Daily Market Briefing — 29 October 2026

Risk conditions are improving faster than the headline market

The clearest change in the cross-asset picture is the retreat in market stress.

SPY closed at 769.36 on October 29, up 0.7% over five sessions and 0.9% over 21 sessions. It remains above its 50-day moving average of 766.87. More importantly, the recent improvement is broadening beyond the largest companies. IWM gained 2.7% over five sessions and 2.2% over 21 sessions, outperforming SPY over both periods. It remains slightly below its 50-day average and down 2.2% over 63 sessions, so the longer-term relative weakness has not disappeared.

QQQ presents the opposite pattern. It gained 1.5% over five sessions but remains down 3.3% over 21 sessions and below its 50-day moving average. The divergence between a stable S&P 500, improving small caps and weaker Nasdaq leadership is significant. This is no longer simply a broad risk-off market, but neither is it a return to the technology-led structure that previously supported the indices.

Sector leadership reinforces that distinction. Energy has gained 11.7% over 21 sessions, consumer staples 9.4%, utilities 9.4% and healthcare 9.3%. Technology is down 3.6% and communication services 8.8%.

The industry data are even more divided. Consulting services have gained a median 23.7% over 20 sessions, with every tracked company above both its 50-day and 200-day moving averages. Steel is up 14.4%, also with full breadth above both averages.

At the bottom, semiconductor equipment and materials remain down 22.1% over 20 sessions, industrial metals and mining 22.0%, uranium 20.5% and computer hardware 18.3%. Yet these groups have rebounded sharply over five sessions. Semiconductor equipment gained a median 11.7%, electronic components 9.8%, industrial metals 8.0% and uranium 7.0%.

The market is showing early repair beneath some of its worst-performing groups, but not yet a durable reversal of the medium-term leadership change.

The Fed held rates, while markets continued to price less stress

The Federal Reserve left its target range unchanged at 3.75%-4.00% on October 28. The decision was not unanimous. Lisa Cook and Beth Hammack preferred another 25-basis-point increase, producing a 10-2 vote.

The statement described economic activity as expanding at a strong pace, with resilient domestic spending, robust capital investment and strong productivity growth. It also said inflation remained elevated. The Fed maintained its policy of keeping reserves ample and retained the option to purchase Treasury bills and other short-dated Treasuries when necessary to maintain that framework.

Market rates nevertheless remain below their late-September levels. The two-year Treasury yield was 4.67% on October 28, down 14 basis points over seven days and 21 basis points over 28 days. The 10-year yield was 5.05%, down eight and 24 basis points over the same periods.

The latest session also produced a notable steepening. The two-year yield fell three basis points on October 28 while the 10-year rose six, widening the 10s-2s spread from 29 to 38 basis points.

Real yields remain the principal constraint. The 10-year inflation-protected Treasury yield rose three basis points on October 28 to 2.67%. Although it is 26 basis points below its level 28 days earlier, it remains around the 99th percentile of observations over the trailing decade. The nominal 10-year yield is similarly extreme.

This creates an unusual combination: the marginal direction of financial conditions has improved, but the absolute cost of long-duration capital remains exceptionally high.

Volatility and credit now give a much cleaner signal

The improvement in market stress is no longer confined to equities.

MOVE fell to 94.55 on October 28, down from 97.87 a day earlier and 110.45 four weeks earlier. The 15.9-point decline over 28 days represents a substantial reduction in Treasury-market volatility.

Equity volatility has moved in the same direction. VIX fell to 16.91 on October 28 from 17.52 the previous day. VVIX, which measures volatility in VIX options, fell to 96.61 from 99.45. Both are now close to the middle of their trailing ten-year distributions.

The volatility curve also remains orderly. VIX is below the three-month VIX index at 19.22, providing no indication of acute near-term panic.

Credit confirms the improvement. High-yield option-adjusted spreads narrowed to 3.14 percentage points on October 28, down 13 basis points over seven days and now only two basis points wider than four weeks earlier. Investment-grade spreads fell to 0.86 percentage points and are also only two basis points wider over 28 days.

