Welcome to Yield Report

Interest Rate & Market Commentary for Week Ending  31st October 2025

Weekly Overview

The major U.S. large-cap stock indexes climbed for the third week in a row and pushed their record levels higher, although mid- and small-cap indexes fell. The NASDAQ outperformed its peers with a 2.3% weekly total return owing to strong earnings reports from some of the index’s biggest technology stocks.

The U.S. Federal Reserve fulfilled market expectations as it cut its benchmark rate by a quarter percentage point for the second meeting in a row. However, Chair Jerome Powell added to the uncertainty over prospects for another cut at the Fed’s December meeting. Powell said that a reduction “is not a foregone conclusion,” citing a lack of consensus among Fed members.

The S&P 500 and the Dow both finished more than 2% higher for October as each index extended its positive streak to six months in a row. The NASDAQ outperformed with a 4.7% rise—its seventh consecutive monthly gain.

Mostly strong results during the busiest period of quarterly earnings season led analysts to lift their overall earnings growth forecasts again. As of Friday, analysts projected that S&P 500 companies’ third-quarter earnings rose by an average of 10.7%, based on results already released and expectations for pending reports, according to FactSet. Entering earnings season, analysts had expected an 8.0% rise. The leaders of the world’s two largest economies announced an agreement partially rolling back tariffs implemented earlier this year. President Trump said the total combined tariff rate on Chinese imports will fall from 57% to 47%. The pact extends to other trade issues, including rare earth export controls, fentanyl trafficking, and U.S. soybean exports.

U.S. government bond yields climbed, with most of the week’s rise coming on Wednesday afternoon following comments from U.S. Federal Reserve Chair Jerome Powell that increased uncertainty about prospects for another rate cut in December. The yield of the 10-year U.S. Treasury finished the week at 4.09%, up from 3.99% at the end of the previous week.  A U.S. small-cap stock benchmark fell during a week when its large-cap peers posted gains. The Russell 2000 Index finished down around 1.3% overall, with most of the decline coming on Wednesday afternoon in the wake of the Fed meeting

The first week of November would normally yield a bevy of U.S. economic reports, but the government shutdown that began on October 1 meant that data releases continued to be delayed or potentially cancelled. In the past week, investors didn’t get an initial third-quarter GDP estimate. For the week ahead, prospects were in doubt for Friday’s monthly jobs report as well as releases on construction spending, trade, and factory orders.

Figure 1: World –: World – Major Stock Indices 7 Day Return

Chart of the week: US Equities – % of Industries with Positive EPS (Historic and Forward)

The chart tracks the proportion of U.S. industry groups (GICS Level 2) experiencing positive earnings-per-share (EPS) growth, both on a year-over-year (YoY) and forward-looking basis. A higher percentage reflects broader earnings momentum across sectors, signalling improving corporate profitability and economic resilience. As of October 2025, about 71.4% of industries reported positive YoY EPS growth, indicating that earnings are rising in roughly three-quarters of the U.S. economy. Meanwhile, 78.6% of industries showed positive forward EPS growth, suggesting that analysts expect earnings expansion to continue across most sectors in the coming quarters.

This combination points to a broad-based and relatively stable recovery in corporate profits following a period of volatility in 2023–2024. The alignment of current and forward metrics at near 80% levels indicates confidence that profit growth is both sustained and well-distributed, rather than concentrated in a few sectors such as technology or consumer discretionary.

Overall, the data suggests the U.S. earnings cycle remains firmly in expansion, supported by resilient demand, easing input costs, and improving margins across multiple industries, a constructive signal for equity market breadth and the durability of the current corporate profit upswing heading into late 2025.

Market Summary Table

Name	Week Close	Week Change	Week High	Week Low
Cash Rate%	3.60%
3m BBSW %	3.65	0.15	3.65	3.50
Aust 3y Bond %*	3.62	0.25	3.62	3.37
Aust 10y Bond %*	4.31	0.17	4.31	4.14
Aust 30y Bond %*	4.95	0.12	4.94	4.83
US 2y Bond %	3.61	0.11	3.61	3.49
US 10y Bond %	4.11	0.10	4.11	3.98
US 30y Bond %	4.67	0.07	4.67	4.55
$1AUD/US¢	65.39	0.46	66.11	65.33

Global Themes Shaping Markets

1. Liquidity: The Fed Cuts Rates Again & Announces QT Pause

In October, the U.S. Federal Reserve delivered a 25-basis-point rate cut and formally announced an end to quantitative tightening (QT) effective December 1, reinforcing market confidence amid tightening liquidity. The decision followed signs that banking system reserves had fallen below $3 trillion, raising funding stress concerns. The QT pause was thus both timely and pre-emptive, aimed at stabilizing liquidity before strains escalated.

