Wall Street Cautious: Fed Rate Cut Doubts, Data Deluge, and Nvidia Earnings Loom

Article Summary

• Caution prevails on Wall Street due to doubts about Fed rate cuts.
• Key economic data releases will paint a clearer picture of the US economy.
• Nvidia's earnings report will be crucial for the AI sector.
• Impact of labor market and inflation data on Fed policy decisions.
• Gold price predictions amidst market volatility.

As the relief from the end of the historic US government shutdown fades, coupled with a deluge of economic data about to hit the market and lingering concerns about the Federal Reserve's ability to cut interest rates smoothly in December, a cautious mood has taken hold on Wall Street this week.

Amid a global sell-off triggered by hawkish signals from the Fed, US stocks also fell sharply during trading, with volatility in AI stocks and other popular sectors favored by momentum traders. After briefly recovering from a 1.4% dip, the S&P 500 closed Friday virtually unchanged. Nvidia's stock rose ahead of its earnings release.

Risk aversion this week deepened the Bitcoin sell-off. Bitcoin has fallen from its all-time highs set in early October, and has only recorded a slight gain since 2025 so far. The largest digital asset fell below the $95,000 level. CoinGecko data shows that the crypto market continues to be under pressure after a $19 billion liquidation on October 10, which led to the evaporation of more than $1 trillion in total cryptocurrency market value.

The 10-year US Treasury yield rose three basis points to 4.15%. Despite the stability of US Treasury yields, the dollar failed to capitalize on this. The Dollar Index fell 0.28% this week, closing above the 99 level after defending its Thursday low of 98.991. Due to the lack of key data indicators, the market has been stuck in a narrow trading range, leaving the Dollar Index in a defensive position as next week approaches.

Spot gold plunged more than 3% during trading on Friday, eventually closing down more than 2%. The market believes that the possibility of a Fed rate cut in December has decreased, which is hurting the momentum of the gold and silver markets. However, gold still rose more than 2% this week.

"When it comes to margin call notices and liquidation, traders close all positions to free up margin... This partly explains why even in this safe-haven environment, gold is falling," said Fawad Razaqzada, market analyst at City Index and FOREX.com.

Next Week's Key Events:

Central Bank Dynamics:

• Officials from the Federal Reserve, European Central Bank, and other central banks will speak.
• The FOMC meeting minutes will be released.

Economic Data:

• CPI data from Canada, the UK, and the Eurozone.
• PMI data from France, Germany, Eurozone, UK, and the US.
• Initial jobless claims and existing home sales from the US.
• Michigan Consumer Sentiment Index.

Corporate Earnings:

• Nvidia, Xiaomi, Baidu, Pinduoduo, and Kuaishou will report earnings.
• Walmart and Target will report earnings, providing insight into consumer spending.

Traders are bracing for a deluge of economic data that will shape the Fed's monetary policy outlook. Notably, due to the fallout from the US government shutdown, scheduled data next week may not be released on time.

According to official data, some severely delayed data is expected to be released next week, including the September Employment Situation Report, which was originally scheduled to be released on October 3. September's inflation-adjusted real earnings data will also be released next week.

This new data will help gradually reveal the state of the US economy, and although it will be more "lagged" than usual, it will somewhat alleviate the "blind flying" state experienced by policymakers, business leaders, and investors.

Economists and investors are closely watching the timing and form of the release of October data. The director of the National Economic Council stated on Thursday that the October jobs report will not include unemployment rate data, and the White House has indicated that there will be no October CPI report. The US Census Bureau and the Bureau of Economic Analysis have not released updated release dates for key statistics such as retail sales and inflation-adjusted consumer spending. The Bureau of Economic Analysis stated on Friday that it is consulting with parties "to determine data availability" in order to schedule its release.

Stephen Innes, managing partner at SPI Asset Management, said that after the US government reopens, a batch of accumulated important data will be released, including employment and inflation indicators, and the market expects this data to be weaker. Weaker US data may push down US Treasury yields, rekindle expectations of a rate cut in early 2026, and provide room for gold to rebound after being squeezed by rising real yields.

He pointed out that the recent correction in gold prices looks more like position adjustments rather than a change in trend. The outlook for gold remains tilted towards the positive, and investors will closely monitor US real yields, dollar weakness, and upcoming data. If the data points to a cooling US economy, gold is expected to rebound next week.

