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- Private-sector hiring rebounded modestly in October, but a surge in layoff announcements and renewed valuation concerns weighed on stocks.1
- Broad-based strength in corporate earnings is supporting markets, with growth now extending beyond technology leaders.
- The prolonged government shutdown is straining households and heightening pressure on lawmakers to reach a funding deal.
1. Mixed Labor Signals Pressure Markets
With the Bureau of Labor Statistics employment report delayed by the government shutdown, investors turned to private-sector data for insights into the labor market. The October ADP report showed private payrolls rising by 42,000, surpassing expectations and ending a two-month stretch of job losses.2 Most of the gains came from large firms, while small and mid-sized businesses continued to reduce hiring.
Despite the improvement, broad labor conditions showed signs of strain. Separate data from Challenger, Gray & Christmas, an outplacement and executive coaching firm best known for its monthly job cut report, revealed more than 153,000 job cuts in October, the highest for that month since 2003 and more than double September’s total.4 The layoffs were concentrated in the technology sector as companies adjusted to slower demand, higher costs, and structural shifts related to AI integration.
On Thursday, equity markets reacted sharply to the layoff data and renewed concerns about tech valuations. The Dow fell nearly 400 points, while the Nasdaq dropped about 2%.1 Still, the rebound in private hiring suggests the labor market remains intact, even as employers grow more cautious. A labor market that’s cooling but not collapsing gives the Federal Reserve more room to cut rates without stoking fears of overheating, an environment investors expect to unfold later this year.
2. Earnings Strength Broadens Beyond Tech as Season Wraps Up
As the third-quarter earnings season winds down, results remain stronger than expected. Roughly 86% of S&P 500 companies have now reported Q3 earnings, with 82% beating forecasts by an average margin of 7.3%.1 Technology firms continue to lead overall growth, followed by strength in financials and utilities. Importantly, gains have been broad-based, with eight of the eleven sectors on track to post year-over-year earnings increases, an encouraging sign for market balance and diversification.
Earnings growth for the quarter is approximately 12%, compared with early estimates of 7%. Sectors such as industrials, health care, and consumer discretionary have also delivered notable surprises.1
Looking ahead, S&P 500 earnings are expected to rise roughly 11% in 2025, with potential acceleration to 13% next year.1 Sustained growth across both tech and non-tech industries could remain a key driver for equity markets despite elevated valuations.
3. Record-Setting Government Shutdown Weighs on Economy
Last Wednesday, the Federal government shutdown became the longest on record, surpassing the 35-day shutdown that extended from late 2018 into early 2019.3 With agencies closed and thousands of federal workers still furloughed, signs of strain on the broader economy are starting to surface. Temporary funding for food assistance programs such as SNAP has eased some pressure, yet roughly 40 million Americans remain uncertain about future benefits.
Meanwhile, open enrollment for Affordable Care Act plans began just as many households face rising insurance premiums.3 The combination of financial stress from delayed federal pay and higher out-of-pocket costs for healthcare is amplifying public concern. If the impasse continues, these disruptions could weaken consumer confidence.
Political negotiations remain at a standstill, but the mounting economic toll may force both parties to find common ground. Any lasting resolution is likely to depend on renewed engagement from the White House and congressional leaders.
For the period ending 11/7/25.
* Small-cap stocks are represented by the Russell 2000® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.
Sources
1 FactSet
2 ADP
3 Bloomberg
4 Challenger, Gray & Christmas
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Additional Disclosures: International and Foreign Securities, Fixed Income Investments, the Consumer Price Index, the Producer Price Index.
Comparative Index Descriptions: The Standard & Poor’s (S&P) 500 Index, The Russell 200® Index, The NASDAQ Composite Index, The MSCI EAFE Index, Dow Jones Industrial Average® (Dow Jones or DJIA), The Bloomberg Barclays US Aggregate Bond Index (US Agg Bond), The CBOE Volatility Index (VIX). CSP2025061_34
