Markets found their footing again Wednesday as earnings strength outweighed political gridlock and trade friction.

The S&P 500 and Dow advanced, led by gains in banks and semiconductors, while small caps continued their record run on rate-cut optimism. Bank of America and Morgan Stanley reported solid results that helped restore faith in corporate balance sheets, reinforcing early signals from JPMorgan, Citi, and Wells Fargo that credit remains intact despite macro uncertainty.

Fed Chair Jerome Powell’s dovish remarks a day earlier continued to anchor sentiment. Futures markets now fully price a quarter-point cut at the October 29 meeting and better than even odds of another by year-end. 

Treasury yields slid further, with the 2-year touching a three-year low and the 10-year again flirting with 4%.

Gold extended its record-setting streak above $4,200 an ounce, while oil prices hovered below $60 amid evidence of slowing demand and shipping bottlenecks in Europe. The dollar weakened for a third straight day.

Momentum remained strongest in the AI-linked corners of the market, semis, data centers, small modular reactors, where TSMC’s record earnings and upgraded revenue guidance reinforced the sense that artificial intelligence is becoming less a trend and more a structural backbone of growth.

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Wall Street’s tone turned from fear to focus. Traders described the midweek mood as “relieved but restless,” with earnings the only unambiguous bright spot in a market still wrestling with policy noise.

TSMC’s blockbuster quarter helped reignite enthusiasm across the chip complex, where Nvidia, AMD, and Broadcom continue to lead turnover. 

At the same time, speculative energy has spilled into derivative themes, quantum computing, AI infrastructure, and uranium, echoing the kind of cross-sector rotation that usually defines early-cycle recoveries.

Gold’s relentless rally, now up more than 60% this year, remains the counterweight to that optimism. Traders say it captures two currents at once: faith in easier policy and fear of deeper dysfunction.

Corporate guidance will dictate the next phase. With banks setting a resilient tone, attention now shifts to Tesla’s report next week, its first since EV tax credits were withdrawn under the Trump spending plan. 

Legacy automakers are warning of steep write-downs and waning demand, while Tesla’s lower-priced models may test whether brand strength can outlast policy headwinds.

Investor cash levels remain low, and every dip still meets a bid. For now, the market’s belief in the Fed’s safety net is intact.

The Federal Reserve’s forthcoming rate cut has become the gravitational center of global markets, drawing in policy responses abroad. 

The European Central Bank and Bank of England have both softened rhetoric, while Japan’s central bank is splintering, hawkish board member Naoki Tamura called for further hikes to bring rates “closer to neutral,” warning that Japan risks overheating if policy stays too loose.

In Switzerland, the government slashed its growth forecast, citing Trump-era tariffs as a “heavy burden” on exports and a potential trigger for recession. A surging franc, up more than 12% this year, has only deepened the challenge.

At the same time, optimism flickered in Seoul, where South Korean officials signaled progress on a long-delayed trade deal with Washington. Treasury Secretary Scott Bessent said an announcement could come within ten days, sending the KOSPI and automaker shares sharply higher.

These diverging signals, tightening in Tokyo, strain in Bern, and détente in Seoul, underscore a global economy trying to find equilibrium under the weight of U.S. tariffs and monetary transition.

The geopolitical map remains in motion. The port of Antwerp, one of Europe’s busiest fuel hubs, is still clearing a backlog of nearly 200 vessels after a harbor-pilot strike paralyzed shipments. Jet fuel and diesel deliveries have been disrupted, adding pressure to already stretched logistics chains.

Oil found solid ground after reports that India may curtail Russian crude purchases following pressure from Washington, an announcement that, if realized, could reroute major flows and lift prices over time. Brent traded near $62, WTI just under $59.

Meanwhile, gold’s ascent continues to mirror the world’s unease: tariffs, shutdowns, and trade bottlenecks have revived its safe-haven allure.

Europe’s markets rose as French Prime Minister Sébastien Lecornu survived the first of two no-confidence votes, easing fears of a snap election. The euro climbed modestly, while bond yields slipped to two-month lows.

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The government shutdown entered its sixteenth day with no visible path to resolution. The Senate prepares for a tenth vote on a stopgap funding bill today after yet another failed attempt Wednesday.

A federal judge’s order halting mass federal layoffs has removed one pressure point but also reduced urgency for compromise. Prediction markets now assign a better-than-even chance that this becomes the longest shutdown in U.S. history.

The political stalemate is beginning to ripple through the real economy, delayed paychecks, idled contractors, and frozen data releases have left investors navigating without the usual macro compass.

Powell’s October rate cut now doubles as insurance against fiscal paralysis.

Fed Speakers: Barkin, Barr, Miran, Waller, Bowman, Kashkari
Philadelphia Fed Manufacturing Index
NAHB Housing Market Index

SCHW
MMC
BK
USB
CSX
TRV

Asia: Nikkei +1.27%, Shanghai +0.10%
Europe: FTSE -0.1%, DAX +0.12%

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Markets wake to a mix of momentum and fragility. The story of the week has shifted from Fed reassurance to earnings validation, and for now, that combination is enough to keep risk appetite alive.

Volatility remains tethered but not tamed, and every data void gives narrative power to policymakers and CEOs alike.

Investors are treating the Fed’s next move as given and the rest of the world as noise. Whether that confidence proves prescient or premature will depend on how long the policy fog lingers, and whether earnings can stay louder than politics.