Markets Brace for Impact With All Eyes on the Fed and Big Tech

Stocks, bonds, gold, and the US dollar are coiling up ahead of a blistering week loaded with blockbuster event risk. Will it make or break the markets?

• Stocks managed only a shallow bounce as markets consolidated ahead of a heavy week of event risk
• The Fed is expected to hold rates steady, but markets still see more tightening in 2027 than officials do
• Third-quarter GDP data may matter most for its mix, as strain on consumers spreads to middle-income households

Markets started the week much as they did the last one, with a modest recovery that lacked conviction. Crude oil gapped lower after the weekend passed without a strike in either direction between the US and Iran, easing fears that had fueled a rally into Friday’s close. That offered stocks some relief, but oil did not unwind the uptrend it has built since early October, and the bounce in equities quickly ran out of steam.

The S&P 500 gapped higher but failed to mount a meaningful break, and the tech-heavy Nasdaq 100 managed only a shallow rebound from a dense cluster of support near the 29,000 level. Both remain in the downtrend in place since the start of October. The small-cap Russell 2000 tried to break higher turned back, trapped in the downtrend in play since mid-August. Even with big tech names leading and AI buildout-linked sectors in the green, stocks could not muster a more convincing rally.

Last week followed a similar script. Stocks recovered early, then slid once earnings had come and gone without offering anything to change minds.

Elsewhere, assets settled into holding patterns too. Gold and silver digested last week’s selloff, Treasury bonds consolidated after breaking higher, and Bitcoin clung to the bottom of its range. The euro remained impressively resilient against the US dollar despite acute bond market stress in France that has spilled over into Italy and Spain. The greenback looked weaker still against the British pound, the Australian dollar, and the Canadian dollar, all of which have broken higher.

The Fed and markets still disagree on 2027

The Fed is widely expected to hold its benchmark rate in a range of 3.75% to 4% on Wednesday. Fed funds futures put the odds of a hold near 90%, roughly where they have been since September’s meeting. Back then, the Fed projected two hikes this year and delivered the first. Traders see the second coming in December, pricing roughly 90% odds, with a 25-basis-point (bps) increase fully discounted by January.

The disagreement comes after that. Fed officials see rates peaking this year, holding steady through 2027, and falling by 2028. That reflects a view that hikes are needed only to keep the oil shock and other near-term pressures from becoming lodged in inflation expectations. Futures price at least one more hike by April and lean toward another, though with less conviction than they had not long ago, as US economic data have softened.

Will the GDP data confirm a lopsided economy?

Third-quarter GDP figures arrive Thursday, just after the Fed’s decision. The Atlanta Fed’s GDPNow model puts growth at 3.5%, down from 5-6% when tracking began in early August, while consensus forecasts call for 3.2%.

The composition may matter more than the headline. The Fed’s latest Beige Book found growth increasingly narrow, driven overwhelmingly by manufacturing tied to the AI buildout and defense, while pressure on consumers spread from lower-income to middle-income households. Consumption accounts for about 68% of the economy, five times the roughly 14% share contributed by business investment. Even growing at a blistering pace, the data center boom would struggle to offset a consumer pulling back in earnest.

Other event risk is plentiful. The personal consumption expenditures (PCE) price index is expected to show inflation rising to 3.6% year-on-year in September from 3.4% in August. The Bank of Canada (BOC) is expected to raise rates, while the European Central Bank (ECB) and the Bank of Japan (BOJ) are seen holding steady. Guidance may matter more than rate levels, especially from an ECB facing turmoil in regional bond markets. China’s Communist Party also convenes its fifth plenum in Beijing, which could produce headlines on hot-button issues like tariffs, rare earths, energy, or artificial intelligence.

Earnings add another layer. Alphabet and Microsoft report Wednesday, followed by Amazon and Intel on Thursday, all at the heart of the AI narrative. So far, according to FactSet, the earnings season has largely met expectations. Blended third-quarter growth is pacing at 29.5%, little changed from the 29.2% expected a month ago. That has done little to inspire fresh speculation.

If the data reveal a consumer in retreat, markets may move closer to the Fed’s view and pare their 2027 rate hike bets. That could extend the US dollar’s slide and support bonds. Stocks may not find much comfort, however, if rate hikes fade because the economy is weakening.

Ilya Spivak, tastylive Head of Global Macro, has over 15 years of experience in trading strategy. He specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak

For live daily programming, market news and commentary, visit tastylive.com or @tastyliveshow on YouTube

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.