Wall Street is betting that a packed earnings calendar can quiet last week’s unease over private credit markets and U.S.-China trade tension. The S&P 500 (SPX) added 1.7% last week, trimming October’s losses to just 0.4%, as investors leaned on strong bank earnings and dovish signals from Federal Reserve Chair Jerome Powell.
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On Monday, the index rose another 1.07%, putting it just 20 points shy of its Oct. 8 all-time high. The rally came despite recent jitters in the $2 trillion private credit market, which had sparked the biggest volatility jump since the spring’s tariff turmoil. Analysts say the next phase of corporate results could finally push those concerns aside.
Moreover, about 89 S&P 500 companies will report this week, including Tesla (TSLA), Netflix (NFLX), IBM (IBM), and Intel (INTC). Forecasts from LSEG (LSEG) suggest total S&P 500 profits will climb 9.3% from a year ago to roughly $574.4 billion, a $4.2 billion upgrade since early October.
Markets Find Calmness as Volatility Eases
The Cboe Volatility Index (VIX) dropped 14% from last Friday’s close, falling below the 20-point mark that typically divides calm from choppy markets. Monday’s reading of 18.23 implies traders expect daily swings of about 1.14%, or roughly 77 points in the S&P 500, over the next month.
That moderation comes after several weeks of turbulence linked to credit exposure and tariff headlines. Investors say the easing volatility reflects growing conviction that U.S. growth remains resilient and that the Fed’s coming rate cuts will extend the cycle.
Moreover, the CME FedWatch tool shows markets pricing in two quarter-point cuts by year-end, taking the federal funds rate to between 3.5% and 3.75%. Traders also see rates sliding to 2.75%-3.0% by September 2026, helping valuations stay buoyant even amid slowing inflation.
Trade Talks Keep Investors on Edge
Even with calmer trading, geopolitical risk remains a key theme. President Donald Trump said Friday that the current tariff situation with China was “not sustainable.” This set the tone for another sensitive week in global diplomacy.
Treasury Secretary Scott Bessent is set to meet China’s Vice Premier He Lifeng in Malaysia this week, with plans to prepare a high-level sit-down between Trump and President Xi Jinping later this month in South Korea.
For equity markets, those talks could determine whether optimism continues or fades. Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, warned that renewed trade and credit stress “may end up being catalysts that spark the five- to 10-percent tier one drawdown in the S&P 500 that we have been on guard for between now and the end of the year.”
Inflation Data Could Add to the Noise
Adding to the mix, investors will get a long-delayed consumer price inflation report on Friday, one of the few major datasets still being released during the government shutdown. Economists expect the core CPI to remain steady at an annual rate of 3.1%, driven in part by lingering tariff effects.
While that figure remains above the Fed’s target, analysts say it won’t derail the rate-cut trajectory. Instead, the combination of easing inflation, lower borrowing costs, and the ongoing AI investment boom continues to support corporate earnings momentum.
Moreover, tax incentives from the One Big Beautiful Bill Act are adding a growth tailwind for U.S. companies heading into 2026, helping to offset global uncertainty.
Analysts See Opportunity Beneath the Noise
Despite headline risks, strategists say the market’s primary uptrend remains intact. Keith Lerner, chief market strategist at Truist, called October “a spooky gut check after an unusually calm stretch,” but emphasized that any deeper pullbacks should be viewed as buying opportunities.
“Stay focused on the primary trend, stay diversified, and don’t let the headlines haunt your long-term strategy,” Lerner said.
To sum up, Wall Street enters one of the most pivotal earnings weeks of the year with volatility cooling, trade talks looming, and credit fears fading. Strong results could cement confidence heading into the final stretch of 2025.
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