Weekly Market Update, by Kip Lytel, CFA – Montecito Capital Management
Driven by renewed investor confidence following cooler-than-expected inflation data, U.S. equity markets surged for the week ending October 24, 2025. The Consumer Price Index (CPI) came in at 2.3% year-over-year, roughly 1% lower than economists’ forecast, signaling that inflation continues to cool more rapidly than anticipated. In response, the S&P 500 advanced 1.9%, the Dow Jones Industrial Average gained 2.2%, and the tech-heavy Nasdaq Composite outperformed with a 2.3% rise. The unexpectedly mild inflation report fueled optimism about potential Federal Reserve rate cuts, propelling all three major indexes to fresh record highs by Friday’s close.
This upbeat momentum marked the second consecutive week of market gains, with the Dow posting its strongest performance since early July and the S&P 500 and Nasdaq recording their largest weekly increases since August. The rally reflected a broader recalibration of investor sentiment, as markets increasingly price in a “soft landing” scenario—where inflation cools without triggering an economic downturn. For the Federal Reserve, the lower CPI reading validates earlier policy decisions aimed at taming price growth while creating room to refocus on supporting employment. With inflation pressures easing and labor market data showing early signs of softening, Wall Street now views rate cuts in 2025 as not only likely but strategically sound, reinforcing optimism for a steady and resilient economic path ahead.
