October 17, 2025, Weekly Stock Market Return Recap

October 17, 2025, Weekly Stock Market Return Recap, by Kip Lytel CFA, Montecito Capital Management.  For the week ending October 17, 2025, U.S. stock markets posted solid gains as investors grew more confident about the economy’s resilience and the potential for interest rate cuts in early 2026. The S&P 500 rose about 1.7%, marking another week of steady advances across large-cap stocks. The Dow Jones Industrial Average climbed roughly 1.6%, supported by strong performances in financials and industrials. Meanwhile, the Nasdaq Composite led the major indexes with a 2.1% gain, lifted by renewed strength in technology and semiconductor shares. These gains came even as the federal government shutdown, which began on October 1, stretched into its third week – a major overhang that disrupted key economic data releases and complicated investor assessments of growth and inflation. Overall, the week reflected improving market sentiment, with investors balancing optimism over earnings results against ongoing caution about inflation and global growth. In remarks Tuesday on the Federal Reserve’s balance sheet, Chair Jerome Powell highlighted the progress of quantitative tightening, emphasizing that since June 2022 the Fed has cut $2.2 trillion from its holdings – shrinking the balance sheet from 35% to just under 22% of GDP. The timing of his comments underscores the Fed’s effort to maintain transparency amid evolving economic conditions.