US OPEN: US500 erases some gains on downbeat ISM

US500 climbed above 4600 after best October in 6 years
ISM manufacturing shows disturbing trends in the economy
Traders brace for the FOMC decision this week

Friday ended with a strong melt-up as US stocks surged to records despite initial declines on weaker Apple and Amazon quarterly results. This strength was continued up to the opening bell as US100 broke above 15900 for the first time ever. This came on the back of increased option buying and ETF inflows.

Call option buying and ETF inflows helped drive US500 higher in October – each week of the month ended higher! Source: Bloomberg

While this could show some market exuberance, many point out to favourable seasonal patterns. Since 1927, the S&P 500 has notched gains in the final two months about 57% of the time. When the first 10 months saw the index rising more than 20%, as is the case in 2021, the odds of positive returns jumped to 75%!

Investors can surely back their optimism on the strength of the earnings season where record 87% of companies delivered EPS above expectations and while “EPS beats” are the norm on Wall Street, the level of outperfmance was unmatched. Now the question is to what extent can these results be extrapolated? Looking at ISM manufacturing there are some concerns. While the index slid just a bit to still high 60.8 points, new orders tumbled from 66.7 to 59.8 points, backlogs rose to 75.6 points and prices gained again to 85.7 points. This could be drawing a picture where a lack of supply and increased prices slowly dent new demand.

ISM manufacturing in October remained very high but components were less convincing. Source: Macrobond, XTB Research

Finally, investors want to know how the Fed plans to address rising inflation risks. Will it remain sanguine (as in case of the ECB) or sharpen their views (more like Bank of Canada). Since the rally is som much reliant on liquidity, message from the Fed could be decisive in a longer run.

Even after some hesitation US500 remains close to record levels. Source: xStation5

17 October 2025, 6:48 AM

Morning wrap (17.10.2025)

16 October 2025, 6:56 PM

Daily summary: indexes edge lower into the close, gold tests $4,300 💰

16 October 2025, 5:05 PM

Breaking: crude oil inventories above expectations 📌

16 October 2025, 4:31 PM

Fed officials favor continued monetary easing 🔎

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US OPEN: US500 erases some gains on downbeat ISM

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