Market recap: Week ended October 30, 2026

Stock markets reversed course late in the week

Renewed enthusiasm for AI-related shares lifted the major North American indexes higher on Monday. In the U.S., the Nasdaq led with a 0.82% gain, while the S&P 500 rose 0.70% and the Dow advanced 0.30%. Canada’s TSX gained 0.44%, supported by strength in financial and base-metal shares.

Positive momentum continued Tuesday, with tech stocks leading the U.S. market higher once again. The Nasdaq climbed 1.18%, while the S&P 500 gained 0.60% and the Dow edged up 0.03%. In Canada, the TSX rose 0.6%, supported by a 3.3% advance in materials shares, as gold prices moved higher.

On Wednesday, investors turned their attention to interest-rate decisions by the Bank of Canada and the U.S. Federal Reserve (the Fed). The major indexes finished modestly higher, with the TSX rising 0.3%, supported by strength in energy and technology shares. In the U.S., the S&P 500 gained 0.28%, the Nasdaq added 0.27% and the Dow advanced 0.19%.

The three-day advance ended Thursday as investors reassessed the scale and potential returns of AI spending by major tech companies. Alphabet shares fell about 13%, marking their steepest one-day decline since the company went public in 2004 and weighing heavily on the tech-focused Nasdaq, which fell 1.37%. The S&P 500 declined 0.30% and the Dow slipped 0.25%. In Canada, the TSX edged down 0.04%, as declines in materials and technology shares offset strength elsewhere.

Selling intensified Friday following disappointing results and outlooks from Amazon and Intel, adding to concerns about technology valuations and AI-related spending. The Nasdaq fell 2.86%, while the S&P 500 declined 1.82% and the Dow lost 1.09%. The weakness extended to Canada, where the TSX dropped 1.74%, leaving all four major indexes lower for the week.

The Bank of Canada raised interest rates

Canada’s central bank raised its benchmark interest rate by 25 basis points to 2.5% on Wednesday, its first increase since July 2023. The central bank pointed to two key developments: increased inflation pressures driven by higher global oil prices, which raised costs for consumers and businesses; and modestly stronger economic growth despite continued U.S. trade attacks. “With the outlook for inflation substantially higher and the economy showing resilience, an increase in the policy rate is needed to reduce the risk that elevated energy prices could spill over and become generalized inflation,” Governor Tiff Macklem said.

The Bank now expects inflation to remain above 3% through 2027 before returning closer to its 2% target by mid-2028, reflecting higher and more persistent energy prices as well as rising prices for non-energy imports.

Its latest economic projections also showed stronger growth through the middle of 2026. GDP grew at an annualized rate of 3.3% in the second quarter, while recent indicators pointed to about 2% growth in the third quarter. Growth is expected to slow to 0.8% in the fourth quarter as new U.S. tariffs and trade uncertainty weigh on the Canadian economy.

The Fed held rates steady

The Fed kept its benchmark interest rate unchanged at a range of 3.75% to 4.00% on Wednesday after raising rates in September for the first time since July 2023. The decision passed by a 10-2 vote, with two policy-makers favouring another quarter-point increase. The Fed said economic activity was expanding at a “strong pace,” supported by resilient domestic spending, strong productivity growth and robust capital investment.

Fed Chair Kevin Warsh said employment conditions remained positive, but acknowledged that the central bank had yet to achieve price stability. “Inflation is too high” for American households, he said, adding that the Fed would work to “deliver price stability.” New inflation data released Thursday reinforced those concerns. The personal consumption expenditures (PCE) price index rose 3.6% annually in September, up from 3.4% in August. Core PCE, which excludes food and energy, increased to 3.1% from 3.0%.

Big Tech earnings took focus

Big Tech earnings moved into the spotlight later in the week, with results from Alphabet, Microsoft and Amazon offering mixed signals as investors weighed strong cloud growth against the cost of continued AI investment. Alphabet Inc. reported third-quarter revenue of US$127.6 billion, slightly below expectations. The company’s free cash flow came in at negative US$9.07 billion after it continued to invest heavily in AI infrastructure. At the same time, Microsoft reported stronger cloud growth. Revenue from Azure, its cloud computing platform, was up 48%, while its quarterly free cash flow reached US$18.6 billion, about US$10 billion more than analysts expected. The company forecasts Azure growth of 49% to 50% in the next quarter.

Amazon added to the mixed picture on Thursday. Revenue from Amazon Web Services (AWS), its cloud computing business, rose 39% to US$46 billion in the third quarter, slightly ahead of expectations and up from 37% growth in the previous quarter. However, Amazon also reported negative free cash flow and maintained plans for substantial capital spending as it continues to invest in AI infrastructure. Its fourth-quarter revenue forecast of US$240 billion to US$247 billion also raised concerns about retail demand heading into the important holiday shopping season.