Over the last two weeks, the S&P 500 has been stuck in a “neither fish nor fowl” phase: no outright panic, but with little fuel for further growth. Even the news of the end of the longest US government shutdown had little impact.
Why has apathy set in among investors?
The main factor is lingering uncertainty over the Fed’s next moves. Just a month ago, in October, markets were pricing in almost a 100% chance of a rate cut in December. Now, that probability has dropped below 45%.
The lack of fresh data, resulting from government agencies not collecting statistics during the 43-day shutdown, adds to fears that the Fed might simply pause. Finally, recent comments from the presidents of the Kansas City and Cleveland Federal Reserve banks don’t exactly inspire confidence.
In particular, Kansas City Fed President Jeff Schmid warned that further cuts could entrench higher inflation rather than support the labor market, while Cleveland Fed President Beth Hammack's comments suggest she isn’t in favor of another near-term cut, citing pro-inflation risks. She also pointed out that tariffs are pushing up prices, and those costs are likely to be passed on to consumers.
A second factor weighing on markets is concern over overvalued AI-related stocks. For example, Oracle’s shares have dropped 25% over the past month, amid concerns that the company's spending exceeds its free cash flow and that revenue is highly concentrated among a few clients.
What could shake things up this week?
On the Fed front, if Philip Jefferson, Christopher Waller, Michael Barr, Stephen Miran, and Lisa Cook continue with a hawkish stance (showing more concern for inflation than for the labor market), risk appetite could weaken further, putting pressure on the S&P 500 and even BTC/USD.
Regarding the U.S. September jobs report, even if numbers come in weaker than expected, the reaction may be muted since the data is already somewhat outdated, and it’s unclear if October’s data will even be released.
As for AI stocks, Nvidia reports earnings on Wednesday. Analysts expect, on average, a 53.8% year-over-year rise in EPS and $54.8 billion in revenue, according to LSEG. Equally important will be the company’s outlook.
It will also be interesting if Nvidia’s CEO addresses concerns that AI companies may have inflated their forecasts by overestimating the lifespan of Nvidia chips — potentially leading to an overestimation of their profits by around $176 billion between 2026 and 2028.
