North American Markets Mixed as Fed Caution Tempers Trade Deal Optimism

Toronto, Oct. 30, 2025 – North American equity markets delivered a mixed performance on Thursday, as investors digested hawkish central bank signals, big-tech earnings surprises, and a long-awaited U.S.-China trade truce. U.S. stock indexes pulled back from record peaks after the Federal Reserve hinted it may pause further rate cuts, dampening risk appetite despite a tariff-reduction deal between Washington and Beijing. In contrast, Canadian shares inched higher on strength in technology and mining stocks, while Mexican equities saw modest profit-taking after a multi-session rally. Small-cap stocks reflected the cautious tone: the U.S. Russell 2000 and Canadian small-cap indices both faltered slightly alongside their large-cap counterparts, and Mexican small-caps similarly edged lower. Investors across the continent balanced encouraging corporate news with lingering concerns over monetary policy and economic growth, resulting in a choppy but resilient trading session.

Traders on the floor of the New York Stock Exchange react to earnings and Fed signals, as U.S. markets turn mixed on October 30, 2025.

U.S. Stocks Slip as Tech Giants Stumble and Fed Signals Caution

On Wall Street, stocks lost steam after an early-week rally to all-time highs. The S&P 500 and Nasdaq Composite both finished in the red, weighed down by sharp drops in mega-cap technology shares. Meta Platforms plunged over 12% – on track for its worst rout in three years – after the Facebook parent warned of “notably larger” capital expendituresahead to fuel its artificial intelligence ambitionsreuters.com. Likewise, Microsoft fell about 2.3% as investors balked at the software giant’s record $35 billion in quarterly capital spending and forecast of higher expensesreuters.com. Those hefty spending plans spooked a market that had been enthralled by Big Tech’s AI-driven growth, prompting some to question when those investments will pay off. “We’re seeing a limitation in the context of CapEx spend and AI monetization,” observed Timothy Chubb, chief investment officer at Girard, adding that earnings results have been extremely bifurcated this seasonreuters.com.

Not all tech news was gloomy. Alphabet (Google) provided a bright spot, leaping 5% after reporting better-than-expected sales in advertising and cloud servicesreuters.com. The Google parent’s strong results, powered in part by robust AI-related demand, offered reassurance that the year’s artificial intelligence boom is translating into real earningsreuters.com. Still, with market heavyweights like Apple and Amazon due to report after the closing bell, many traders took a defensive stance. “It was a fairly low bar this quarter,” Chubb noted, “and it’s going to be extremely bifurcated. We’re interested in getting a better read on the consumer after the next [“Magnificent Seven”] reports.”reuters.com

Broader market internals in the U.S. underscored the cautious mood. By midday, the Nasdaq was down nearly 1%, the S&P 500 off about 0.4%, while the blue-chip Dow Jones Industrial Average clung to a modest gain on the strength of non-tech namesreuters.com. (Defensive plays like healthcare and certain industrials helped buoy the Dow even as high-flying tech sagged.) Small-cap stocks were not immune: the Russell 2000 index of U.S. small caps also gave up ground, reflecting wider risk aversion. At least five of the 11 S&P sectors traded lower, led by a 1.2% drop in information technology stocksreuters.com. On the upside, a few pockets of the market provided counterbalance. Pharmaceutical distributor Cardinal Health surged 16% after raising its profit forecast, and chip designer Nvidia – which a day earlier became the first publicly listed company ever to hit a $5 trillion market cap – continued to attract dip-buyersreuters.com.

The Federal Reserve’s latest move loomed large over market sentiment. On Wednesday the Fed cut interest rates by 0.25% in a widely expected move – its third rate cut of 2025 – but surprised traders by casting doubt on another reduction in December, with Chair Jerome Powell stressing that a further cut was “not a foregone conclusion.”reuters.com The hint that this week’s cut might be the last easing for a while rippled through asset prices. U.S. Treasury yields jumped to multi-month highs and the dollar strengthened, pressuring rate-sensitive stocks. “Markets’ immediate reaction has been to see the FOMC meeting as hawkish – with simultaneous selling of bonds, gold, and equities,”commented Matt King, founder of Satori Insightsreuters.com. Indeed, fed funds futures show investors now assign only about a 70% chance of another quarter-point cut in December, down from 90%+ odds just a week agoreuters.com. Investor sentiment turned more defensive on this realization, overshadowing what had been a supportive backdrop of cooling inflation and earlier hopes of a year-end rate-cutting spree.

