Financial Market News | Sunday Outlook

Last week moved the AI question from demand to funding. Meta Platforms' (META) capital spending topped its operating cash flow by $2.12 billion. The Nasdaq fell 2.6% Thursday, and the chip index fell 6.7%.

Bonds took the other side. The 10-year Treasury yield closed at 4.96% Thursday, below 5% for the first time since September. Kalshi's contract on an October Fed hike fell to 6 cents from 12.

Oil did not follow yields lower. Brent traded above $115 Friday afternoon, its highest since May, after attacks on Saudi sites.

This week puts all three tests on the calendar. The Fed decides Wednesday. Microsoft, Alphabet and Amazon show what the richest AI buyers will spend. Thursday morning brings growth and inflation in one release window.

The order matters. The Fed votes a day before September's inflation data is published Thursday at 8:30 a.m.

The six items below split into four dated events and two open questions.

$183 BILLION OF NOTES

The Treasury sells $69 billion of two-year notes Monday, $70 billion of five-year notes Tuesday and $44 billion of seven-year notes Thursday. Bids are due at 1 p.m. Eastern each day.

The sales follow a fast rally. The 10-year yield closed at 4.96% Thursday, down 17 basis points in one session. The two-year ended Thursday at 4.65% and the five-year at 4.78%. Last month's five-year sale cleared at 5.033%.

Recent demand has been mixed. The 20-year bond sold at 5.469%, with more bids but only at a higher yield. A five-year inflation-protected sale drew the weakest demand for that maturity since April 2025.

Investor Signal

Will buyers follow the rally or wait for higher yields? Sales that clear at or below the 1 p.m. market yield would say real demand stands behind it. A large tail, with dealers left holding more, would say the rally rested on fear. The five-year sale lands the day the Fed meeting opens. Two-year yields, mortgage rates and bank stocks are most exposed.

THE FED DECIDES

The Fed releases its statement at 2 p.m. Eastern, and Chair Kevin Warsh speaks at 2:30 p.m. The range stands at 3.75% to 4.00% after a unanimous quarter-point hike in September.

A hold is expected. Of 100 economists in a Reuters survey, 94 expect one. All 100 expect a hike in December. Prediction markets still give better-than-even odds of a hike by December.

The bond market has moved the other way. Traders halved the October hike bet in one session Thursday, with no Fed official speaking.

Investor Signal

Does the Fed lean against last week's rally? A statement that keeps the door open to December would likely lift two-year yields. A dissent in favor of a hike now would revive the October fight. A nod to tighter credit or the AI selloff would support the rally. Two-year notes, the dollar and rate-sensitive stocks are most exposed.

THE BIGGEST BUYERS

Microsoft (MSFT) and Alphabet (GOOGL) report after Wednesday's close, a few hours after the Fed. Amazon (AMZN) reports after Thursday's close. Microsoft guided first-quarter capital spending above $50 billion.

Meta (META) set the bar for how investors judge these reports. Its shares fell about 7% Thursday, and the cost of insuring its debt hit a record.

Verizon (VZ) reports Monday, with its call at 8:30 a.m. It gives the first carrier response to SpaceX (SPCX) and its reported push for 80,000 U.S. cell sites.

Investor Signal

Will these three pay for AI from their own cash? Higher spending plans covered by operating cash flow would ease the funding fear behind Thursday's selloff. Spending that outruns cash, as at Meta, would extend it. Chip-equipment makers, power stocks and CoreWeave (CRWV) are most exposed.

GROWTH AND PRICES TOGETHER

Third-quarter GDP, September personal income and spending, and the PCE price index all arrive at 8:30 a.m. Eastern. Weekly jobless claims come at the same time.

The Atlanta Fed's GDPNow model put third-quarter growth at 3.6% in mid-October. Second-quarter growth was 2.2%. The Cleveland Fed's nowcast puts September PCE inflation near 3.6% from a year earlier, up from 3.4% in August. Its core estimate sits near 3.05%, against 3.0% in August.

Jobless claims fell to 194,000 last week. Pending home sales fell 7.3% in September. The third-quarter employment cost index follows Friday at 8:30 a.m.

Investor Signal

Did last week's bond rally misread the economy? Growth above 3.6% with core PCE above 3.1% would make the 10-year below 5% hard to hold. A miss on growth would support the rally, with the Fed already on record. Two-year notes, homebuilders and the dollar are most exposed.

THE GULF AND BRENT ABOVE $115

Brent climbed after Aramco told staff to leave its Dhahran headquarters, Reuters reported. On Friday, reports said the U.S. and Israel were weighing new strikes on Iran after the Nov. 3 elections. No such operation has been confirmed.

Two dates frame the week. Egypt's parliament put off its vote on military support for Saudi Arabia to Oct. 26. Polymarket's contract on a U.S. announcement ending the Iran blockade by Oct. 31 fell to 8.5 cents Wednesday.

Investor Signal

Can long yields keep falling with Brent above $115? A confirmed supply outage or a U.S. strike order would lift crude and test the bond rally before the Fed. A firm reply from Tehran could pull the front of the oil curve lower. Airlines such as United (UAL), refiners such as Valero (VLO) and inflation-protected Treasuries are most exposed.

WHO FUNDS THE NEXT ROUND

Several AI funding questions have no set date. Meta (META) says it "expects to conduct offerings" of its new non-voting stock, with no size or timing set. OpenAI's round is reported near $1.25 trillion, below the $1.4 trillion once discussed.

CoreWeave's (CRWV) June bonds traded at prices implying about 15% earlier this month. Blue Owl (OWL) reports before Thursday's open and could mark its stake in Oracle's (ORCL) unpowered New Mexico campus.

Investor Signal

Who carries the AI bill if cash flow does not? A Meta offering or a final OpenAI price would set the first public marks. A CoreWeave bond sale at lower yields would be the first sign lenders are easing. Silence keeps the discount in place. AI cloud lessors, private credit managers and Meta's bonds are most exposed.

Last week showed investors selling AI spending they cannot see paid for. This week asks three groups to show their hand.

The Fed speaks first, then the biggest buyers, then the economy. If spending stays funded and inflation cools, last week's bond rally holds. If either slips, the 10-year below 5% will be hard to keep.