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This Week on Wall Street
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| The week's scheduled test is earnings from the largest technology companies, where the question has moved from how much they are spending on artificial intelligence to how they are paying for it. Alphabet reports Wednesday and Amazon Thursday, with Microsoft also due midweek. The money has started to come from outside operating cash flow. Meta is planning a large stock sale to fund its buildout, SpaceX closed debt financing earmarked for chip purchases, and Anthropic filed a prospectus for a Nasdaq listing. Smaller operators that rent computing capacity to others fell this morning after Elon Musk said more than 200 of them faced failure, which is a reminder that the capital is not reaching every layer of the stack on the same terms. Energy is the other live thread. Brent crude settled Friday at its highest level since April after reported attacks on Saudi production and export facilities, and roughly a fifth of seaborne oil and gas moves through the Strait of Hormuz. Prices eased this morning, which says the premium is priced against what a wider disruption would cost rather than against what has been lost so far. |
| The Fed announces Wednesday, and the decision itself is close to settled. Futures treat another hold as the heavy favorite, which would leave the target range where September's increase put it. The harder question is the split underneath. Hiring has stalled, with the September payroll gain among the weakest of this cycle, while inflation has stayed well above target and the move in crude has not helped. Those two facts pull policy in opposite directions, and the committee chose the inflation side in September. So Wednesday is really about whether Chair Kevin Warsh points to December as the natural follow-through, which is where most of the pricing already sits, or leaves the path open. September's PCE report lands Thursday, a day after the decision, so the committee acts first and the figure arrives into whatever has already been said. Consensus looks for core prices to rise about 0.3% in the month. |
| Underneath the policy calendar, the credit market has spent the autumn sorting borrowers rather than repricing all of them together. Spreads on the lowest-rated corporate bonds, the CCC tier and below, have widened sharply since late summer and now sit above their 2025 peak. The broad high-yield index has moved much less and remains below its March high, and the BB tier has barely moved at all. That gap is what matters. A broad deterioration in corporate health would show up as a uniform repricing across the asset class. What is happening instead looks like investors separating issuers by their ability to refinance, as bonds sold in the low-rate years come due into a much higher cost of capital. Part of the widening also traces to a small number of distressed names rather than to the cohort as a whole. The question from here is whether the move stays confined to the bottom tier, since credit tends to register a change in financing conditions before equity markets do. |
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The Lowest Rung of High Yield
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| The CCC and lower tier closed at 13.56% over Treasuries on October 23, past the 11.37% reached at the April 2025 peak. The broad high-yield index ended the same day at 3.38%, still short of the 3.46% it touched in March. |
| Source: ICE BofA indices, via the Federal Reserve Bank of St. Louis |
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Economic Releases This Week
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| Monday | None |
| Tuesday | Consumer Confidence, New Home Sales,
Case-Shiller Home Price Index |
| Wednesday | FOMC Rate Decision |
| Thursday | GDP (Q3 Advance), PCE Price Index,
Personal Income, Consumer Spending,
Initial Jobless Claims |
| Friday | None |
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Stories to Start the Week
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What is Newton?
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Our Newton model determines the highest probability of future price direction using advanced algorithmic and high-order mathematical techniques on the current market environment. It scores securities over multiple time periods on a 0–20 scale (0 worst, 20 best). Trend and level both matter. A name moving from 18 to 16 still signals a strong level, with slight exhaustion in the trend.
▼ 0–8 declining
▬ 9–13 neutral
▲ 14–20 strong
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| Equities |
Trend |
This Wk |
Last Wk |
| Foreign Developed | ▲ | 16 | 13 |
| Mid Cap | ▬ | 13 | 10 |
| Large Cap | ▬ | 11 | 10 |
| Small Cap | ▬ | 9 | 5 |
| Emerging Markets | ▼ | 5 | 3 |
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| Fixed Income |
Trend |
This Wk |
Last Wk |
| Floating Rate Bond | ▬ | 11 | 12 |
| Long-Term Bond | ▼ | 8 | 10 |
| Corporate Bond | ▼ | 7 | 10 |
| Short Term Bond | ▼ | 7 | 8 |
| High Yield Bond | ▼ | 6 | 9 |
| Intermediate Term Bond | ▼ | 5 | 10 |
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| Sectors |
Trend |
This Wk |
Last Wk |
| Health Care | ▲ | 18 | 18 |
| Financials | ▲ | 14 | 17 |
| Consumer Defensive | ▬ | 12 | 15 |
| Consumer Cyclical | ▬ | 12 | 12 |
| Energy | ▬ | 11 | 14 |
| Technology | ▬ | 10 | 9 |
| Communications | ▬ | 9 | 17 |
| Real Estate | ▬ | 9 | 11 |
| Materials | ▬ | 9 | 9 |
| Utilities | ▼ | 5 | 8 |
| Industrials | ▼ | 5 | 5 |
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| Market Segments |
Trend |
This Wk |
Last Wk |
| Large Value | ▲ | 18 | 16 |
| Small Value | ▲ | 14 | 12 |
| Mid-Cap Value | ▬ | 12 | 14 |
| Small Growth | ▬ | 9 | 5 |
| Mid-Cap Growth | ▼ | 8 | 5 |
| Large Growth | ▼ | 6 | 9 |
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Notable Newton Moves This Week: Equity reads improved while fixed income fell across the board. Foreign Developed rose 13 to 16 and is the only equity line in the strong band, with Small Cap up 5 to 9. Bonds went the other way, Intermediate Term sliding 10 to 5, Corporate 10 to 7 and High Yield 9 to 6, leaving Floating Rate at 11 as the firmest read in the group. Communications reversed hardest among sectors at 17 to 9 while Health Care held the top spot at 18, and value led growth across styles, Large Value rising 16 to 18 against Large Growth at 9 to 6.
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Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.
Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This newsletter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Waterloo Capital to be reliable. The letter may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon information in this letter is at sole discretion of the reader. Please consult with a Waterloo Capital financial advisor to ensure that any contemplated transaction in any securities or investment strategy mentioned in this newsletter aligns with your overall investment goals, objectives and tolerance for risk. Additional information about Waterloo Capital is available in its current disclosure documents, Form ADV, Form ADV Part 2A Brochure, and Client Relationship Summary report which are accessible online via the SEC's Investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using SEC # 133705. Waterloo Capital is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.
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