Trade Truce and Shutdown Developments Fail to Ignite Wall Street

Geopolitics offered a mixed bag for U.S. markets. President Donald Trump announced an “amazing” trade deal after meeting China’s President Xi Jinping – agreeing to roll back some tariffs on Chinese imports from 57% to 47% in exchange for Beijing cracking down on fentanyl trafficking, resuming large U.S. soybean purchases, and keeping exports of rare earth minerals flowingreuters.com. This marked a significant de-escalation in the U.S.-China trade war and in theory should bolster global growth prospects. However, the news had been widely anticipated and produced only a muted market reactionreuters.comtradingview.com. “Perhaps not quite as much progress as President Trump had signaled,” noted David Morrison, senior market analyst at Trade Nation, pointing to the lack of fresh surprises in the agreementtradingview.com. Traders remain cautious that the tariff truce could prove short-lived after past negotiations falteredreuters.com. Moreover, a looming U.S. government shutdown, now in its 24th day, tempered any celebration. The ongoing budget standoff in Washington has delayed key economic reports (like today’s scheduled U.S. GDP release) and added a layer of uncertainty to the outlook, leading some investors to sit on the sidelines.

TSX Rises as Canada’s Central Bank Pauses – Small Caps Boosted by Gold

Canadian equities managed to advance despite the cross-currents, with the S&P/TSX Composite Index climbing 0.3% to ~30,223 by midday and holding those gains into the closereuters.com. The Toronto market was buoyed by its tech and resource sectors, as investors in Canada reacted to domestic news distinct from Wall Street’s tech turmoil. The information technology sector led the way, up about 0.8%, helped by strength in e-commerce star Shopify and other software namesreuters.com. Materials stocks jumped 0.9%, driven by a 2% surge in gold prices after the Fed’s outlook knocked the U.S. dollar off recent highsreuters.com. Canada’s many gold miners and base metal producers benefited from this commodity uptick. Notably, the TSX healthcare sector was the top performer, rallying almost 3% as Bausch Health Companies soared 14.6% on upbeat earnings and a raised full-year revenue forecastreuters.com. Even the heavyweight financials group eked out slight gains (+0.2%)reuters.com, suggesting broad-based confidence.

The Art Deco facade of the original Toronto Stock Exchange building on Bay Street. Canadian stocks rose modestly as investors digested rate signals and a trade truce on October 30, 2025.

The Bank of Canada’s recent policy shift underpinned the day’s trading. Just one day earlier, the BoC cut its benchmark interest rate by 25 basis points to 2.25%, the lowest level in three years, in a bid to support Canada’s faltering economyreuters.com. More importantly, Governor Tiff Macklem signaled this cut could be the last in the cycle for now, as the Bank “signaled an end to its interest rate cutting cycle” after downgrading its 2025 growth forecast to 1.2% (from 1.8% previously)reuters.com. That guidance quickly reset market expectations – traders are now pricing a 90% probability that the BoC will pause rate moves at its next meetingreuters.com. Interestingly, some analysts viewed the central bank’s restraint as a positive sign. “We need to take a bigger picture view – absence of further rate cuts potentially signals some positives as well, namely that we’re likely experiencing a more stable economic environment,” said Josh Sheluk, portfolio manager at Verecan Capital, reflecting a sense that the Canadian economy may avoid the need for more stimulus.

Canadian investors thus appeared relieved by a “dovish pause” stance, even though the BoC’s easing was prompted by some worrying signs. Weakening domestic data – including an uptick in unemployment and sluggish services activity – prompted the recent rate relief. “The worrying thing is rates were cut because our economy is weakening as this trade dispute continues,” noted Michael Sprung, president of Sprung Investment Management, referring to U.S.-Canada trade frictions that have hurt exportsreuters.com. He added that a looming federal budget release next week (rumored to include hefty deficit spending on social programs) is also on investors’ mindsreuters.com. Despite those concerns, Thursday’s trade news from south of the border provided some encouragement in Toronto; reduced U.S.-China tensions could indirectly benefit Canada’s resource-heavy economy. Energy stocks, however, lagged – the TSX energy sector dipped about 0.7% as oil prices slipped back under $61 a barrelreuters.com. Traders were evaluating how a U.S.-China accord might impact global oil demand in the coming months. Overall, large-cap and small-cap Canadian stocks alike participated in the day’s uptick. Many junior mining and tech names – often traded on the TSX Venture exchange – saw renewed interest thanks to stronger gold and copper prices. Nine of ten Toronto sectors closed higher, and the TSX’s resilience this week has it on track for a second straight week of gains, reflecting a degree of immunity to overseas volatility.

Mexican Market Eases Off Highs Amid Growth Worries and Rate Cut Bets

Mexico’s stock market took a breather, with the benchmark S&P/BMV IPC index snapping a five-session winning streak to edge down about 0.2% on Thursdaytradingview.comtradingview.com. The slight decline to around 63,200 pointscame as investors in Mexico City confronted a pair of contrasting signals: encouraging moves by central bankers to spur growth, versus fresh evidence of the economy’s weakness. On the positive side, Mexico stands to gain from improved U.S.-China trade relations and remains an attractive destination for emerging-market investors hunting for value. But Thursday’s local data gave bulls pause. New figures showed the Mexican economy contracted 0.3% in the third quarter, the first year-on-year quarterly decline since 2021reuters.com. Industrial output slumped sharply, offsetting modest gains in services, and economists note that external headwinds – from global trade tensions to softer U.S. demand – are weighing on Mexico’s manufacturing sectorreuters.com.

