The stock market's biggest test in weeks is here

By Mark DeCambre

The Fed meets, more than a third of the S&P 500 reports earnings and a bruised tech trade looks to rebound - with Middle East tensions adding to the uncertainty

Markets will have their eyes on the Fed this week.

Here's what I'm watching this morning: A week chockablock with market-moving events could finally give investors some answers about where stocks are really headed.

The S&P 500 SPX has fallen for two straight weeks, the Nasdaq Composite COMP has shed more than 5% over that span, and the Russell 2000 RUT just snapped a six-week losing streak with a 2% gain. Treasury yields, meanwhile, have declined for three straight weeks, while oil prices have advanced for five weeks running.

My take: Some of this may be healthy broadening after a long stretch of overheated tech buying. I still think the debt-fueled AI build-out will eventually face a true reckoning. But that doesn't necessarily mean this is it. Credit spreads remain relatively contained, earnings expectations are still holding up and demand for AI has stayed strong, even as financing risks and market concentration rise.

This week should be informative. The Fed meets, more than a third of the the S&P 500 reports quarterly results, and many of the bigger names will offer further insight into whether the enormous AI spending under way is translating into sufficient growth to justify the bill.

Three stories worth your time ...

-- Worried about this stock-market selloff? Relief may be coming after the midterms - no matter who wins.

-- The U.S. economy is great by this measure, and the good times aren't over. So why are Americans so sour?

-- Over 40% of Americans are heading toward retirement 'blind' - with no plan

On markets: There's a growing disconnect between Wall Street and Main Street, with the state of the economy having less impact on stocks. Columnist Mark Hulbert explains how AI could accelerate that divergence.

-- Elon Musk says SpaceX SPCX just secured $40 billion in debt to buy AI chips even as he warns that some AI rivals could face a shakeout. It's another reminder of how much borrowing is underpinning the boom in artificial intelligence, and how unevenly the risks are distributed.

-- Yet one gauge from Evercore ISI suggests the danger is contained. The Wall Street analysts' gauge of AI excess is flashing only a moderate 4 out of 10, with credit and earnings still relatively healthy even as market concentration and financing risks rise.

On trading: Morgan Stanley remains upbeat on the broader stock market, with an S&P 500 year-end target of 8,000. But its chief strategist sees potential support for chip stocks as much as 15% below current levels. That's not a forecast of a further 15% decline; it's a reminder, however, that the selloff may have legs.

-- Follow our live market coverage for Monday, including the latest moves in stock-index futures and the AI trade.

-- Big Tech earnings: Microsoft MSFT and Google parent Alphabet GOOG GOOGL report results on Wednesday. Amazon AMZN reports Thursday.

-- The Federal Reserve begins its two-day monetary-policy meeting tomorrow, with its decision on rates (likely a hold this time) due Wednesday at 2 p.m. Eastern.

-- Economic health: Thursday brings the first estimate of third-quarter GDP and September's personal-consumption-expenditures inflation report - the Fed's preferred method of assessing price pressures.

Anthropic's $2 trillion question ...

Anthropic's IPO could be the biggest ever.

Can Anthropic pull off the biggest IPO ever? The maker of the AI model Claude faces a narrowing window to file paperwork if it wants to go public by Thanksgiving. Otherwise, its potentially $2 trillion debut will have to wait, writes William Gavin.

Debt-free, not cash-poor ...

Getting out of credit-card debt faster is a worthy goal, but draining your emergency savings to do so can backfire. MarketWatch columnist Aditi Shrikant explains how a tighter budget, automatic payments and unexpected cash windfalls can shrink your balance without sacrificing your financial safety net.

A resentment-free retirement?

Quentin Fottrell is MarketWatch's Moneyist.

A retired reader wonders whether it's fair that an ex-spouse got $90,000 from a 401(k) in their divorce settlement. The Moneyist notes that what's fair and what a court will rule aren't always the same thing, and sometimes it's better to make peace with what's done and move on.

The Fed's message matters more than its decision ...

Fed Chair Kevin Warsh.

The Federal Reserve is expected to hold interest rates steady this week. But some economists say Chair Kevin Warsh's reluctance to explain his strategy is too often leaving investors guessing.

Meanwhile, columnist Michael Kramer argues that investors looking for clues to the Fed's next moves should pay less attention to interest rates and more to broader financial conditions.

Do machines have feelings?

Whether or not robots dream of electric sheep, rapid advances in artificial intelligence have tech leaders and philosophers pondering what constitutes consciousness. Christine Ji delves into the debate over morality and technology.

-- Middle East tensions are raising shipping costs. Tanker freight rates are climbing amid reports of fresh Houthi attacks against Saudi Arabia, adding to concerns about fuel prices and inflation.

-- Brazil's election fallout: President Luiz Inácio Lula da Silva won a new term Sunday, but rival Flávio Bolsonaro is refusing to concede defeat. Brazilian assets are already under pressure, with currency futures and a Brazil-focused ETF falling in Asian trading.

-- Protests in France show little sign of easing. More than 400,000 took to the streets over the weekend, sparked in part by anger about the cost of living, with organizers calling for a nationwide strike Nov. 5. French borrowing costs have hit 24-year highs, while investors seeking safety have helped push Treasury yields lower.

About me

Mark DeCambre is editor in chief of MarketWatch. He has spent more than 20 years covering Wall Street, markets and personal finance, and writes Need to Know, drawing on the award-winning analysis and journalism of the newsroom.

-Mark DeCambre

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10-26-26 0737ET