Fed Chair Jerome Powell’s caution that a December rate cut “is not guaranteed” was interpreted as a deliberate effort to temper excessive optimism, not a policy reversal. MacroMicro identifies three reasons for this stance: (1) to reset market expectations; (2) to signal confidence in economic resilience; and (3) to reaffirm the Fed’s readiness to act if liquidity deteriorates. Combined with potential fiscal stabilization once the U.S. government resumes operations, the policy mix, rate cuts, QT suspension, and fiscal funding, creates a constructively accommodative monetary backdrop.

The report concludes that U.S. monetary conditions will remain supportive from Q4 2025 through Q1 2026, providing a strong liquidity cushion for risk assets. The Fed’s actions are seen as a stabilizing force that mitigates funding volatility, strengthens investor confidence, and sets the stage for sustained equity momentum heading into early 2026.

1. Fundamentals: AI Boom Delays Manufacturing Downturn to Mid-2026

Macro fundamentals remain robust, driven by the AI-led industrial expansion that has now evolved from an “AI-only” rebound to a broad-based electronics recovery. In October, semiconductor bellwether TSMC raised its full-year revenue growth guidance to 35%, forecasting Q4 stability even during the usual off-season, evidence of persistent, high-intensity AI demand. Taiwan’s ICT and electronics exports are maintaining $22 billion monthly averages, representing 80–100% YoY growth, confirming enduring sectoral strength.

Supporting indicators reinforce this expansion: rising 3nm foundry prices, upward smartphone shipment revisions, and falling TSMC inventory ratios, all pointing to a sustainable cycle rather than overheating. MacroMicro now forecasts the manufacturing upcycle to extend into Q1 2026, with no signs of a peak yet.

Caution is advised from March 2026 onward, when base effects will amplify export comparisons, and by July 2026, analysts should watch for potential moderation signals in inventory and shipment data. Overall, AI-driven capital expenditure continues to delay the cyclical downturn, pushing the next manufacturing inflection point to mid-2026, underlining the resilience of global tech and supply-chain sectors.

III. US Earnings

U.S. equities saw strong corporate-led moves this week, with major industrial, technology, and consumer names reporting sharply divergent earnings outcomes that shaped market sentiment.

Caterpillar led industrial gains, surging 12% after posting better-than-expected quarterly results and raising its annual sales forecast. The machinery maker highlighted a 31% jump in power generator sales, driven largely by surging demand from AI data-centre developers, which boosted its engine division’s profit. The performance underscored the broader tailwind artificial intelligence is creating across industrial and infrastructure supply chains.

Similarly, Whirlpool shares climbed 5.2% after reporting an unexpected rise in North American sales, credited to new product traction and renewed strength in domestic manufacturing. The appliance producer said U.S. tariffs are increasingly weighing on foreign competitors, providing a competitive advantage to its home-market operations. In technology, Nvidia became the first company to hit a $5 trillion market capitalization, cementing its dominance in the AI economy. Its valuation now exceeds that of Qualcomm, AMD, Arm, ASML, Broadcom, Intel, Lam Research, Micron, and TSMC combined, according to Dow Jones data. Nvidia’s ascent reflects relentless AI-driven optimism and partnerships with companies including OpenAI, Oracle, Nokia, and Eli Lilly.

Other corporate developments were mixed. Chipotle Mexican Grill shares plunged 18% after the chain warned of weakening demand among younger and lower-income consumers, citing inflation, unemployment, and wage stagnation. The company’s quarterly net income fell 1.4%, and it forecast a modest sales decline in 2025.

Kenvue, the Tylenol maker, dropped 3.8% after Texas sued the company for allegedly concealing autism risks tied to acetaminophen—claims the firm and medical authorities called “baseless.”

