Markets rebounded strongly on Wednesday after Tuesday’s steep selloff, with all three major US indices closing higher as investors shook off concerns about inflated tech valuations. The Dow Jones Industrial Average gained 225.76 points (0.48%) to close at 47,311.00, while the S&P 500 rose 24.74 points (0.37%) to 6,796.29, and the Nasdaq Composite climbed 151.16 points (0.65%) to 23,499.80.
The recovery came as better-than-expected economic data and strong corporate earnings helped restore investor confidence. The ADP National Employment Report showed private payrolls increased by 42,000 in October, beating expectations, while the ISM services sector continued to expand despite ongoing challenges. With 83% of S&P 500 companies beating earnings expectations so far this season, analysts have revised their aggregated earnings growth projections to 16.2% year-over-year, more than double the 8% growth expected at the start of the quarter.
However, the rally lost some momentum after JPMorgan Chase CEO Jamie Dimon warned that asset prices are quite high and there is always a risk of markets going down. Market strategists are cautioning that a 10% to 15% short-term correction should be anticipated at any time, though many investors maintain a “buy the dip” mentality. Technology and AI-related shares have muscled the stock market to record-breaking highs in recent months, leading to legitimate concerns about inflated valuations.
Political and policy developments are also weighing on market sentiment. The US Supreme Court raised doubts over the legality of President Trump’s market-jarring tariffs in a case with global economic implications. In a positive development, Beijing announced it would lift some retaliatory tariffs on US imports, though it maintained 10% levies imposed after what Trump called Liberation Day on April 2. The ongoing US government shutdown, now at 34 days and tied with the previous record, continues to force investors and the Federal Reserve to rely on private sector indicators.
Looking at individual stocks, Amgen surged 7.8% after beating profit expectations, while Johnson Controls jumped 8.8% following its stronger-than-expected 2026 profit forecast. Match Group gained 5.2% and McDonald’s rose 2.2% after beating same-store sales estimates. On the downside, Super Micro Computer tumbled 11.3% after disappointing results, and Humana dropped 6.0% following its third-quarter report.
The US dollar is distinctly lower today, with EUR/USD back above 1.15, AUD/USD trading above 0.65, and GBP/USD defending the 1.30 support level. This weakness in the greenback comes as stronger risk sentiment curbs demand for the safe-haven currency. The dollar index has slipped to around 100 after reaching five-month highs earlier this week.
All eyes are on the Bank of England today, with the market expecting the BoE to leave the Bank Rate on hold at 4% when it meets this Thursday. UK inflation is running at almost double the central bank’s 2% target, and with Chancellor Rachel Reeves set to deliver her budget on November 26 with expected hefty tax increases, the BoE is likely to maintain a cautious stance. GBP/USD has broken below the 1.3200-1.3400 support zone and could test lower towards 1.3000 over the coming weeks.
The euro remains under pressure from weak economic fundamentals and geopolitical concerns. After the European Central Bank kept interest rates unchanged at 2% for the third consecutive meeting in October, EUR/USD has struggled to break above strong resistance at 1.1820. While the pair may find some support at the 1.1500 area in the near term, a correction lower to around 1.1150 is possible.
In Asia, the Bank of Japan kept interest rates steady at 0.5% at its October meeting, disappointing yen bulls. The interest rate outlook remains cloudy, putting pressure on the Japanese currency. USD/JPY is holding near the 154 level and might move higher towards 155.00 in the broad uptrend channel, with potential to test the channel top around 157.00 in the following weeks. Adding to the uncertainty, the leader of Japan’s Innovation Party, part of the ruling coalition, warned that a near-term rate hike by the BoJ could send a negative signal to businesses.
The Federal Reserve cut rates by 0.25% to a range of 3.75%-4.00% at its October 28-29 meeting, but Fed Chairman Powell cautioned that a further reduction in the policy rate at the December meeting is “not a foregone conclusion, far from it.” A policy divide within the Central Bank and a lack of federal government data due to the ongoing shutdown remain stumbling blocks. On the positive side, Powell signaled the Fed may stop Quantitative Tightening to allow more liquidity into the economy, hopefully stimulating it in the face of rising unemployment.
Commodity markets are showing mixed signals. Crude oil is attempting a slight recovery, gaining 0.35%, though WTI remains priced below $60 per barrel. Morgan Stanley raised its oil price forecast to $60 for 2026, citing the OPEC+ decision to maintain current output levels through the first quarter of next year. Gold is up 0.2%, trading just below the $4,000 mark, while silver gained 0.7%, surpassing the $48 level. After a remarkable rally that saw gold gain almost 67% year-to-date at its highest point, the precious metal suffered its largest single-day price decline in over a decade on October 21, falling almost 7%. This sharp correction was necessary to trim down excessive speculative long positioning.
In corporate news, Qualcomm reported strong results for its fiscal Q4 2025, with revenue hitting $11.27 billion (versus $10.8 billion forecast) and adjusted earnings per share at $3.00 (versus $2.87 expected). However, shares fell 3% in after-hours trading due to a GAAP loss of $3.12 billion from a one-off $5.7 billion tax-related write-down. Arm delivered robust results for fiscal Q2 2026, posting revenue of $1.14 billion (a 34% year-over-year jump) and exceeding market expectations for Q3 guidance, with shares gaining 4.5% post-market. Snapchat surged 14% in after-hours trading following the announcement of a partnership with Perplexity to integrate AI search tools into the social media app.
China made its first purchase of US wheat in over a year, comprising two December shipments totaling 120,000 tonnes. This is seen as a positive signal indicating China’s intention to honor the trade agreement, at least temporarily. Chinese indices gained more than 1% in today’s session, contrasting with Japan’s Nikkei 225, which fell 0.5%.
Looking ahead, traders should watch for President Trump’s scheduled announcement at 3:00 PM CET today, which media outlets suggest aims to divert attention from the US air travel crisis caused by the government shutdown. The ECB’s Money Market Conference begins today, featuring speeches by key officials including ECB’s Schnabel, Fed’s Williams, and SNB’s Tschudin. These speeches could provide further insights into central bank thinking on monetary policy.
For today’s trading, market participants should remain cautious given the elevated valuations and ongoing policy uncertainties. While the November and December months tend to be favorable for equities historically, the combination of valuation concerns, political uncertainties, and mixed economic signals suggests that volatility could remain elevated. Traders should consider maintaining diversified positions with appropriate risk management, being prepared for potential pullbacks while also being ready to capitalize on any dip-buying opportunities that may arise.
The forex market offers opportunities for traders who can navigate the shifting central bank policies and economic data releases. With the dollar showing weakness, currency pairs like EUR/USD and GBP/USD may see increased volatility around today’s BoE decision and upcoming ECB speeches. Traders should watch key technical levels closely and be prepared to adjust positions as new information emerges from central bank officials and economic data releases.
