Weekly Market Update – October 17, 2025

Quick Takes

• Stocks rebounded last week despite extremely choppy trading as US-China trade tensions and banking sector volatility whipsawed markets throughout the week. Stocks and bonds ultimately resolved to the upside on trade tension de-escalation and solid bank earnings.
• The S&P 500 finished up +1.7%, Nasdaq Composite rose +2.1%, and the small cap Russell 2000 Index gained +2.4%. The Russell hit a new all-time high on Wednesday before the Thursday credit-induced pullback. 
• The Labor Department has paused its usual weekly initial unemployment claims report due to the government shutdown, but state unemployment insurance program offices still report unemployment claims filed by federal workers, and those have spiked to their highest level since the 2018–2019 34-day government shutdown. 

Source: Bloomberg. Data as of October 17, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Markets Show Some Cracks but Ultimately Rebound Higher

On Friday October 10th, US markets saw sharp declines after President Trump reacted to China signaling that they would restrict exports of rare earth minerals. President Trump announced that he would cancel a planned meeting with Chinese leader Xi Jinping and would impose additional 100% tariffs on Chinese products, setting in motion the selloff that wiped out the week’s gains. However, last week started out on a much more positive note as markets opened the week higher after President Trump and Vice President Vance struck a conciliatory tone toward China, signaling potential de-escalation ahead of the APEC summit. In addition to the easing US-China trade tensions, major U.S. banks, including JPMorgan, Wells Fargo, Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley, reported strong third quarter earnings early in the week, helping to boost investor sentiment. However, in the back half of the week, investor optimism was challenged when concerns in the credit markets bubbled up. JPMorgan CEO Jamie Dimon warned of broader credit issues, citing recent bankruptcies in the auto industry and suggesting more could follow. Disclosures of fraudulent loans by regional banks Zions and Western Alliance reinforced fears about the group and the health of the broader credit market. On Monday and Tuesday, the S&P Regional Bank Index was up +5.4%, but on Wednesday and Thursday, the index sank -8.4% on the credit warnings. By Friday, some Wall Street analysts proclaimed the sell-off in financials was overdone, including some ratings upgrades for some of the regional banks tied to troubled loans, like Zions. 

The choppy trading throughout the week was enough to push the CBOE Volatility (VIX) Index to its highest level since April. But news Friday morning that President Trump said the US is “going to do fine with China” and that the extra 100% tariff on goods from China wasn’t sustainable. That was enough to turn stocks higher for the week’s final session and cement a positive week despite the volatility. For the week, the S&P 500 Index was up +1.7%, the Nasdaq Composite Index rose +2.1%, and the small cap Russell 2000 Index gained +2.4%. The Russell hit a new all-time high on Wednesday before the Thursday credit pullback. Non-US stocks were more subdued than their US counterparts, despite the US Dollar Index declining -0.6%. The MSCI EAFE Index (developed market non-U.S. stocks) edged up +0.7% after falling -1.7% the prior week. The MSCI Emerging Markets Index underperformed the EAFE, falling -0.3% for the week after dipping -0.6% the previous week.

With all the back and forth in stocks, yields fell across maturities with the benchmark 10-year US Treasury yield ending the week down -2 basis points (bps) at 4.01% after a -9 bps drop the prior week. At one point on Thursday, the 10-year UST yield was down at 3.935%, the lowest since October 2024. The 2-year Treasury yield fell -4 bps to end the week at 3.46%. Bond prices and yields move in opposite directions, and the Bloomberg U.S. Aggregate Bond Index returned +0.5% for the week following a +0.3% gain the prior week. Non-US bonds rebounded last week, with the Bloomberg Global Aggregate ex U.S. Bond Index (non-U.S. bonds) returning +1.1%, nearly offsetting the prior week’s -1.2% decline.