Among tech giants, Meta Platforms tumbled 11% after pledging to “aggressively” ramp up AI spending, contrasting with Alphabet’s 2.4% rise on strong advertising and cloud revenue. Microsoft slipped 2.9% despite robust results and a $4 trillion valuation milestone, while Amazon jumped 9.6% on a 13% revenue surge and accelerating AWS cloud growth.

Market Outlook & Positioning

Both liquidity and fundamentals currently underpin market resilience, while sentiment indicators show no signs of euphoria. Despite record equity highs, the CNN Fear & Greed Index remains subdued—suggesting further room for upside as investors remain cautious rather than complacent. MacroMicro maintains that until Q2 2026, the combination of accommodative liquidity, strong earnings, and restrained sentiment will support equities, particularly in AI, semiconductor, and electronics sectors.

Overview of the US Equities Market

Wall Street ended October on a powerful note as stock bulls pushed the S&P 500 and Nasdaq 100 to historic highs, capping one of the longest winning streaks in years. Despite geopolitical risks, a U.S. government shutdown, and debate over lofty valuations, optimism around corporate earnings and AI-led growth kept markets surging. The S&P 500 has now rallied nearly 40% since April, climbing to around 6,840, while the Nasdaq 100 extended its seven-month winning run, its longest since 2017.

The latest leg higher was driven by strong earnings from Amazon and Apple, though the latter’s gains faded on weaker China sales. Amazon jumped nearly 10% after reporting accelerating cloud growth, while optimism over AI infrastructure investment continued to dominate market sentiment. “Confidence in Corporate America and expectations of rate cuts sustaining profit growth outweighed macro headwinds,” said Nationwide’s Mark Hackett, noting that indicators still point to a “strong market through year-end.”

The rally, however, remains highly concentrated, with the “Magnificent Seven” mega caps leading gains and market breadth narrowing. Analysts like Piper Sandler’s Craig Johnson warned that many smaller stocks are being “left empty-handed,” even as the S&P’s leadership holds firm.The index now trades at 23x forward earnings, above the two-decade average, raising questions about sustainability. Still, the fourth quarter is historically the strongest for equities—with an average 3.3% gain since 1950—and inflows remain robust: global equities drew $17.2 billion in the week to October 29, according to Bank of America.

AI remains the dominant driver. UBS’s Mark Haefele and BofA’s Michael Hartnett both said AI leadership is “not budging,” urging investors to increase diversified exposure. Corporate transcripts show accelerating mentions of AI spending, with strategists like Ryan Grabinski (Strategas) arguing that robust capital expenditure is extending the cycle. While value stocks lag, growth continues to outperform. Analysts at Lombard Odier and Janus Henderson noted that, unlike the 2000 tech bubble, today’s valuations are underpinned by solid profitability and rising return on equity.

Corporate highlights reinforced the bullish tone. Amazon posted strong cloud and retail results, Apple tempered enthusiasm with weaker China demand, and Meta and Nvidia continued heavy AI investment. Exxon and Chevron diverged in energy strategy, Cloudflare and Coinbase beat expectations, and Tether reported over $10 billion in profit.

With the S&P 500 up 16% year-to-date, history suggests momentum could carry into the year’s final months. Yet, strategists like Chris Senyek at Wolfe Research caution that a broader market rotation is unlikely until fundamentals for small- and mid-cap stocks improve. For now, AI optimism, strong earnings, and robust fund flows continue to power the historic bull run, making 2025 one of the most resilient years for U.S. equities since the 1950s.

Overview of the US Treasuries Market and Other Fixed Income Markets

U.S. Treasury yields ended October largely unchanged after a volatile month marked by shifting rate expectations, a partial government shutdown, and renewed caution from Federal Reserve officials. Despite intermittent swings, the 10-year Treasury yield finished down 5 basis points to 4.10%, its third consecutive monthly decline, while the 2-year yield edged up marginally to 3.61%, reflecting diverging views on the path of monetary policy.

