Stocks, Crypto, Gold Sink in Momentum-Trade Unwind: Markets Wrap
(Bloomberg) — Volatility resurfaced on Wall Street in a session that saw most megacaps getting hit while gold slid alongside cryptocurrencies. A report saying the Trump administration is weighing restrictions on software exports to China added to recent anxiety around trade.
Following a torrid rally, calls for a breather have emerged with equities vulnerable to any bit of negative news. The S&P 500 lost about 1% and the Nasdaq 100 slipped 1.5%. A tepid outlook from Texas Instruments Inc. and a slump in Netflix Inc. after in-line results added to investor caution. Tesla Inc. – which is set to kick off the megacap earnings season – sank.
Wednesday was another session in which assets favored by retail momentum traders bore the worst losses, among them precious metals, crypto and companies in the artificial-intelligence space. Indexes used by quant investors to track the theme in the equity market, such as the Bloomberg US Pure Momentum Portfolio, have fallen sharply in recent days.
The last week has seen a significant cooling in enthusiasm for areas of the market that since the start of August had gone “parabolic,” according to Bespoke Investment Group.
“It appears that, at least temporarily, the music has stopped and the party has ended for the most-speculative names,” the Bespoke strategists said. “No one knows when the music will pick back up again, but usually, the higher they go, the harder they fall.”
The S&P 500 fell to around 6,670. Tesla slid 2.5%. Netflix sank 10%. Texas Instruments dropped 8%. Beyond Meat Inc. whipsawed, echoing the meme-stock frenzies that periodically roil the market.
The yield on 10-year Treasuries fell one basis point to 3.95%. A $13 billion US sale of 20-year bonds was strong. Bitcoin lost 2.8%. The dollar wavered. Gold slid 1.3%. Oil rose 2.1%.
“With equities hovering near record highs and valuations stretched, investors are looking for exceptional fundamentals to justify these lofty prices,” said Fiona Cincotta at City Index.
At a time when the equity rally has slowed, the flip side is that the proportion of companies beating earnings expectations this quarter is the highest since 2021. Most S&P 500 firms typically top expectations, but this season stands out considering that analysts had set the bar higher.
US companies should continue to deliver superior earnings growth supported by a robust AI investment cycle, ongoing deficit spending and a still-resilient consumer, JPMorgan Chase & Co.’s Dubravko Lakos-Bujas says.
To Thomas Lee at Fundstrat Global Advisors, the post-earnings slide in names like Netflix and Texas Instruments “is not thesis-changing.”
“We are not necessarily concerned about stocks selling off, short-term,” he said.
He listed the primary rationale for a strong final 10 weeks of 2025: corporate earnings are solid, Fed is dovish, AI visibility remains strong and there’s fourth-quarter positive seasonality.
“We continue to be constructive and expect the S&P 500 to reach at least 7,000 by year-end and that is the base case, with the possibility that we could see an even better 7,500,” Lee said.
The companies’ financial results — and all the “confident” commentary — mark a turnaround from recent quarters when CEOs pulled their year-ahead forecasts and used their conference calls to highlight uncertainty around trade, tariffs and consumer behavior.
The strategy over the last 10 months or so has been to dampen investor expectations and hope lower financial estimates would be easier to reach or beat if any of their worst case economic scenarios came to fruition.
“Earnings are obviously a big focus right now, and there will be a lot of attention on Tesla’s report,” said Matt Maley at Miller Tabak. “After getting a big boost in sales from the end of the tax credits, a lot of focus will turn to the robotaxi.”
Tesla is expected to post a 25% drop in third-quarter profits from a year ago when it reports earnings on Wednesday. Yet hope for the future while discounting the present has taken Tesla’s market valuation to dizzying heights. The shares trade at a whopping 195 times expected earnings over the next 12 months.
Its valuation is head and shoulders above megacap peers: Alphabet Inc., Amazon.com Inc., Apple Inc., Meta Platforms Inc., Microsoft Corp. and Nvidia Corp. The Bloomberg Magnificent Seven Index trades for roughly 33 times expected earnings.
“The trend remains positive with some of the froth selling off, adding to volatility, generally a good thing for market health,” said Louis Navellier at Navellier & Associates. “While earnings are off to a good start, how megatech performs has an outsized impact on market trends due to its record weight in the indexes.
With the season now well underway, results are looking promising, according to Oppenheimer Asset Management Chief Investment Strategist John Stoltzfus.
The fact that big US companies are beating expectations and guidance despite ongoing risks suggests there is “enough resilience to provide stocks with a ticket to ride,” Stoltzfus said this week.
“Markets are taking another breather today, as investors weigh earnings coming in,” said Dan Wantrobski at Janney Montgomery Scott. “We are still looking for a correction in the magnitude of 5% to 10% in stocks for the remainder of the year, although we note that the major benchmarks continue to respect the rising 50-day moving average as support.”
Wantrobski recommends watching that level on a closing basis for the remainder of this week. Holding at or above it will keep the short-term uptrend intact, he said.
“We are likely to see ongoing choppy waters for this trading environment over the next few days, albeit with the overall uptrend intact underneath the noise,” he noted.
As we venture deeper into the third-quarter reporting season, with the busiest weeks for earnings this week and next, the S&P 500 is exiting the peak of the buyback blackout window, noted Ryan Grabinski at Strategas.
“There’s certainly a wall of worry to climb,” he said. “However, all else equal, the corporate bid reasserting itself over the coming weeks should be a tailwind for risk more broadly.”
Beyond corporate earnings, though, US-based traders are focused on a few “good news” narratives that have also supported the positivity about risk assets and US stocks, according to Thierry Wizman at Macquarie Group.
