Summary of Recent Financial Events (October 28, 2026)

Author: Kathleen Brooks, Research Director UK

Key Takeaways

• The Federal Reserve (Fed) maintained steady interest rates while US stock indices experienced gains.
• Brent crude oil prices fell by $2.50 amid reports of potential peace talks with Iran.
• Alphabet's shares dropped nearly 10% after failing to meet Q3 earnings forecasts.
• Microsoft's shares rose by 2.5% following strong Q3 results and increased free cash flow.

Federal Reserve Meeting Insights

The Fed's decision to hold interest rates steady was accompanied by a notable dissent from two FOMC members who advocated for a rate hike. Despite this, market expectations for a December rate hike have surged to 85%.

Kevin Warsh, during his press conference, indicated that financial conditions are tightening, leading traders to reassess their rate hike predictions for 2027. Additionally, the Fed plans to reduce the frequency of its rate-setting meetings, moving from eight to six annually starting in 2028. This shift aims to allow the Fed to focus on broader economic questions rather than just interest rate decisions.

Market Reactions

The Treasury market responded calmly to the Fed's announcements, with short-term yields declining. The 2-year yield fell by 3 basis points, while 10-year yields remained stable. The market is adjusting to Warsh's approach, which favors less forward guidance on interest rates.

Overall, the Fed's meeting has contributed to a continuation of recent rallies in US stock indices and has slightly weakened the US dollar, which was one of the poorer performers among G7 currencies.

Corporate Earnings Highlights

In the tech sector, Microsoft and Alphabet reported their Q3 earnings, showcasing a divergence in performance among the "Magnificent 7" tech stocks. Microsoft exceeded expectations with a significant $10 billion beat on free cash flow, indicating successful monetization of its AI investments. In contrast, Alphabet's earnings fell short, with an EPS of $2.12 compared to the anticipated $2.99, raising concerns about its advertising and search business.

Investors are increasingly cautious about growth narratives that rely on high capital expenditures and cash burn without immediate returns. This sentiment has led to a nearly 10% drop in Alphabet's share price post-market, while Microsoft and other companies like SK Hynix and Oracle saw their stock prices rise.

Conclusion

This earnings season has highlighted the fragmentation within the tech sector, with varying success in AI investments among major players. As the market approaches the end of 2026, investor patience appears to be waning, particularly regarding the timelines for returns on AI-related expenditures.