Technical analysis shows that gold prices fell to a four-day low of $4,032 on Friday, and then buying triggered a sharp intraday reversal. The decline briefly fell below the 20-day moving average ($4,065) and the 10-day moving average ($4,059), but the rebound from the upward trend line (which defines short-term dynamic support) quickly recovered these two levels.

Fxempire's analysis mentions that the upward trend line connecting the recent series of higher lows remains strong, proving the resilience of the bullish trend. This classic behavior of "retesting previous resistance as support" enhances the possibility of the trend continuing. Thursday's high of $4,245 now constitutes a lower swing high.

Analysts say that as long as the upward trend line and the recovered 20/10-day moving averages are maintained, gold prices will remain in a bullish position, aiming to reach the range between $4,275 and $4,381. If the weekly closing price falls below the area between $3,997 and $4,032, it will trigger effective confirmation of the "shooting star" pattern, break the upward trend line, and open the way to reach the area between $3,929 and $3,886. Before this signal appears, a pullback in gold prices to the dynamic support level can still be regarded as a buying opportunity within the intact channel structure.

Corporate Earnings:

Despite the uncertainty about the path of Fed policy, earnings for most major tech companies have been in line with or exceeded expectations. With Nvidia preparing to release its earnings next Wednesday, options traders are pricing its stock to move 6.2% in either direction - the largest implied move in a year.

"Nvidia's earnings will be a big test for the market and AI trading," said Kyle Rodda of Capital.com. "It could alleviate concerns about AI valuations or significantly exacerbate them."

Analysts at Jefferies and Wedbush said in recent reports that they expect the AI giant to once again deliver "better-than-expected performance and increased guidance," meaning the reported financial metrics will be better than analysts' forecasts and will simultaneously increase future expectations.

Also next week, major retailers such as Walmart Inc. and Target Corp. will announce their results, providing clues about the state of the main engine of the US economy - consumer spending.

After briefly falling below the 50-day moving average, the S&P 500 remains firm above this average. A measure of the performance of mega-cap stocks stopped a three-day losing streak.

"The stock market is supposed to rebound here, but recent bottom buyers have suffered heavy losses, so restoring confidence and market recovery may be a slow process," said Bob Lang, founder of Explosive Options.

According to Ken Mahoney of Mahoney Asset Management, the market also saw some fairly obvious sector rotation this week, with funds mainly flowing into the healthcare and consumer staples sectors - which seem to have bottomed out.

"If you are in AI trading or related stocks, this is probably not what you want to see," he said. "It is a unique situation, and it seems that some stocks are stuck in a mini-bear market" although the S&P 500 is not far from its all-time high.

"The recent market performance cannot be described as a disaster for technology stocks, but it may be regarded as a small liquidation of technology stocks," said Daniel Skelly, head of market research and strategy at Morgan Stanley Wealth Management. He pointed out that recent volatility has not changed the long-term bullish argument for leaders in the field of artificial intelligence. However, the healthcare sector remains a key area overlooked in the market.

Craig Johnson of Piper Sandler believes that the deteriorating breadth of the US stock market is still a continuous concern, indicating that the market is taking a more tactical defensive stance and implementing sector rotation. Nevertheless, the S&P 500 managed to stay above the 50-day moving average. Johnson pointed out that losing this line may trigger a deeper correction.

"The general trend has been to buy on dips, which may provide a respite for the market," said Melissa Brown of SimCorp. "Retail investors may be temporarily scared, but if they believe that the long-term logic driving those stocks that have been hit hard is still sound, they are likely to return to the market."

However, Brown also pointed out that the real rebound may have to wait until government data begins to resume publishing and investors have a clearer understanding of the economy and inflation conditions. "But recovery can only truly be achieved if the economy continues to grow and inflation no longer rises," she added.

Mark Hackett of National Mutual Insurance Company believes that with the return of labor market and inflation reports, fundamental factors should help distinguish between real trends and emotion-driven sell-offs, making the recent correction feel more like a reset rather than a market turning point.

Disclaimer: The market is risky, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, views or conclusions in this article are consistent with their specific situation. Investment on this basis is the sole responsibility of the investor.