The month’s volatility stemmed from alternating bouts of optimism and concern. Early October saw yields drift higher after the Fed’s 25-basis-point rate cut, followed by Chair Jerome Powell’s hawkish tone, which dimmed hopes of another cut in December. The ongoing government shutdown exacerbated market uncertainty by delaying key data releases, leaving traders reliant on speeches (“Fedspeak”) for clues about policy direction. Several officials, including Governors Cook, Bowman, and Miran, expressed unease with cutting rates further, citing persistent inflationary pressures and the need for more evidence of a slowdown. Data signals were mixed. The Chicago Business Barometer rose more than expected to 43.8 yet still indicated contraction in regional activity. Meanwhile, the WSJ Dollar Index ticked up 0.1%, and the two-year Treasury yield traded narrowly around 3.61%, underscoring subdued conviction ahead of upcoming Fed commentary.

Market strategists began viewing longer-duration Treasurys as increasingly attractive. RBC BlueBay’s CIO Mark Dowding suggested that yields near 3.75% (2-year) and 4.80% (30-year) could mark “buy zones,” while Barclays recommended going long two-year Treasurys, anticipating a potential 25-basis-point yield decline as the Fed eventually resumes easing. Across the Atlantic, Eurozone government bond yields edged higher following the ECB’s decision to hold rates steady while striking a relatively upbeat tone on growth. Analysts, including Fidelity’s Salman Ahmed, believe the ECB has likely ended its rate-cutting cycle, with the 10-year Bund yield rising to 2.65%. In the U.K., gilt yields climbed to 4.43% as markets scaled back expectations for Bank of England rate cuts, while political tensions surrounding Treasury Chief Rachel Reeves briefly pressured sterling and gilts.

Overall, October closed with longer-term yields easing modestly, while short-end rates held firm, reinforcing a mildly bull-flattening curve. Investors are now awaiting November’s refunding announcement and additional Fed guidance, with consensus forming that U.S. Treasurys are approaching more attractive entry levels after months of repricing.

Figure 2 :Bond Yield Movements in the Past Week

Overview of the Australian Equities Market

Australia’s share market ended October on a subdued note, capping off a difficult week marked by stock-specific shocks and stronger-than-expected inflation data that dampened investor sentiment. The S&P/ASX 200 slipped 3.6 points (-0.04%) on Friday to 8,881.9, while the All Ordinaries edged down 0.01% to 9,178. Despite modest weekly stability, the ASX materially underperformed global peers, posting only a 0.5% monthly gain, compared with double-digit rallies in Japan’s Nikkei and South Korea’s KOSPI and record highs on Wall Street. The September-quarter inflation data reset expectations for near-term rate cuts, hitting interest-rate-sensitive sectors hardest. Consumer discretionary and real estate stocks both fell over 4.5% for the week, while analyst Tony Sycamore (IG Markets) noted persistent headwinds for property and consumer names amid a “more neutral” monetary outlook.

Seven of eleven sectors advanced on Friday, led by energy and communications, with financials and materials providing some stability. Gold miners Northern Star, Evolution and Newmont each jumped more than 3% after a rebound in spot gold, although prices slipped back below US$4000/oz by the close. Iron ore majors BHP, Rio Tinto and Fortescue softened on Friday but still posted weekly gains on stronger iron ore and copper prices. Rare earth and critical minerals producers (Lynas, Iluka, Liontown) also rallied on shifting commodity expectations. Among individual names, Steadfast Group plunged nearly 10% after CEO Robert Kelly stepped aside for an investigation, and Mayne Pharma collapsed almost 30% following Treasurer Jim Chalmers’ move to block a US$672m Cosette takeover, citing economic risks. CSL’s second profit warning in two months dragged the healthcare sector more than 8% lower for the week. Meanwhile, energy stocks rose 1.4% for the week, supported by uranium optimism after U.S. nuclear expansion plans.

At week’s end, the Australian dollar traded at US$0.6541, down from US$0.6592, reflecting broader risk aversion.

Figure 3– World MSCIPE Ratio by country

Overview of the Australian Government Bond Market

Australia’s labour market remains tight and inflation stubbornly elevated, prompting Reserve Bank of Australia (RBA) Governor Michele Bullock to signal a more cautious approach to further monetary easing following three rate cuts earlier this year. Speaking at an economists’ dinner in Sydney, Bullock said the central bank needs “a bit more data” on jobs and prices before making its next policy move, emphasising that monthly figures can be volatile

Her remarks immediately reverberated through markets, with traders trimming bets on a November rate cut, the probability fell from about 60% to below 40%, and the Australian dollar strengthened 0.6% to US$0.6555, its highest level since early October. Bullock reiterated that the RBA board remains “cautious” and data-dependent, describing policy as still “a little bit restrictive” but not yet at a point where further easing is assured. The comments come ahead of critical data releases, including the third-quarter CPI report, which will heavily influence the RBA’s November 3–4 meeting. Economists expect the trimmed mean inflation measure to hold at 2.7%, above the RBA’s August forecast of 2.6%, suggesting disinflation has stalled near the midpoint of the 2–3% target band. Bullock noted that a 30-basis-point upside miss on inflation would be “material” and could delay any additional cuts.

