Stocks Rally to Records, Again

(On Plethora of Favorable Developments: Oct. 29, 2025)

By: Jose Torres, Senior Economist

Stocks achieved records for the fourth consecutive session this morning as AI enthusiasm, robust corporate earnings, trade deal optimism and dovish monetary policy expectations encouraged risk-taking on Wall Street. Nvidia’s market cap rose above $5 trillion after CEO Jensen Huang highlighted a series of new partnerships and delivered a glowing outlook for the firm’s semiconductor revenues. Investors will look for similar confidence from the majority of the Magnificent 7 members, with 3 of them reporting subsequent to the bell while an additional 2 post results following tomorrow’s close. Meanwhile, presidents Trump and Xi are scheduled to talk in South Korea later, which occurs on the heels of a final agreement connecting Washington and Seoul and a truce extension with Mexico. Regarding today’s meeting, anecdotal evidence signals concessions are possible from both the US and China. Indeed, technology access, tariff relief, soybean purchases, export controls, rare earth supplies, fentanyl crackdowns, shipping fees, Russian crude transactions and TikTok are anticipated to be featured in the high-profile negotiation. It’s also a Fed Day and fixed-income watchers are especially focused on the central bank’s projections for future reductions, since a cut this afternoon is essentially in the bag in light of decelerating labor conditions and a government shutdown that is raising the chances of a slowdown. Another critical development would be the halt of quantitative tightening, which would alleviate Treasury demand concerns and open the door to potential balance sheet growth in coming quarters. All major domestic equity benchmarks are climbing, but volatility protection instruments are catching bids too, in case something goes wrong on the quarterly call, cross-border commerce or FOMC fronts. Yields and the greenback are nearly flat as participants await the Fed statement and the Powell Presser before choosing a direction. Commodities are bullishly tilted, although lumber is suffering due to a much weaker-than-expected pending home sales publication. Bitcoin appears to be losing its mojo; however, forecast contracts posted the second day in a row of YTD highs in volumes; at 3.36 million, as prediction market enthusiasts gravitated to rate decision questions and election outcomes.

Credit Conditions Support Halting Quantitative Tightening

The argument to suspend quantitative tightening is quite strong, with multiple signals pointing to declining liquidity that is beginning to hurt financial institutions. Following the pandemic, banks held too much cash and not enough collateral existed for those funds, so they used the Fed’s reverse repo facility to achieve short-term yields. Now we’re seeing the opposite, with the use of the traditional repo program climbing alongside the effective overnight interest rate moving closer to the top of its allowed range, having drifted from 4.08% to 4.12% in just a few weeks. Furthermore, private credit issues are arising sporadically and the latest Treasury auction for 7-year notes saw soft demand, raising the chances of stability risks worsening from a lack of reserves in the system. As far as the central bank’s benchmark is concerned, however, I envision a justification for another drop in December, but with the Consumer Price Index at 3% and growth performing well in 2025, Chair Powell may quell the enthusiasm of fixed-income watchers that are expecting two or three more quarter-point reductions in 2026.

International Roundup

Australia Inflation Climbs Above Central Bank Target

Australia’s third-quarter inflation rate rose from 2.1% year over year (y/y) in the preceding three-month period to 3.2%, according to the Consumer Price Index (CPI). A consensus of economists predicted that the print would match the 3% upper limit of the Reserve Bank of Australia’s inflation target. On a quarter-over-quarter (q/q) basis, the CPI hit 1.3%, which exceeded the economist forecast of 1.1% and the preceding 0.7% print. The recent q/q and y/y results were the hottest since the quarters ended in March 2023 and June 2024.

Relative to the second quarter of this year, housing costs grew 2.5% and a 9% spike in electricity. Higher demand for flights to Europe, furthermore, drove airfares up while increased domestic travel charges caused the recreation and culture category to become 1.9% more costly. Third-quarter gasoline prices also increased, causing the transportation category to become 1.2% more expensive.

Australia’s trimmed mean CPI, which removes items with the largest price changes during the measurement period, was up 3% y/y and 1% q/q, surpassing estimates of 2.7% and 0.6%.

Bank of Canada Cuts Key Rate

Citing damage to its economy resulting from US trade tariffs, the Bank of Canada trimmed its key interest rate by 25 basis points to 2.25%, a target last established in July 2022. In announcing the change, the organization also said it lowered its economic growth estimate for the second half of this year to 0.75%. Governor Tiff Macklem said the forecast is highly uncertain due to unresolved questions regarding US tariffs. He also said future cuts are unlikely and that the current interest rate is roughly at the correct level for keeping inflation at 2% while helping the economy transition in response to the new international trade environment.

Japan Consumer Sentiment Strengthens

The Japan Consumer Confidence Index climbed from 35.3 in September to 35.8 this month and surpassed the consensus estimate of 35.5.

Within the overall survey, consumers’ views of their overall livelihoods increased 1.1 points to 34.3 and perception of income growth climbed 0.6 points to 40. Survey respondents’ opinions of employment and willingness to buy durable goods also strengthened from 39.9 to 40.1 and from 28.8 to 29.9.  Additionally, the percentage of individuals expecting prices to climb was 92.6%, down by 0.8% points in September.

Singapore Wholesale Price Increases Accelerate

Singapore’s Producer Price Index recorded a 3.7% y/y hike in September, the highest rate since March and up considerably from 1.1% in August. The gauge, which tracks prices that businesses charge one another for services and goods, was pushed higher by the miscellaneous manufactured goods category, which was 13.8% higher amidst a 10.1% bump for machinery and transport equipment. The crude materials group and the animals, vegetable oils and fats classification also became more expensive with increases of 2.9% and 4.3%. Conversely, chemicals declined 5.7% while the mineral fuels, lubricants, and related materials group slipped 4.9%. Businesses also charged 0.4% less for manufactured goods. 

Originally posted on October 29, 2025 on Traders’ Insight blog

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