Executive Summary
Equity prices cooled last week as skepticism surrounding returns on artificial intelligence (AI) capital expenditures intersected with a sharp surge in crude oil prices. The tech-heavy Nasdaq experienced the steepest pullback under pressure from AI valuation concerns, while the Energy sector led the market as crude rallied amid record-high shipping disruptions in the Strait of Hormuz.
Investor focus now turns to key macroeconomic catalysts, including Wednesday’s Federal Open Market Committee (FOMC) interest rate decision and Thursday’s Personal Consumption Expenditures (PCE) price index report—the Federal Reserve’s primary inflation gauge.
Key Market Takeaways
Favorable Seasonality & Short-Term Buy Signals
- Strong November Dynamics: As we enter the final week of October, seasonal tailwinds turn positive. Historically, November has been the strongest month for equities over the past five years, with the S&P 500 delivering an average gain of 3.9% alongside falling long-term interest rates.
- Oversold Rebound Potential: Both the S&P 500 and Nasdaq 100 are sitting near or within short-term oversold territory based on 14-day stochastic indicators.
- Internal Strength: The Cboe Volatility Index (VIX) has spiked into the traditional “buy zone” around 20, market breadth continues to improve despite the pullback, and internal volume models have triggered a buy signal.
- Year-End Target: Sanctuary Wealth maintains its S&P 500 year-end price target of 8,225 (~7% potential upside from current levels).
Market Commentary: “It may feel spooky, but there are clear buy signals emerging as seasonals turn positive. We continue to expect stocks to rally into year-end, though investors may wait for clarity past mid-term elections before buying with greater confidence.”
Energy Leadership & Geopolitical Fuel Risks
- Strait of Hormuz Escalation: Ongoing conflicts led to 27 commercial ship attacks in October—the highest single-month total since hostilities began. WTI crude oil futures rose over $100/bbl, driving Energy to a sector-leading >50% YTD gain.
- Inflationary Impact: Fuel costs accounted for more than 50% of September’s monthly CPI rise and nearly 80% of PPI increases, with AAA national average diesel prices remaining elevated at $6.309 per gallon.
- Executive Action: On October 22, President Trump invoked Section 303 of the Defense Production Act to expand domestic petroleum production and refining capacity, directing up to $150 million in Department of Energy funds toward U.S. refinery infrastructure.
Big Tech Capex, Space Economy & Exchange Operations
- AI Revenue Questions: Meta reported solid revenue and earnings but reaffirmed heavy AI capital expenditures, driving free cash flow negative for the first time since Q4 2021. IT research firm Gartner warned that near-term AI revenues fall short of capital required for data center build-outs.
- SpaceX Earnings Surprise: SpaceX reported exceptional Q3 2026 earnings per share, exceeding consensus estimates by 158%. The company is exploring a potential merger with Tesla, which would create a deeply integrated tech enterprise.
- Extended & 23-Hour Trading: Cboe extended trading hours for 29 high-volume stocks and ETFs. Meanwhile, NYSE Arca and Nasdaq are targeting December 6, 2026, for launching 23-hour daily weekday stock trading, pending final regulatory approval.
Fixed Income & Central Bank Watch
- 10-Year Treasury Yields: Yields pulled back to 4.9779%, finding technical support in the 4.7%–4.8% range ahead of central bank meetings.
- FOMC & Inflation Data: The Federal Reserve is widely expected to hold interest rates steady on Wednesday. Attention will center on Fed Chair Kevin Warsh’s press conference ahead of Thursday’s PCE inflation release (consensus expects 3.6% YoY headline and 3.1% YoY core PCE).
- Global Monetary Policy: The European Central Bank (ECB) reports its interest rate decision on Thursday, followed by the Bank of Japan (BOJ) policy meeting conclusion on Friday.
Disclosures & Disclaimer
Sanctuary makes no representation as to the accuracy or completeness of information contained herein. Any forward-looking statements are based on assumptions, may not materialize, and are subject to change without notice. The information is based upon data available to the public and is not an offer to sell or solicitation of offers to buy any securities mentioned herein. Any investment discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Investments are subject to risk, including but not limited to market and interest rate fluctuations. Any performance data represents past performance which is no guarantee of future results. Prices/yields/figures mentioned herein are as of the date noted unless indicated otherwise. All figures subject to market fluctuation and change. Additional information available upon request.
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