2 Events This Week Could Decide a Record for the S&P 500

Without its AI shares, the S&P 500 has crushed the full index by 6.4 proportion factors this October. Chipmakers slid on AI spending and financing worries, placing that lead on tempo for a report month.
That swing got here one month after ex-AI shares trailed by 5.1 factors. AI-linked corporations make up about 45% of the S&P 500, a weight that turned a drag this month.

3 Weeks of Selling Built the Widest Gap on Record

Most of that lead constructed up over the previous three weeks, when ex-AI shares outperformed by 7.4 factors. Bloomberg information shared by The Kobeissi Letter reveals no wider three-week unfold on report.

October’s margin additionally sits nicely above the earlier month-to-month report of three.6 factors, set in July. Leadership has modified palms typically, with ex-AI shares successful 4 months of 2026 and the full index 6.

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Worries over AI spending and rising financing prices started dragging AI shares down this month. A sizzling inflation report on October 14 added to the pressure by reviving bets on one other Fed price hike. Higher charges would make debt-funded AI spending dearer.

Chipmakers took the heaviest losses, with the Philadelphia Semiconductor Index falling for eight straight classes. That marked its longest dropping streak since 2008.

Money leaving chips moved into power and shopper staples, which every gained double digits in October via October 22, CNBC data reveals. That rotation briefly erased the hole AI stocks had built over 2026.

2 Tests Now Stand Before October Closes

The report nonetheless has three classes to outlive, and two occasions this week may resolve it. 

The first is the Federal Reserve’s price resolution right now. Markets have already priced in a pause, with CME FedWatch displaying about a 90% chance of a hold.

That shifts consideration to what the Fed signals about December, when futures merchants see roughly a 75% probability of one other hike. 

The second is Microsoft and Alphabet earnings this week. Meta shares fell greater than 9% final week after the firm reported its first detrimental free money circulate. Evercore analyst Mark(*2*) flagged that this week’s hyperscaler stories may elevate capital spending by as much as $100 billion.

The AI commerce has already began recovering forward of each occasions. The semiconductor index gained about 7% over three classes via October 27. 

July’s report lead became a 5.1-point deficit inside two months. Whether October’s lead holds is determined by whether or not this week eases doubts about AI spending or deepens them. 

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