Observations & Insights – October 19, 2026
Tech Sell-Off
Technology stocks sold off sharply last week, sending the NASDAQ down 4.5% and leaving it 5.3% below its October 6 record high. The S&P 500 fell 1.9%, while the Dow finished slightly higher.
Key Points
- Concerns about AI infrastructure spending triggered a sharp sell-off in technology stocks, even as other sectors demonstrated relative strength.
- Inflation remains stubbornly elevated, complicating the Federal Reserve's outlook and keeping investors focused on Treasury yields.
- Corporate earnings continue to grow at an impressive pace, although high expectations leave little room for disappointment.
- Weakness beneath the major indexes may be creating opportunities that headline index returns obscure.
- The market has been consolidating near its highs since August, making patience and selectivity especially important.
Observations: Growth Stocks Stall as Earnings Season Kicks Off
Source: John Hancock Investments, “Weekly Market Recap,” October 16, 2026
A rotation away from AI-related stocks and chipmakers weighed on U.S. large-cap growth stocks, while relative strength in healthcare and traditionally defensive sectors lifted the value equity style. A growth benchmark finished the week down 5.0%, while its value counterpart climbed 0.9%.
The decline in oil prices seen since mid-September reversed course, with U.S. crude rising more than 8% for the week and moving back above $100 per barrel on Friday. The shift came amid uncertainty over Middle East supplies and a larger-than-expected withdrawal from U.S. crude stockpiles. Even with the latest price rise, U.S. crude remained below a recent high of nearly $106 set on September 15.
Overall earnings expectations were modestly scaled back after mixed results came in from the major U.S. banks that opened earnings season. As of Friday, analysts projected that third-quarter earnings for companies in the S&P 500 rose 29.0%, down from a forecast of 29.4% a week earlier, according to FactSet. Such an outcome would mark the third consecutive quarter of earnings growth exceeding 25%.
Yields on longer-dated U.S. Treasury securities fell for the second week in a row, with the 10-year Treasury yield ending the week at 5.08%, down from 5.24% the previous week. The 30-year yield fell to 5.43% from 5.60%. Shorter-term yields declined more modestly, with the 2-year Treasury yield at 4.72%, versus 4.79% the prior week.
Two reports reflected persistently elevated inflation at the consumer and wholesale levels, with costs rising beyond energy prices. Wednesday’s Consumer Price Index report showed a 3.7% annual rate in September, up from 3.4% the previous month. A separate Thursday report on producer prices showed wholesale inflation rose in September at a 6.3% annual rate, the highest since 2022.
U.S. retailers reported a bigger-than-expected gain, with sales up 0.8% in September versus economists’ consensus estimate of 0.3%. However, excluding gasoline, retail sales rose just 0.2%, suggesting that higher fuel prices accounted for much of the headline increase.
A South Korean stock benchmark dropped more than 14%, with the weekly sell-off driven largely by declines in the shares of the nation’s chipmakers and AI-related stocks. As of Friday, the index had fallen almost 38% since June, when it reached a record high.
In the week ahead, investors will focus on the next round of third-quarter earnings reports and management guidance, especially commentary on capital spending, demand and profit margins. Economic releases and movements in Treasury yields and energy prices will also remain important drivers of market sentiment.
Insights: Market Turbulence — Risk or Opportunity?
Last week’s sell-off showed that even a bull market can experience substantial turbulence. Technology shares, among the market’s strongest performers this year, fell as investors questioned valuations and the scale of AI infrastructure spending.
The divergence between major indexes and their individual stocks is striking. Although the S&P 500 remains near its highs, many companies have suffered substantial corrections, revealing risks and opportunities that headline returns can obscure.
A Bull Market Hiding a Bear Market?
Because the S&P 500 is weighted by market capitalization, its largest companies drive a disproportionate share of index returns. Their strength can conceal weakness elsewhere.
Market breadth has been uneven, with fewer stocks participating consistently in the advance. That does not necessarily signal an imminent bear market, but it suggests greater investor selectivity.
Source: Macro Micro
Some stocks have declined because earnings prospects weakened; others have become less expensive despite healthy fundamentals. We believe the latter may offer opportunities as conditions stabilize.
Interest Rates and the Bond Market Hold the Key
We expect technology and other high-growth stocks to remain especially sensitive to interest rates.
When Treasury yields rise, bonds become more competitive with stocks, and investors generally become less willing to pay higher multiples for future corporate earnings. This is particularly important for technology companies whose valuations depend heavily on expectations for earnings growth years into the future.
Even small changes in Treasury yields can produce outsized moves in technology shares and, given their index weightings, the broader market.
