By Martin Baccardax

Stock markets have sailed through the first test of the third-quarter earnings season with flying colors, while early indications from the tech sector and dovish signals from the Federal Reserve suggest the rally has plenty of fuel to power into the end of the year and beyond.

Trade and tariff policy changes, the ongoing surge in gold prices and broader concerns over the risks of a bubble developing in artificial intelligence stocks may have injected a fresh round of uncertainty into global markets over the three months ending in September, but it hasn't hurt the bottom line of Wall Street's biggest banks.

The top five lenders hauled in just over $33 billion in trading revenue over the third quarter, adding around $5 billion to last year's tally. All five of Wall Street largest banks, as well as the consumer-focused Wells Fargo, topped earnings analysts' forecasts and issued solid near-term outlooks.

Banks are likely to get further support from the Federal Reserve, which is both signaling lower interest rates over the coming months and possibly ending the sale of assets on its $6.6 trillion balance sheet in order to ensure funding markets have ample liquidity.

Investors will get their first look at U.S. tech earnings next week as well, with updates from Amazon, Intel, International Business Machines and Tesla. Meta Platforms, Microsoft, Apple, and Alphabet are slated for the following week.

A key player in their AI fortunes, however, has already reported. Taiwan Semiconductor, the world's biggest contract chip maker, posted stronger-than-expected third-quarter earnings on Thursday and boosted its full-year revenue forecast for the second time this year.

CEO C.C. Wei also noted that AI demand "continues to be very strong, stronger than we thought three months ago" amid what he called "strengthening conviction in the AI megatrend."

Europe's ASML, which makes $400 million extreme ultraviolet lithography machines used in advanced chip making, also reported its strongest order book in nearly two years, even with an expected slowdown in China sales tied to U.S. export restrictions.

But that's not to say there aren't headline risks. President Donald Trump's "trade war" remarks, and the confusion that now appears to have clouded talks between Washington and Beijing, are likely to linger over markets for several weeks.

The federal government shutdown, meanwhile, will continue to keep investors in the dark with respect to both key economic data releases and its ultimate impact on the job market.

Stocks are also still leaning too heavily on Big Tech performance to power their gains.

Adam Turnquist, chief technical strategist at LPL Financial, notes that five stocks ( Nvidia, Apple, Tesla, Google and Broadcom) have collectively accounted for around 60% of the S&P 500's 7% rally over the past three and a half months.

Away from those leading names, Turnquist says, is a concerning shift in the broader benchmark.

"The percentage of S&P 500 stocks trading in some form of an uptrend has declined from 77% in early July to only 57% as of Oct. 14," he said in a recent note. "Those in a downtrend has increased from 23% to 44%."

But others are still betting on the momentum of the current bull market, which is now entering its fourth year, even as volatility and valuation concerns creep back into investor conversations.

"Bull markets are like a cruise ship; once they get moving, they're hard to slow down, really hard to turn around," said Ryan Detrick, chief market strategist at Carson Group.

"When you're up 10% for the year going into the fourth quarter, the fourth quarter is higher 20 out of 22 times," he added. "The catch, and there's always a catch, is that October is down on average. So it's not a shock to me to see some of this volatility that we're seeing."

The S&P 500 is up 13.7% this year, as of Wednesday's close.

Write to Martin Baccardax at martin.baccardax@barrons.com

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October 16, 2025 08:10 ET (12:10 GMT)

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