’s report on personal income and spending, which includes the Fed’s preferred measure of inflation. Friday brings the Employment Cost Index, a quarterly measure of wages and benefits. Earnings season reaches the largest technology companies, with Microsoft and Alphabet on Wednesday and Amazon on Thursday. Visa, Boeing, and Coca-Cola report on Tuesday. Mastercard, Merck, Eli Lilly, and Caterpillar report on Thursday, and Exxon Mobil, Chevron, and AbbVie on Friday. Apple reports on Monday, November 2.

LPL Research: “Weekly Market Performance, October 23, 2026.” Market data: Sector, MSCI index, bond index, and gold returns from LPL Research and Bloomberg as of 2:56 p.m. ET on October 23, 2026. U.S. index closing levels as reported by the Associated Press, October 16, 22, and 23, 2026, cross-checked against LSEG and the Federal Reserve Bank of St. Louis. S&P 500 Equal Weight Index levels from S&P Dow Jones Indices, cross-checked against MarketWatch. PHLX Semiconductor Index from Nasdaq. Friday stock breadth as reported by the Associated Press. Treasury yields from the U.S. Department of the Treasury, cross-checked against the Federal Reserve Bank of St. Louis. Federal funds target range and meeting dates from the Federal Reserve. Futures pricing as reported by the Associated Press and Reuters. Crude oil, natural gas, and gold settlement prices as reported by major financial news services, October 16 and 23, 2026. Company results from company filings with the U.S. Securities and Exchange Commission: SpaceX and Super Micro Computer, October 20. Meta, Lam Research, and Tesla, October 21. Netflix, October 20, 2026. Stock moves from Nasdaq closing prices. SpaceX cell-site talks as reported by Bloomberg, October 23, 2026. Kering and Volvo Cars results as reported by the companies and major financial news services, October 22 and 23, 2026. European and Asian index changes as reported by Reuters and major financial news services. CSI 300 fund trading as reported by Reuters and Bloomberg. French business survey from S&P Global, October 23, 2026. French government debt from INSEE, September 29, 2026. French bond yields from the Banque de France. MSCI EAFE country weights from MSCI, September 30, 2026. Saudi attacks as reported by Saudi authorities, The National, Agence France-Presse, and Reuters. State Department order as reported by CNN and the Associated Press, October 21, 2026. Strike plans as reported by The New York Times, October 21, 2026. Jobless claims from the U.S. Department of Labor through the Federal Reserve Bank of St. Louis, cross-checked against major financial news services. Other U.S. economic data from the U.S. Census Bureau, S&P Global, and the University of Michigan. Economic calendar from the Federal Reserve, the U.S. Bureau of Economic Analysis, the U.S. Bureau of Labor Statistics, the U.S. Census Bureau, and the Conference Board. Earnings dates from company announcements. Nasdaq CME Crypto Index settlement values from Nasdaq, cross-checked against LSEG. Important: The opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested in directly. Company names are for illustration only and are not a recommendation. Economic forecasts may not develop as predicted. International investing involves special risks, including currency and political risk. Cryptocurrencies are speculative and highly volatile and may not be suitable for all investors. For informational purposes only; not investment advice or a recommendation to buy or sell any security.