Last week was a whirlwind across the financial markets, packed with central bank updates, a sharp tech sell-off, solid corporate earnings, and a massive cybersecurity breach in the crypto space. Here is a breakdown of the biggest events moving the markets and what to watch in the week ahead.
Fed Stays Firm on Inflation Amid Tech Sector Sell-Off
The Federal Open Market Committee (FOMC) held its regularly scheduled policy meeting last Wednesday. Federal Reserve Chair Kevin Warsh made it clear that the Fed is determined to bring inflation down from roughly 3% to its long-run 2% target. While the FOMC kept interest rates steady, they signaled that further tightening could be on the horizon.
Meanwhile, Big Tech’s artificial intelligence (AI) capital expenditures (capex)—driven by the “hyperscalers”—came under heavy scrutiny after several firms posted negative free cash flows (FCF), compounded by a few notable earnings misses.
- The Tech Correction: Tech equities sold off sharply. The drop was accelerated by hedge funds (“fast money”) being heavily leveraged and overweight in the sector. 2026 11226 Week Ahead FINAL WL 2.pdf+ 2
- Sector Rotation: Broader market averages proved resilient as investors rotated out of tech and into defensive havens like Healthcare and Consumer Staples. 2026 11226 Week Ahead FINAL WL 2.pdf
Adding to the week’s market jitters, crypto exchange Binance announced a massive $6.3 billion hack, triggering a flight to safety into U.S. Treasuries and pushing yields lower.
AI CapEx Spends Big: Growth vs. Free Cash Flow Concerns
According to Gartner, worldwide AI spending is on track to hit $2.7 trillion in 2026 (a 49.5% year-over-year increase) and is projected to climb between $3.3 trillion and $3.64 trillion in 2027. However, rapid infrastructure buildouts over the past 2.5 years have pushed hyperscalers like Microsoft, Amazon, Alphabet, and Meta into net negative free cash flow positions.
While negative FCF forces companies to balance share buybacks against heavy capex, the consensus view remains that missing out on the AI revolution carries a much higher competitive cost than burning cash. Demand for “compute” remains intensely robust—evidenced by stubbornly high GPU rental prices—and we view the recent tech pullback as a tactical hedge fund correction rather than a fundamental flaw in the long-term AI thesis.
Earnings Season Shines Brighter Than Expected
Despite tech volatility, Q3 2026 earnings are coming in strong:
- The Numbers: With 60% of S&P 500 companies reporting so far, FactSet notes an aggregate earnings growth rate of 30.2%. This marks what could be the third consecutive quarter above 25% growth. 2026 11226 Week Ahead FINAL WL 2.pdf+ 1
- Valuations: The forward 12-month P/E ratio sits at 18.7, which is below both the 5-year average (19.8) and 10-year average (19.1), positioning equities fairly-to-cheaply heading toward year-end. 2026 11226 Week Ahead FINAL WL 2.pdf
- Market Breadth: The equal-weighted S&P 500 ETF (RSP) rose last week as the average stock outperformed cap-weighted indices, signaling that the four-year bull market remains broad and healthy. 2026 11226 Week Ahead FINAL WL 2.pdf
Binance Crypto Breach Spooks Markets
Last Thursday, Binance experienced what is likely the largest crypto heist in history, suffering an unauthorized hot wallet withdrawal of approximately $6.3 billion.
- Asset Freezes: Binance and partners managed to freeze roughly $3 billion in affected stablecoins (like USDT and USDC), though recovering decentralized assets like Bitcoin and Ethereum remains significantly more challenging. 2026 11226 Week Ahead FINAL WL 2.pdf
- Attribution: The FBI has formally attributed the attack—referred to as “TraderTraitor”—to North Korea. Binance has stated that user funds are secure and that it has prepared over $6.34 billion via its Secure Asset Fund for Users and company reserves to cover the loss. 2026 11226 Week Ahead FINAL WL 2.pdf+ 1
Inflation & Commodities to Watch
- Inflation Metrics: Core PCE sits at 3.1% annually, while Truflation gauges real-time inflation at 3.2%. Fixed-income markets are currently pricing in a roughly 73% probability of another rate hike by January. 2026 11226 Week Ahead FINAL WL 2.pdf+ 1
- Energy & Geopolitics: With U.S. crude oil inventories declining and post-midterm election dynamics surrounding Iran in focus, WTI crude oil is eyeing resistance levels near $120–$150. The Energy sector continues to lead year-to-date performance, breaking out of a massive multi-year base. 2026 11226 Week Ahead FINAL WL 2.pdf+ 4
What to Watch This Week
- Elections: Mid-term elections for the House and one-third of the Senate take place tomorrow. 2026 11226 Week Ahead FINAL WL 2.pdf
- Employment Data: The Bureau of Labor Statistics (BLS) releases October employment figures this Friday, with consensus pointing to a nonfarm payroll increase of 65,000 and an unemployment rate holding at 4.2%. 2026 11226 Week Ahead FINAL WL 2.pdf
- Key Earnings: Apple and Palantir report today, followed by AMD, Arista Networks, Amgen, Pfizer, McDonald’s, Qualcomm, Cisco, Applied Materials, and Airbnb later in the week. 2026 11226 Week Ahead FINAL WL 2.pdf
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