Analysts interpreted Bullock’s tone as less dovish. Commonwealth Bank economist Belinda Allen said the speech confirms the RBA will remain cautious and is unlikely to match the pace of rate reductions seen abroad, predicting the next move only in February 2026. Similarly, Goldman Sachs’ Andrew Boak said policy remains “contingent on the Q3 CPI outcome,” reinforcing the RBA’s emphasis on evidence-driven decision-making.

Bullock also highlighted that the RBA’s new staff forecasts, due next week, will guide the board’s judgment on whether the balance of risks favours further easing to support employment or holding steady to contain inflation. While she acknowledged progress in restoring price stability and preserving labour-market gains, she warned against “counting the chickens too soon.”

Despite higher unemployment at 4.5%, the labour market remains tight, job vacancies are elevated, and home prices continue to rise amid chronic supply shortages. Together with firmer credit growth and resilient household spending, these trends underscore why the RBA sees a narrower window for further cuts, opting instead for patience as it navigates the “last mile” of disinflation.

Looking Ahead: Major Economic Releases for the Week Ending 7th November

For the week ending November 7, 2025, Australian economic data will feature prominently, beginning with the final S&P Global Manufacturing PMI, expected to signal continued contraction in factory activity amid global headwinds. Building approvals are anticipated to recover from prior weakness, potentially boosting confidence in the housing and construction sectors. The RBA cash rate decision is likely to hold steady, underscoring a cautious approach to balancing inflation control with economic support. Final services and composite PMIs are projected to indicate solid expansion, highlighting service-sector resilience. Trade figures, including goods balance, imports, and exports, may show volatility due to shifting international demand, with implications for the current account and overall growth momentum. These releases could reinforce Australia’s moderate recovery trajectory, though external risks like commodity price fluctuations remain.

Shifting to the United States, several major indicators are delayed amid the ongoing government shutdown, now entering its second month since October 1, exacerbating operational strains in areas like air traffic control and federal assistance programs, potentially dampening consumer and business sentiment. On-schedule data include the final S&P Global Manufacturing PMI and ISM Manufacturing PMI, both poised to reflect subdued industrial conditions. The ISM Non-Manufacturing PMI, along with final S&P Global services and composite PMIs, are expected to show steady service-sector growth, offering some offset to manufacturing softness. The data delays may amplify market uncertainty, complicating Federal Reserve policy decisions and risking broader economic slowdown if the shutdown persists.

Major Economic Releases for the Week ending 7 Nov, 2025

Date	Country	Release	Consensus	Prior
Sunday, 02/11	Australia	S&P Global Mfg PMI Final	n/a	49.7
Monday, 03/11	Australia	Building Approvals	5	-6
Monday, 03/11	Australia	Building Approval Total YY	n/a	-1.2
Monday, 03/11	United States	S&P Global Mfg PMI Final	n/a	52.2
Monday, 03/11	United States	ISM Manufacturing PMI	49.5	49.1
Tuesday, 04/11	Australia	RBA Cash Rate	3.6	3.6
Tuesday, 04/11	Australia	S&P Global Svs PMI Final	n/a	53.1
Tuesday, 04/11	Australia	S&P Global Comp PMI Final	n/a	52.6
Wednesday, 05/11	United States	ISM N-Mfg PMI	50.7	50
Wednesday, 05/11	United States	S&P Global Comp PMI Final	n/a	54.8
Wednesday, 05/11	United States	S&P Global Svcs PMI Final	n/a	55.2
Thursday, 06/11	Australia	Balance on Goods	4000	1825
Thursday, 06/11	Australia	Goods/Services Imports	n/a	3.2
Thursday, 06/11	Australia	Goods/Services Exports	n/a	-7.8

Source: Refinitiv

For more detailed weekly updates, YieldReport Weekly