This is materially different from the earlier October configuration. Volatility and credit are no longer confirming an intensifying risk-off regime. They now indicate that the recent stress episode has substantially receded.

Strong growth and persistent inflation complicate the macro picture

The economic backdrop gives the Fed little reason to declare victory.

Real GDP grew at a 3.37% annualised rate in the third quarter, up from 2.22% in the second. At the same time, September headline CPI inflation was 3.7%, core CPI 2.6% and core PCE inflation 3.1%.

Labour-market momentum is considerably softer. The three-month average payroll increase was approximately 51,000 in September and unemployment stood at 4.2%.

The result is not a conventional recessionary easing environment. Growth remains strong while inflation is above target, even as employment growth has slowed. That helps explain why long-term yields and real yields remain high despite the recent retreat in market volatility.

Middle East energy risk also remains material. Brent crude settled at $114.88 a barrel on October 29 as renewed diplomatic efforts competed with continuing concerns about attacks on Saudi infrastructure and disruption around the Strait of Hormuz. The geopolitical risk premium has therefore eased at the margin without disappearing.

AI demand remains strong, but earnings are exposing a widening divide

The latest large-cap earnings provide important context for the technology weakness. The central AI investment cycle remains powerful, but the financial consequences are becoming more differentiated.

Microsoft reported fiscal first-quarter revenue of $92.3 billion, up 19% year on year, with operating income up 21%. Microsoft Cloud revenue increased 30% to $63.9 billion and Azure revenue grew 48%. Commercial remaining performance obligations increased 73% to $677 billion.

Alphabet produced an even stronger cloud growth rate. Third-quarter revenue rose 25% to $127.6 billion, while Google Cloud revenue increased 103% to $30.7 billion. Cloud operating income rose to $11.1 billion from $3.6 billion a year earlier. Search and other revenue also grew 12% to $63.4 billion, and management said year-on-year query growth was the strongest in five years.

The complication is capital intensity. Alphabet's quarterly free cash flow turned negative as infrastructure spending accelerated, while its results fell short of market expectations despite exceptional Cloud growth. The company is simultaneously demonstrating very strong AI demand and the growing cost of supplying it.

Amazon reinforces both sides of that argument. Third-quarter sales increased 12% to $201.9 billion and operating income rose to a record $28.1 billion. AWS revenue accelerated 39% to $46.0 billion, its fastest growth in nearly five years, while AWS operating income increased 55% to $17.8 billion.

But Amazon's trailing 12-month free cash flow moved to a $42.4 billion outflow as capital investment surged. The company still expects approximately $220 billion of capital expenditure in 2026. Its fourth-quarter sales guidance of $240 billion to $247 billion also left investors less enthusiastic about the near-term consumer outlook.

Intel presents a different problem. Third-quarter revenue increased 21% to $16.5 billion, but the company forecast fourth-quarter revenue of only $15 billion to $16 billion. Management cited continuing weakness in PCs, while an explosion at its Israeli manufacturing operation is expected to reduce revenue by roughly $600 million across two quarters.

Taken together, these reports do not support the simple conclusion that AI demand is weakening. Microsoft Azure, Google Cloud and AWS are all expanding rapidly. The emerging issue is whether the extraordinary capital required to satisfy that demand can translate into sufficiently strong incremental cash flow and returns, while weaker parts of the technology ecosystem absorb company-specific and cyclical pressures.

That distinction helps explain why strong AI operating data can coexist with weak technology-sector price performance.

Liquidity has deteriorated again

The most important counterweight to the improvement in volatility and credit is US liquidity.

Net liquidity fell another $78.4 billion in the week to October 28, reaching $5.73 trillion. It is now $17.6 billion below its level 28 days earlier and $35.3 billion lower over 91 days.

The Treasury General Account was the main driver. It increased $70.5 billion in one week to $1.016 trillion. Because money held in the Treasury's Fed account is effectively removed from private-sector reserves, a rising TGA can mechanically reduce this liquidity measure.