Treasury yields fell last week even as technology shares sold off, underscoring that rates are only one influence. AI spending concerns, high expectations and questions about future profitability can outweigh the benefit of lower yields. Still, bond-market movements and expectations for Federal Reserve policy will remain important drivers of valuations.
The latest inflation reports complicate the outlook. Consumer inflation accelerated in September, while producer prices indicated that businesses continue to face significant cost pressures. Much of the recent inflation has been influenced by energy prices and supply-related disruptions, factors that higher interest rates cannot directly resolve.
We remain concerned that the Federal Reserve could unnecessarily weaken economic growth by responding too aggressively to inflation driven partly by supply constraints. Our expectation is that inflation and interest rates will eventually stabilize, although the path may be uneven and take longer than anticipated.
Corporate Earnings Remain Encouraging
Corporate earnings remain an important foundation for our longer-term optimism.
FactSet’s October 16 update projected third-quarter S&P 500 earnings growth of approximately 29%. Of the 9% of companies reporting, 84% beat earnings estimates, although the average surprise was smaller than historical norms. Encouragingly, earnings estimates have also improved beyond the largest technology companies.
First Trust’s October 16 Equity Newsletter highlights two encouraging trends. The S&P 500 forward price-to-earnings (P/E) ratio has fallen to 18.91 times estimated earnings, although it remains above the chart’s long-term average of 17.25 times. Meanwhile, analysts have raised aggregate 2027 earnings estimates since December 2025 for the S&P 500 (+18.2%), S&P Midcap 400 (+6.1%) and S&P SmallCap 600 (+12.0%).
Together, the charts show how rising earnings estimates and a declining P/E multiple can make valuations more attractive, even when index prices remain elevated. The market is not necessarily cheap, but improving earnings prospects may create opportunities across company sizes.
These valuations depend on forecasts, not guaranteed earnings. Estimates could fall if growth slows, margins weaken or companies scale back investment.
High Expectations Create Vulnerability
We believe AI will deliver substantial productivity gains, but not every company funding or building the infrastructure will earn attractive returns.
The scale of spending raises questions about financing, profitability and how quickly investments will pay off. Some businesses may justify their valuations; others may not.
As the AI investment cycle matures, investors may place more weight on demonstrated earnings and cash flow than on projected growth.
Patience and Opportunity
We believe stocks have been consolidating near their highs since August. The major indexes have traded in a range as investors weigh strong earnings against elevated rates, persistent inflation and demanding valuations. Last week’s technology sell-off appears to be another episode in that process, rather than necessarily the start of a new phase.
We see this consolidation as potentially constructive. It gives earnings time to catch up with valuations, as First Trust’s charts illustrate. Further downside is possible, but a major index decline is not required for valuations to improve.
Over time, stabilizing inflation and interest rates could improve confidence and support higher valuation multiples, even if earnings growth moderates. Persistent inflation or recession would challenge that outlook.
For now, patience is more appropriate than pessimism. The market has been working through these pressures for months, and the next sustained advance may take time. We remain constructive over the longer term and intend to stay disciplined, selective and opportunistic.
Financial Planning: Trump Accounts
Sources: Internal Revenue Service, “Working Families Tax Cuts” and “Instructions for Form 4547” (December 2025); Invest America, “Dell $250 Contribution FAQ” (updated October 9, 2026).
We have received many questions about Trump Accounts and how they might fit into a family's financial planning. These new tax-advantaged investment accounts are designed to help children begin building long-term savings. Eligible U.S. citizen children born between 2025 and 2028 may receive a one-time $1,000 federal contribution, while certain children born between 2016 and 2024 may qualify for a separate $250 contribution funded by Michael and Susan Dell. Families and other eligible contributors may contribute up to a combined $5,000 annually per child in 2026, including qualifying employer contributions of up to $2,500. Investment earnings grow tax-deferred, with funds invested in eligible low-cost U.S. stock index funds.
Beginning in the calendar year the beneficiary turns 18, traditional IRA rules generally apply, potentially creating opportunities for Roth IRA conversions when the beneficiary is in a lower tax bracket. However, conversions may generate taxable income, and early distributions may be subject to additional taxes. Trump Accounts should be evaluated alongside 529 college savings plans and other strategies, as their tax treatment and withdrawal rules differ. We believe they are worth considering, particularly when government or employer contributions are available.
It is our aim at Asbury Wealth Partners that you find the market commentary we provide informative and useful. As our success grows mainly through referrals from our clients, we encourage you to share this weekly newsletter with your friends, family, and colleagues. If you are a client, we thank you for your business and your confidence. If you are not yet a client, we encourage you to contact us today and explore how our team may be able to add value to your unique financial situation.
Thank You,
Jeff
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Jeffrey S. Markewich
Wealth Advisor
Off – 719-548-8103
Cell - 719-357-7747
Text – 702-493-9678
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