NEW YORK, October 31, 2025 – A resilient U.S. stock market heads into a busy corporate earnings week, as investors weigh the strength of the artificial intelligence (AI) trade against caution over the Federal Reserve’s interest rate policy.

The S&P 500 ended October up 2.3%, marking its sixth consecutive monthly gain, even after wobbling earlier in the week amid mixed results from megacap companies. Concerns have emerged that additional Fed rate cuts may not materialize following the central bank’s quarter-point reduction on Wednesday, as expected.

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Fed Policy Leaves Investors Uneasy

Fed Chair Jerome Powell signaled that a December rate cut is “not a foregone conclusion”, countering market expectations for a near-certain reduction. Investors are also monitoring private employment data, including the ADP report, as the ongoing government shutdown has delayed official labor statistics, leaving markets in a data vacuum.

Angelo Kourkafas, senior global investment strategist at Edward Jones, noted:

“If we are approaching a ceiling on valuations similar to the tech bubble, earnings will need to do the heavy lifting to drive returns forward.”

Indeed, the S&P 500’s forward P/E ratio has climbed above 23, its highest level since the dot-com bubble 25 years ago, heightening scrutiny of corporate results for evidence that AI and other investments are generating sustainable growth.

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Corporate Earnings Set to Drive the Market

Third-quarter S&P 500 profits are on pace for a 13.8% year-over-year increase, with more than 130 companies scheduled to report next week. Of the companies that have reported so far, 83% exceeded earnings expectations, a figure well above the historical average of 67%.

Recent results highlight the duality of the market:

• Meta Platforms (META.O) and Microsoft (MSFT.O) shares declined after reporting increased AI-related spending.
• Alphabet (GOOGL.O) shares rose, as investors welcomed its ability to fund AI expansion from cash flow.
• Amazon (AMZN.O) surged nearly 10%, driven by strong growth in its cloud division, alleviating concerns about falling behind in AI.

Tech companies reporting next week include Advanced Micro Devices (AMD.O), Qualcomm (QCOM.O), and Palantir Technologies (PLTR.O), all of which have posted substantial gains this year. Other major companies reporting include McDonald’s (MCD.N) and Uber (UBER.N).

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AI Investment and Valuation Concerns

Investor enthusiasm for AI has helped propel the S&P 500 up 90% since the start of the bull market over three years ago. However, analysts caution that overexuberance could expose the market to volatility, especially if companies fail to deliver clear returns on AI spending.

Eric Kuby, CIO at North Star Investment Management, explained:

“Investors want to understand not just growth prospects but also the level of spending and the returns it implies.”

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Labor Market and Government Shutdown Impact

The U.S. government shutdown, now the second-longest in history, has halted most official economic reports, increasing investor reliance on alternative data to gauge the economy.

• Amazon announced a reduction of 14,000 corporate positions globally, with more cuts expected in 2026.
• The monthly jobs report, scheduled for November 7, will be delayed, adding uncertainty about labor market health.

Robert Pavlik, senior portfolio manager at Dakota Wealth Management, said:

“With a lack of U.S. government data and signs of layoffs, investors are understandably nervous about the economy’s strength.”

This data will be particularly scrutinized to inform expectations for future Fed action, including potential rate cuts or pauses in monetary easing.

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Historical Context and Year-End Outlook

November traditionally marks a strong month for stocks, averaging 1.87% gains since 1950, with December also historically positive. Year-to-date, the S&P 500 is up 16% and the Nasdaq Composite approximately 23%, raising questions about whether some of the year-end gains have been pulled forward.

History suggests further upside is possible: in 21 instances since 1950 when the S&P 500 gained at least 15% in the first 10 months, the index posted gains in the final two months in 20 of those cases, according to Truist Advisory Services.

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Key Takeaways

• The S&P 500 and Nasdaq enter a busy earnings week amid AI-related stock gains and investor caution over Federal Reserve policy.
• 130+ S&P 500 companies will report next week, with earnings likely to influence near-term market direction.
• Amazon, Alphabet, and other tech leaders remain under focus as AI investments and growth strategies are scrutinized.
• The government shutdown and delayed labor reports make alternative economic data more important for investors.
• Historical trends suggest stocks could continue year-end gains, but valuations and AI spending remain key risk factors.