Here is Schwab's early look at the markets for Thursday, October 30.

Earnings from mega caps dominate early action as investors assess implications of yesterday's Federal Reserve rate cut and scout for headlines from the trade meeting between Presidents Xi and Trump.

Magnificent Seven earnings roll on later as Apple and Amazon report. Microsoft, Alphabet, and Meta Platforms shared results late yesterday in the middle of an AI-powered rally to record highs led by the mega caps and semiconductors. Shares of Alphabet initially rose while the others fell, though all beat estimates.

The Fed's 25-basis point rate cut came as expected and took the fed funds rate below 4% for the first time since late 2022. The second cut in two months didn't surprise, but Fed Chairman Jerome Powell rattled Wall Street by emphasizing that another cut in December is far from baked in. The market had done just that going in, putting odds at 90%, according to the CME's Fedwatch Tool.

"There are strongly differing views about how to proceed in December," Powell said in his post-meeting press conference. "A further reduction in rates in December is not a foregone conclusion. Far from it."

When Powell uttered those words, the S&P 500 index quickly turned from green to red, sinking from record highs earlier. Volatility and the dollar jumped, while rate-sensitive parts of the stock market like energy, staples, and real estate sank.

The Fed chair's hawkish stance sent the 10-year Treasury note yield back slightly above 4% late Wednesday. Chances of a 25-basis point cut in December plunged to just below 66%, according to the CME FedWatch Tool. Odds of a cut in January, which were around 50-50 before Powell spoke, rose to 75%, possibly because the market sees chances of the Fed skipping a cut in December and then easing the following month.

Two policy makers differed with yesterday's decision. One voted against a rate cut and one voted for a 50 basis-point cut. The dissent Powell noted makes December an open book, even more so because there's no data until the government re-opens.

"This is a temporary state of affairs," Powell said, referring to the shutdown. "We'll do our jobs and collect every scrap of data we can find. I'm not saying it will affect the December meeting, but what do you do if you're driving in the fog? You slow down. There's a possibility it will make more sense to say we really can't see, so let's slow down."

Powell added that with rates between 3.75% and 4%--down 150 basis points from their 2024 peak--they're back in the range between 3% and 4% where many economists believe the "neutral rate" currently lies. That's where rates are properly balanced between the Fed's two mandates of maximum employment and stable prices. Some on the committee, Powell said, seem to think it's time to take a step back, pause, and better understand whether recent labor weakness continues and whether recent economic growth is improving.

The Fed also announced the end of Quantitative Tightening, or QT, a program that's reduced its balance sheet the last few years. The program was established to combat inflation, but the balance sheet is now back to near normal levels. Powell doesn't want to trigger any hiccups in the short-term lending market caused by low liquidity. Stopping QT could help ease conditions for borrowers if it ultimately puts pressure on yields. The question is whether that and a lower fed funds rate start having an impact on the broader economy, which is more sensitive to long-term rates.

The Treasury market, barely changed since the September rate cut, suggests there hasn't been much translation into the wider lending economy. The 10-year yield was 4.02% just after the rate cut today, compared with 4.04% just before the September rate cut, CNBC reported.

"Overall, the Fed meeting was not too surprising," said Kathy Jones, chief fixed income strategist at Schwab. "The Fed cut rates as expected but can't provide forward guidance without data." She added that judging from the market's initial reaction, "it looks like more than a few people were caught the wrong way expecting a dovish press conference."

Turning to earnings, investors sent shares of Microsoft down 3% initially in post-market trading despite the company easily beating Wall Street's expectations and reporting 40% quarterly growth in its Azure cloud computing business. Meta fell 6% out of the gate in post-market trading, though it, too, exceeded expectations.

Guidance from Meta was in line with Wall Street's consensus for the fourth quarter, and Meta said it now expects to spend $116 billion to $118 billion this year, up from the prior $114 billion to $118 billion. This works into the spending on AI data centers that's helping drive the market and the economy. Meta  also expects capital expenditures to face upward pressure in 2026, with growth in that category larger than in 2025.