“These ‘good news’ themes are: (1) that the Fed will ease again on Oct. 29, and continue to signal more easing despite ‘sticky’ US inflation; and (2) that the US-China negotiations will lead to a reconciliation that prevents even higher tariffs between the two countries,” he said.
It’s been two weeks since the S&P 500’s last notched all-time highs. In a defensive push, real-estate and consumer staples have rallied. Commodity-related sectors, financial and tech shares have lagged behind.
Bank of America Corp. clients returned to selling US equities last week after buying the dip the week prior, according to strategist Jill Carey Hall.
Institutional clients led the selling, she said. Tech and financials stocks saw the biggest outflows. Despite sales of single shares, clients bought equity exchange-traded funds across styles/sizes.
“Despite the stock market’s deterioration in breadth, we view near-term consolidations or pullbacks as healthy and necessary following the market’s strong five-month advance,” said Craig Johnson at Piper Sandler. “Macro tailwinds, including lower energy prices and bond yields, should continue to set up opportunities to “buy the dips” once support is confirmed.”
In other markets, traders continued to keep a close eye on the performance of precious metals after gold suffered a selloff on concerns its rally had run too far, too fast.
For all the wild market swings in bullion and silver, another market remained relatively listless.
Dollar trading has become unusually subdued, with one measure showing it’s the quietest in more than a decade as a US government shutdown coincides with political tensions abroad, adding complexity to currency risk.
Over the past 60 trading days, the Bloomberg Dollar Spot Index has stayed within one standard deviation of its average about 80% of the time, according to data compiled by Bloomberg. It reached 88% earlier this month, the highest since 2013.
Corporate Highlights:
Tesla Inc. is recalling thousands of recently built vehicles over an issue that can cause a sudden loss of battery power, increasing the risk of a crash. Alphabet Inc.’s Google ran an algorithm on its “Willow” quantum-computing chip that can be repeated on similar platforms and outperform classical supercomputers, a breakthrough it said clears a path for useful applications of quantum technology within five years. AT&T Inc. reported revenue that fell slightly short of analysts’ estimates in the third quarter, resulting from a heavy promotional campaign to woo new customers amid a fiercely competitive mobile phone market. Texas Instruments Inc., the biggest maker of analog chips, gave a lackluster forecast for the current period, adding to concerns that a semiconductor industry recovery is sputtering. Netflix Inc. said a tax dispute with Brazil cut into third-quarter earnings, marring results that otherwise fell in line with Wall Street estimates. Mattel Inc. reported third-quarter sales and earnings that missed analysts’ estimates as US retailers delayed orders due to uncertainty over tariff policies. Western Alliance Bancorp’s third-quarter profit rose more than 27% from a year earlier, topping most Wall Street projections and reassuring investors that an alleged fraud tied to a commercial real estate investor group didn’t impair the bank’s overall health. The stock rose in extended trading. Capital One Financial Corp. reported a surge in third-quarter profit, beating Wall Street estimates, and the lender announced plans to repurchase as much as $16 billion of stock in the wake of its acquisition of Discover Financial Services. Lyft Inc. is piloting a program that offers some customers cash back on future rides, the latest effort to win over users from rival Uber Technologies Inc. Uber Technologies Inc. and Nebius Group NV are committing as much as $375 million to develop Avride, the Dutch cloud infrastructure company’s autonomous vehicle subsidiary. GE Vernova Inc. expects an increasing amount of its natural gas turbines to be snapped up by big tech firms building data centers. Hilton Worldwide Holdings Inc. boosted the lower-end of its full-year outlook for expanding its hotel network. Cryptocurrency exchange Kraken says revenue more than doubled in the third quarter, as the company gears up for a public listing in the US next year. Barclays Plc has conducted a review of its entire loan portfolio after the British lender was stung by the chaotic collapse of Tricolor Holdings. Aberdeen Group Plc reported another quarter of net outflows as ongoing exits in its asset management unit offset a positive period for its Interactive Investor business. Hermès International SCA extended its run as the luxury industry’s strongest performer with another quarterly sales jump, even though the Birkin and Kelly bags maker’s key leather unit fell slightly short of expectations. Reckitt Benckiser Group Plc sales rose more than expected as the London-based consumer goods company reported strong growth in the region that includes China. How often do you look at prediction markets to inform your trading decisions? Let us know in the latest Markets Pulse survey.
Some of the main moves in markets:
Stocks
The S&P 500 fell 1% as of 2 p.m. New York time The Nasdaq 100 fell 1.6% The Dow Jones Industrial Average fell 0.9% The MSCI World Index fell 0.8% Bloomberg Magnificent 7 Total Return Index fell 1.5% The Russell 2000 Index fell 2.4% Tesla fell 2.5% Netflix fell 10% Texas Instruments fell 8% Beyond Meat rose 12% Krispy Kreme rose 13% Currencies
The Bloomberg Dollar Spot Index was little changed The euro rose 0.1% to $1.1614 The British pound was little changed at $1.3360 The Japanese yen rose 0.2% to 151.66 per dollar Cryptocurrencies
Bitcoin fell 2.8% to $107,773.48 Ether fell 3.8% to $3,807.56 Bonds
The yield on 10-year Treasuries declined one basis point to 3.95% Germany’s 10-year yield advanced one basis point to 2.56% Britain’s 10-year yield declined six basis points to 4.42% The yield on 2-year Treasuries declined two basis points to 3.44% The yield on 30-year Treasuries was little changed at 4.54% Commodities
West Texas Intermediate crude rose 2.1% to $58.44 a barrel Spot gold fell 1.3% to $4,069.69 an ounce ©2025 Bloomberg L.P.