Chart of the Week

Typically, every week as part of the Economic Review section below, we report the results of the weekly Initial Jobless Claims. However, the Labor Department has paused its usual weekly reports due to the government shutdown that began on October 1. But state unemployment insurance program offices still provide insight into the labor market, albeit with gaps from four states, for at least a subset of the workforce–federal workers. Those results show the number of Unemployment Claims filed by federal workers have spiked to their highest level since the 2018–2019 34-day government shutdown, with Initial Claims rising from 588 before the October 1 shutdown to 7,244 last week. Additionally, Continuing Claims also increased, reaching 9,430. The surge is driven by furloughs and the expiration of deferred resignation agreements, which left many without pay. Uncertainty around retroactive pay—challenged by the current administration—has prompted more workers to file for benefits. While most deferred resignees are ineligible for unemployment, some may qualify depending on state-specific criteria. Notwithstanding the federal spike, broader unemployment claims remain historically low, suggesting overall labor market stability.

Jobless Claims by Federal Workers Surge

Initial Unemployment Claims Filed by Federal Workers

Source: Labor Department, The Wall Street Journal.

The Week Ahead

A light week of economic reports becomes exceptionally light with several of those reports postponed due to the continuation of the government shutdown. As a result, the weekly data doesn’t start until Wednesday with weekly MBA Mortgage Applications. Thursday brings Existing Home Sales and Kansas City Manufacturing Activity. The week finishes with the Consumer Price Index (CPI) report on Friday, which was originally scheduled for last week. Also on Friday, S&P Global reports its US Purchase Managers Indices (PMIs), plus New Home Sales from the Commerce Department, and Consumer Sentiment by the University of Michigan. 

With the slow economic calendar, investors will be watching the roughly 80 S&P 500 companies report earnings results this week. Earnings season kicked off last week, primarily with banks and financials, but will have more sector diversity this week. Coca-Cola, GE Aerospace, General Motors, and Netflix release earnings on Tuesday, followed by AT&T, IBM, and Tesla on Wednesday. Blackstone, Ford Motor, and T-Mobile US announce quarterly results on Thursday, and Procter & Gamble ends the week reporting earnings on Friday.

*Data subject to delay if government shutdown continues

Did You Know?

HAPPY BIRTHDAY BULLS – Sunday was the third anniversary of the 2022 bear market low. Since 1928, there have been nine other S&P 500 bull markets (i.e., 20%+ gains without a -20% decline in between) that lasted at least three years, and in year four of those bull markets, the S&P 500 saw a median gain of +13.1% with positive returns eight times. (Source: Bespoke)

NOT BOTHERED BY THE SHUTDOWN – 65% of Americans say that the government shutdown has had no impact on their timelines to make a major purchase, such as a home or car. Of those impacted, 17% have delayed major purchase plans, and another 7% have canceled plans altogether. (Source: Redfin)

EGG & COCOA PRICES DOWN – After topping $8/dozen in February following bird flu outbreaks, wholesale large USDA egg prices have fallen -82% to just over $1.50/ dozen. The US currently has about 290 million table-laying hens, compared to 340 million in January 2020. US consumers purchase nearly 100 billion eggs annually. Meanwhile, cocoa prices have since fallen about -50% since spiking to record highs at the end of 2024 due to weather and a disease outbreak in West Africa (where ~60% of cocoa is produced for global consumption). Maybe chocolate Easter eggs should be the Halloween treat of choice this year? (Source: USDA, ICE, ICCO). 

This Week in History

LET THERE BE LIGHT – On October 16, 1878, Thomas Alva Edison, backed by J.P. Morgan, established the Edison Electric Light Co. to commercialize his month-old incandescent light. (Source: The Wall Street Journal)