Alphabet bucked the trend, rising 4% in post-market trading. Earnings and revenue far surpassed Wall Stret's thinking. Like Meta, it raised its capital expenditures guidance, now putting the 2025 figure at between $91 billion and $93 billion, up from $85 billion. Cloud revenue rose 34% in the quarter, up sequentially from 32% the previous quarter.

The strong spending plans could translate into more strength for semiconductor shares today, though it's also possible a lot of the positive hopes got built in earlier this week.

Apple and Amazon keep the mega cap dial humming this afternoon, and investors will watch for their AI spending plans and other key metrics. Amazon has said it plans to spend as much as $100 billion this year on AI as it builds data centers and software.

Tariffs are another element to monitor with these two giants, even if it appears the trade war is temporarily easing. Earnings strength earlier this year at Apple and Amazon may have reflected some "pull forward" in their consumer-facing divisions ahead of tariffs. Amazon's cloud growth is getting nipped at the heels by Alphabet, and Microsoft, so any improvement in Amazon Web Services sequentially from last quarter's 18% AWS revenue would likely be welcomed by investors.

Apple will be under pressure to keep the positive news flow going around its recent iPhone 17 launch. Apple shares recently made record highs, helped partly by data from Counterpoint Research saying the iPhone 17 outsold the iPhone 16 by 14% during its first 10 days of availability in the United States and China.

Tariffs surfaced in Powell's press conference when he was asked about inflation. Goods inflation is up partly due to tariffs, Powell said, though it may be just a one-time impact. He estimated that the annual Personal Consumption Expenditures, or PCE, price index, which was supposed to come out tomorrow but won't due to the shutdown, would show 2.8% core and headline inflation. Without the tariffs, he added, core inflation—excluding food and energy—might be closer to 2.3% to 2.4%

Powell said the Fed is monitoring economic data through various non-government and state reports and hasn't seen major changes in economic or labor market conditions since the September meeting.

Today brings rate decisions from the European Central Bank, or ECB, and the Bank of Japan (BoJ). Analysts expect the BoJ to keep rates unchanged and the same outcome from the ECB. Decisions hadn't been announced as of this recording, but neither seems likely to have immediate market impact unless there's a surprise.

Stocks see-sawed Wednesday before a mixed finish. The tech-heavy Nasdaq rolled up new record highs and closed moderately higher, but the S&P 500 index struggled to get back to even following the late-session Powell plunge. At one point, it was down more than 0.5% but managed to close flat.

The mega-cap dominated tech and communication services sectors continued their sizzling pace with gains of 1.1% and 0.9%, respectively, yesterday, but for the second straight day more sectors fell than rose.  Hopes for progress on trade with China and looser export controls that favor U.S. chip sales there along with rare earth imports to the U.S. gave chip stocks another lift Wednesday that seemed immune from rate concerns.

Nvidia, Broadcom, Advanced Micro Devices, Micron, Coreweave, and Palantir all rose 2% to 3% Wednesday as AI-related stocks rolled along. AI-related power firms like Constellation Energy and Nucor also made big gains.

Elsewhere, Caterpillar climbed more than 11% after quarterly revenue and earnings easily topped estimates. Construction sales rose 7%, helped by the commercial side of the business. Energy and transportation sales rose 17%.

Boeing backed up 4% despite quarterly revenue outpacing estimates. Losses per share were far worse than expected, though the company blamed that on a one-time charge related to the 777X program. Free cash flow improved.

Verizon climbed 2% as the company's earnings beat expectations even though sales narrowly missed. The company topped estimates for quarterly subscriber additions, and reiterated full-year guidance.

The Dow Jones Industrial Average® ($DJI) fell 74.37 points Wednesday (-0.16%) to 47,632.00; the S&P 500 index (SPX) sank 0.30 points (-0.00%) to 6,890.59, and the Nasdaq Composite® ($COMP) rose 130.98 points (+0.55%) to 23,958.47.