October 19, 2026

“Prefer bargains among fundamentally sound companies rather than the cheapest junk.”

Sir John Templeton

US equities finished the week split down the middle. The Dow managed a modest gain, helped by solid bank earnings, while the Nasdaq posted its worst weekly drop in months as AI and semiconductor names sold hard. Hotter-than-expected inflation prints and a sharp rebound in oil kept yields elevated early in the week before they eased into Friday. The S&P 500 lost nearly 2% and snapped a long streak without a 1% down day.

Here are the numbers.

The S&P 500 finished down 1.95% at 7,659.44. The Dow Jones Industrial Average gained 0.67% to 52,002.41. The Nasdaq lost 4.48% to 26,140.03. The Russell 2000 fell about 3% to 2,721.37. Internationally, the FTSE 100 closed Friday near 10,882 and the DAX near 25,623. The 2-year Treasury finished at 4.74% and the 10-year near 5.10%, after tagging higher levels midweek.

So, what happened?

Monday opened with the market still near its recent highs — the S&P closed the prior Friday at 7,811.54 but tech was already soft. Bond markets were closed for the Columbus Day holiday. Tuesday brought the start of bank earnings: JPMorgan, Goldman Sachs, Wells Fargo and others generally beat, supporting the Dow while the Nasdaq slipped. Wednesday delivered the inflation shock. September CPI rose 0.65%month-over-month (3.72% year-over-year) versus expectations around 0.6%, with gasoline up 9.1%. Core CPI rose 0.33% to 2.57% year-over-year. The 10-year yield jumped toward 5.3% and stocks sold, though they recovered some of the loss by the close. Thursday was the PPI and retail sales day: headline PPI jumped 1.34% (6.35% year-over-year), the second-largest monthly gain on record in some series, while retail sales rose a solid 0.77%. Chip and AI names continued lower. Friday the Nasdaq dropped another 2.1% as CoreWeave, Micron, Intel and other AI-linked names extended losses on credit and growth concerns. The S&P fell 1.1% to 7,659.44 — its worst week since June. The Dow held up better, finishing at 52,002.41, up about 347 points on the week. Year-to-date the S&P 500 is up 11.9%, the Dow 8.2%, and the Nasdaq 12.5%.

Overseas,

Foreign markets were firmer into the Friday close even as U.S. tech sold off. Europe had a strong session: Germany’s DAX rose about 1% to roughly 25,623, France’s CAC gained about 0.3% to near 7,957, and the FTSE 100 added about 0.4% to around 10,882. The STOXX Europe 600 put in its best week since June. In Asia, Japan’s Nikkei rebounded 1.4% Friday to 65,324 after earlier weakness, and South Korea’s KOSPI jumped 2.1% as chipmakers bounced. Hong Kong’s Hang Seng rose 0.5% to about 24,187. The multi-year case for foreign equities is unchanged, though we have been selectively take some profits, this week Europe and parts of Asia simply stopped paying the same AI-valuation bill the Nasdaq paid.

What’s the FED up doing now?

No meeting this week. The funds rate remains 3.75%–4.00% after the September hike. Chairman Warsh spoke at the IMF meetings in Bangkok and described AI as the “most consequential change” to the global economy in his lifetime, without issuing fresh rate-hike warnings. Markets still lean toward a pause at the October 27–28 meeting, though the hot CPI and PPI prints keep the possibility of another move this year alive. December 8–9 is the next window after that. A 5.1% 10-year is already doing someof the tightening; the question is whether the Committee still feels it needs to do more itself.

In Economic news,

Inflation was the story. September CPI came in hotter than expected on both headline and core, driven by diesel and gasoline and a firm shelter reading. PPI was even stronger on the monthly print, with energy the main culprit. Retail sales held up, rising 0.77% and showing the consumer is still spending even with 7.4% mortgages and $100 oil. Existing-home sales for September rose to a 3.99 million annual rate, ending athree-month slide, though still down year-over-year; the median price was $417,500. Jobless claims remained low near 199,000. The mix is familiar: activity is not breaking, inflation is not back to 2%, and energy is still the swing factor.

In the housing market and mortgage rates news.

Mortgage rates paused after a long climb. Freddie Mac’s survey for the week ending October 15 showed the average 30-year fixed rate unchanged at 7.40%. The 15-year fixed eased slightly to 6.71% from 6.73%. A year ago the 30-year was 6.27%. The pause ends seven straight weekly increases, but 7.40% is still a heavy affordability weight. Existing home sales managed a small bounce to 3.99 million, and inventory continues to build slowly. Demand still responds when rates ease; they simply stopped rising for one week.

So, in summary,

As we are near the mid-terms both sides see blood in the water. Meaning the Democrats are counting on historical trends and the media is doing its best to push that narrative, The Republicans have the President barnstorming the country and judging by the amount of political solicitations I get, it seems he is have a very positive effect. That plus any media outlet, which wants to maintain some degree of credibility, are starting to sound the alarm for the Dems, and toning down the “blue wave” talk. As to the markets, which will be seriously affected by this election, we are mildly bullish on U.S. equities. We have added some “trend” plays where appropriate specifically in quantum computing, and liquefied natural gas, along with starting to look at 10 year treasury yields, (a bit longer in term than we have used before to lock in the plus 5 interest rates). But this week reminded everyone that AI valuations and energy-driven inflation can still produce sharp rotations. Bank earnings supported the Dow. Tech and semiconductors took the hit the Nasdaq’s worst week in months on worries about the durability and financing of the AI buildout. Oil jumped back above $100 (WTI settled at $101.41). The 10-year is still near 5.1%. Core CPI is 2.57% and headline is 3.72%. Though we are optimistic, we are not going to pretend a 4.5% weekly drop in the Nasdaq is noise. What we need to see is cooler inflation numbers which will that let the second hike fade, a sustained pullback in oil that sticks, and evidence that AI infrastructure spending is translating into durable earnings rather than just capital raises and debt. Capitalism vs Socialism? What side do you guess we are rooting for? Make sure you vote; your portfolio depends on it.

Mike