Economic Review

• Due to the current partial US government shutdown, the release of the following reports have been delayed or postponed: 
• Weekly Initial Jobless Claims and Continuing Claims (Department of Labor)
• September Retail Sales Advance (Commerce Department)
• September Producer Price Index (PPI) (Bureau of Labor Statistics)
• September Housing Starts and Building Permits (Census Bureau)
• September Import and Export Prices (Bureau of Labor Statistics)
• September Industrial Production and Capacity Utilization (Federal Reserve Board)
• The U.S. Treasury Department recorded a surprise Federal Budget Surplus of +$198.0 billion in September, compared to a surplus of +$80.3 billion in the same period a year ago and is the largest monthly surplus since April 2025. Wall Street was expecting a -$110.0 billion deficit. Receipts rose +3.2% (to $544.0 billion) on a year-ago basis, while Outlays fell -22.6% (to $345.0 billion). The upbeat month ends the fiscal year 2025 with the U.S. Treasury recording a -$1.775 trillion deficit for fiscal 2025. The performance marks a slight improvement from the -$1.817 trillion shortfall in 2024. The bottom line from the report is that the 2025 fiscal year deficit was less than the 2024 deficit, but is still a massive -$1.775 trillion, even with the collection of +$195 billion in tariffs. 
• The National Federation of Independent Business (NFIB) reported that their Small Business Optimism Index declined to 98.8 from an unrevised 100.8 the prior month. That was below Wall Street expectations for 100.6. This was the first decline in three months, though it remains above the survey’s 52-year average of 98. Of the 10 component indexes, only 2 increased, while 5 declined and 3 were unchanged. The improvements were Earnings Trends, which improved +3 points to a net -16%, as well as Hiring Plans, which increased +1 point to a net +16.0%. On the downside, a net 23% of small-business owners surveyed said they Expect Better Business Conditions in the next six months, a drop of -11 percentage points from the prior month. Those viewing their Inventory Stock as too low fell -7 points to a net +7.0%. In addition, the Sales Expectations component was down -4 points to +8.0%. Owners also grew more anxious about inflation, with 14% of owners reporting that Rising Costs were their biggest problem in operating their business, up +3 points. A net 31% plan to Raise Prices in the next three months, up +5 points and the largest share since June. The separate Uncertainty Index rose +7 points from August to 100, the fourth-highest reading in over 51 years.
• Homebuilder confidence held steady in October as the National Association of Home Builders (NAHB) Housing Market Index (HMI) rose +5 points to 37, the largest monthly increase since January 2024. A year ago, the index stood at 43. The index is based on a 0-to-100 scale, where any number over 50 indicates a good reading, and below 50 is considered negative sentiment. Sentiment has been in negative territory for 17 months in a row. The Current Sales component was up +4 points to 38, while Sales Expectations in the Next Six Months was up +9 points to 54, and Traffic of Prospective Buyers rose +4 points to 25. For the month, 38% of builders reported cutting home prices, down from 39% which was the highest level in the post-COVID period. The average price reduction rose to 6% from 5%, where it had been every month since last November. The use of sales incentives beyond price cuts was unchanged at 65%. All four regional scores increased for the month, led by the Northeast, which was up +11 points to 55.
• The New York Fed’s Empire State Manufacturing Index, a gauge of manufacturing activity in the state, rebounded from a sharp drop the prior month, bouncing +19.4 points to +10.7, nearly erasing September’s -20.6 point drop. Wall Street was only expecting an improvement to -1.8. Demand rebounded meaningfully, with the New Orders and Shipments indexes rising sharply to +3.7 (up +23.3 points) and +14.4 (up +31.7 points), respectively. The Employment index rose +7.4 points to +6.2, its fastest expansion in three months. The outlook was very optimistic as well, with the Six Months Ahead General Business Conditions index more than doubling to +30.3 from +14.8 – the highest level since January. The only negative aspect in the report was on the inflation front, with Prices Paid and Prices Received bouncing +6.3 and +5.6 points respectively.
• The Philly Fed Manufacturing Business Outlook Survey sank -36.0 points to -12.8 in October, after rising +23.5 points the prior month. That was far worse than Wall Street forecasts for a decline to +10.0. Readings above zero indicate economic expansion, and below zero signal economic contraction. On the positive side, the index for New Orders rose +5.8 points +18.2, but on the downside Shipments sank -20.1 points to +6.0. The Employment index was little changed at +4.6, down slightly from +5.6. Both inflation gauges increased, with Prices Paid and Prices Received up +2.4 points to +49.2 and +8.0 points to +26.8, respectively. The diffusion index for future general activity rose +4.7 points to 36.2.
• Weekly MBA Mortgage Applications slipped -1.8% for the week ending October 10, after falling -4.7% the prior week. The Purchase Index was down -2.7% after slipping -1.2% the prior week. The Refinance Index dipped -1.0% after sinking -7.7% the prior week. The average 30-Year Mortgage Rate dipped to 6.42% from 6.43% the prior week.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.