Federal Reserve assets also declined by $8.0 billion during the week.

Bank reserves confirm the drain. They fell $68.8 billion in the week to October 28 to $2.89 trillion and are now $54.3 billion lower than four weeks earlier.

The reverse-repo facility offers essentially no remaining cushion, with just $0.35 billion outstanding on October 29.

Funding markets are not signalling acute stress. SOFR was 3.94% on October 28, four basis points above the 3.90% interest rate on reserve balances and six basis points above the effective federal funds rate. Those spreads have widened modestly, but remain small.

The distinction is important. Liquidity is contracting, but the available funding indicators do not show a disorderly shortage of cash.

Bitcoin is diverging from the improvement in traditional risk markets

Bitcoin has failed to participate meaningfully in the decline in traditional market stress.

Kraken spot Bitcoin closed the 20:00-21:00 UTC hour on October 29 at $78,759. That is below the approximately $80,869 Binance perpetual close recorded on October 27, although the two observations come from different venues and dates and should not be treated as a direct return comparison.

The latest complete Binance daily data, through October 27, showed Bitcoin 1.3% below its 20-day moving average and 1.2% below its 50-day average, while remaining 10.7% above its 200-day average. The last completed weekly observation, ending October 25, remained 5.3% above the 50-week moving average.

IBIT closed at $45.71 on October 29, slightly below its 50-day moving average. It has lost 3.4% over 21 sessions while SPY gained 0.9%, although IBIT remains up 28.3% over 63 sessions.

The short-term weakness therefore remains intact even as VIX, MOVE and credit spreads improve.

Crypto liquidity is becoming the more important constraint

The crypto-specific liquidity picture has deteriorated further.

Total stablecoin market value fell to $302.0 billion on October 29, down $1.29 billion in one day, $3.38 billion over seven days and $5.46 billion over 28 days.

USDT supply fell by $1.0 billion in one day and $2.84 billion over 28 days. USDC supply was roughly flat on the latest day but remained $2.75 billion lower over 28 days.

Stablecoin supply is not equivalent to capital flowing into or out of Bitcoin. It does, however, represent part of the dollar-like liquidity available inside crypto markets. Its continued contraction is therefore notable precisely because traditional financial stress has been falling.

Derivatives data are less decisive. Across Binance, Bybit and OKX, covered BTC perpetual open interest stood at $15.30 billion on October 28, up $88 million from the previous day but $881 million below its level seven days earlier. Funding remained positive across the three venues.

Coinbase spot buy-minus-sell volume turned positive on October 28 after being negative the previous day, but it remained below its level seven days earlier. A single venue's flow cannot establish market-wide demand.

There is also a data limitation. Several Binance daily archives for October 28 were not yet available in the latest collection, so the newest complete Binance price and positioning observations remain October 27. Current US spot Bitcoin ETF flows are also unavailable, with the last complete observation dating to September 25.

The regime is less stressed, but still restrictive

The cross-asset message has become more nuanced.

Traditional financial stress has clearly improved. VIX, VVIX and MOVE have fallen. Credit spreads have narrowed. SPY remains above its 50-day average and small caps are outperforming over the shorter horizon. Even some of the worst-performing technology and cyclical industries are beginning to rebound.

Corporate earnings also show that the AI investment cycle itself remains powerful. Azure grew 48%, Google Cloud 103% and AWS 39%. The problem is increasingly one of capital intensity, monetisation and dispersion rather than a simple collapse in AI demand.

Against that improvement, the structural constraints remain substantial. The 10-year Treasury and real yield remain around the 99th percentile of the past decade. US net liquidity and bank reserves are falling. Defensive and energy sectors still dominate medium-term leadership. Technology and communication services remain the two weakest major sectors over 21 sessions. Bitcoin is below $80,000 on the latest spot observation, and crypto stablecoin supply continues to contract.

The evidence now argues against describing the environment as an escalating broad risk-off regime. It is better characterised as declining market stress inside a still-restrictive liquidity and real-rate regime, with unusually large differences between assets, sectors and individual companies.