The weak GDP report reinforced expectations that Banxico (Mexico’s central bank) will continue easing monetary policy. The central bank cut rates in late September to 7.50% and is widely expected to cut by another 25 bp to 7.25% at its meeting next week, bringing borrowing costs to their lowest since May 2022reuters.comreuters.com. “With the economy likely to remain relatively weak and inflation set to remain within target, we think Banxico will cut… to 6.25% by the end of next year,” said Kimberley Sperrfechter, emerging-markets economist at Capital Economicsreuters.com. Anticipation of further rate relief has underpinned a broad rally in Mexican assets throughout October. In fact, prior to today’s dip, the IPC index had climbed roughly 3% over the past two weeks, nearing record territory. Lower interest rates, alongside relatively low equity valuations, have attracted fund inflows – the Mexican peso hit a two-year high earlier this week, and international strategists have grown more upbeat on Mexican equities. On Thursday, however, the peso gave back about 0.4%, slipping to its weakest in over two weeks as global risk sentiment soured slightlytradingview.com.

Mexico City’s stock exchange building. Mexican equities pulled back slightly as economic data undershot forecasts and investors anticipated another interest rate cut.

Mexico’s modest stock decline was broad-based. Heavily weighted blue-chips like America Móvil (telecom) and Walmart de México (retail) were roughly flat to down, while some medium-sized domestic firms saw profit-taking after recent run-ups. Small-cap indices in Mexico mirrored the IPC’s move, dipping by a similar margin (around a fifth of a percent)bmv.com.mx. Local traders, lacking any major corporate earnings announcements on the day, took their cue from the global mood. “Latin American assets buckled under a global risk-off sentiment on Thursday,” observed Niket Nishant of Refinitiv, noting that Powell’s hawkish tone and the Trump-Xi meeting’s lack of surprises cooled enthusiasm across emerging marketstradingview.comtradingview.com. Even so, foreign investors have not lost sight of Mexico’s longer-term appeal. This week, analysts at Wells Fargo upgraded Latin American equities to neutral from underweight, citing attractive valuations and the region’s leverage to the worldwide AI boom (through manufacturing of electronics and automobiles)tradingview.com. As Thea Jamison of CHANGE Global remarked, “There are some big elections coming up… and a real possibility that countries may turn more pro-business,” suggesting Mexico’s political outlook could further brighten investor sentimenttradingview.com.

Outlook: Cautious Optimism as Year-End Nears

As October draws to a close, North America’s equity markets are navigating a crosscurrent of forces. Investor sentiment is tinged with caution – central banks from Washington to Ottawa have eased rates to support growth, but are striking a vigilant tone that suggests policy support could be limited if inflation flares up again. That message, combined with a backdrop of slowing economic indicators (Canada’s soft jobs data, Mexico’s GDP dip) and political uncertainties (the U.S. budget impasse, upcoming elections in Mexico and the U.S.), has injected some volatility into markets that had been trending up. Yet, pockets of optimism persist. Corporate earnings overall have been surprisingly resilient this quarter – more than 84% of S&P 500 companies reporting so far beat profit estimatesreuters.com, a rate well above the historical norm. In the U.S., the AI revolution continues to drive massive value creation, exemplified by Nvidia’s trillion-dollar milestones and robust demand for tech servicesreuters.com. In Canada, consumer-facing companies and exporters are hopeful that lower interest rates will rekindle spending. And in Mexico, further monetary easing plus potential pro-business reforms are setting the stage for a recovery next year.

All told, Thursday’s trading session encapsulated the push-pull dynamic that has defined recent weeks. Monetary policyis turning friendlier for equities, but not without some angst over what comes next. Large-cap leaders stumbled even as small-cap and value stocks showed flickers of strength, suggesting investors are rotating positions rather than fleeing the market. “Bad news for the economy is good news for the markets,” one Bay Street portfolio manager quipped earlier this monthreuters.com, alluding to the belief that weaker data will keep central banks accommodative. That theme largely held true in October. Going forward, traders will be watching November’s events – from central bank meetings to trade follow-throughs and budget debates – to gauge whether this delicate equilibrium can hold. For now, North American marketsremain buoyant but cautious, with an enticing mix of AI-fueled dreams and interest-rate realities setting the tone for the final stretch of 2025.

Sources: Reuters market reports and datareuters.comreuters.comreuters.comtradingview.com, official central bank statements, and Bloomberg/Reuters interviews with analystsreuters.com. All market figures are as of October 30, 2025.

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