Weekly Market Performance — October 3, 2025

Markets Blog

David Matzko, LPL Research

LPL Research provides its Weekly Market Performance for the week of September 29, 2025. Major U.S. averages bucked historical trends for September to deliver a solid monthly advance, simultaneously sealing healthy gains for the third quarter. Stocks kicked off the final quarter of 2025 on a positive note, logging weekly gains on the back of healthcare and technology shares, despite a political standoff in Washington leading to a government shutdown. Overseas, international equities gained ground with tech shares powering the Asia-Pacific region, while European markets also traded higher. Treasuries edged higher over the last five days, and the dollar closed modestly lower. In commodities, crude oil prices sold off and gold continued to surge.

Index Performance

U.S. and International Equities

U.S. Equities: The S&P 500 ended September and the third quarter on a positive note, sealing a 3.64% advance, including dividends, and an 8.11% total return, respectively. On the week, markets broadly shrugged off the first government shutdown in seven years to start the new month and quarter, gaining ground over the last five days. Despite delays in key macroeconomic data leaving markets in search of new directional drivers over the latter half of the week, another extended wave of artificial intelligence (AI) optimism buoyed stocks. OpenAI dominated headlines after announcing new partnerships, shortly followed by a deal to sell shares at an updated $500 billion valuation, making the privately owned firm the world’s largest startup. Equities also benefited from firming Federal Reserve (Fed) rate cut bets after employment data from payrolls provider ADP arrived well short of estimates for September, which turned negative alongside revised results for August.

High-profile corporate news also drove markets, with healthcare names in the spotlight as the sector led week-to-date gains. While the healthcare sector has lagged notably this year, pharmaceutical names lifted the industry group after Pfizer (PFE) secured a so-called ‘most favorable nation’ pricing deal with the White House to dodge tariffs — fueling a rally on hopes other companies will be able to strike similar deals. Meanwhile, Nike (NKE) highlighted the earnings calendar, with shares rising this week after delivering an upbeat report Tuesday afternoon.

International Equities: European equities also printed gains, delivering a six-day winning streak to cap the region’s best September since 2019, as well as positive returns for the third quarter. Healthcare names topped the watchlist this week on hopes that local drugmakers will ink deals with Washington for favorable pricing and tariff relief, similar to that of PFE. Stocks also received support from the global rally in tech shares, while on the macro front, preliminary consumer inflation data for the Eurozone rose in line with estimates in September and the unemployment rate unexpectedly ticked higher in August — although market reaction to the latter was limited.

The Asia-Pacific region also posted what could be called a “perfect week” with regional benchmarks gaining ground all five days to cap strong weekly gains. Trading volumes were thinned with mainland exchanges shuttering for the Golden Week holidays, while Hong Kong, South Korea, and Taiwan each had a day off as well. Despite the abbreviated week, South Korea led the region with a nearly 5% advance on the back of tech shares after OpenAI announced partnerships with Samsung Electronics and chipmaker SK Hynix. Tech optimism spilled over into nearby exchanges, as Hong Kong’s Hang Seng rallied nearly 4% and Taiwan’s Taiex scored fresh record highs. Major averages in Japan closed lower, weighed down by local political jitters ahead of this weekend’s election and the U.S. shutdown. However, the tech-heavy Nikkei found positive territory Friday after OpenAI unveiled a new partnership with Tokyo electronic equipment maker, Hitachi.

Fixed Income, Currency, and Commodity Markets

Fixed Income: Core bonds, measured by the Bloomberg Aggregate Index, traded slightly higher on the week, receiving upside support from government shutdown dynamics and Fed rate-cutting expectations. Corporate credit spreads were flat on the week.

While markets have been focused on the expected trajectory of short-term interest rates through Fed rate cut expectations, the Fed’s balance sheet is likely to come into focus as well. The Fed has been reducing its balance sheet by allowing bonds to mature without replacement in an effort to drain excess liquidity from the economy (colloquially called quantitative tightening or QT).

The Fed has shrunk its balance sheet by over $2 trillion, which has come mostly from a corresponding reduction in the Fed’s overnight reverse repo program (O/N RRP). At $8 billion, O/N RRP is at the lowest level since 2021. The Fed has noted that as the facility approaches $0, the Fed will likely need to reassess its ability to drain excess liquidity from the economy without potentially disrupting short-term funding markets. Moreover, as the O/N RRP drops to $0, further balance sheet runoff will have to come directly from the reduction in bank reserves, which recently fell below $3 trillion. The challenge for the Fed is that no one is entirely certain when too much liquidity is removed, and you go from an ample reserve environment (which is now) to a scarce reserve environment. The last time the Fed shrank its balance sheet was in 2019, and they went too far, and repo rates spiked to close to 10%.

Reserve requirements are higher now, so estimates are that the lowest comfortable level of reserves is in the $2.7 to $3.0 trillion amount, but given the uneven distribution of reserves among banks, that number could be higher. Bottom line is that as the O/N RRP gets to $0, short term funding markets could get volatile, which likely means QT probably doesn’t have many months left. As QT ends, the Fed will go back to buying bonds to maintain excess reserve balances, which on net should be supportive to fixed income markets.

Commodities and Currencies: The broader commodities complex traded modestly higher this week amid fairly choppy price action. West Texas Intermediate (WTI) crude oil fell sharply, turning lower four out of the last five days to log its biggest weekly loss since June — briefly dropping below $61 per barrel. Bearish sentiment toward crude stemming from increased OPEC+ production (with more output hikes likely coming this weekend) collided with maintenance-slowed refinery runs, seasonal drops in demand, and the U.S. government shutdown. Meanwhile, gold continued to surge to its seventh straight weekly gain as the yellow metal now approaches $3,900/ounce. Gold powered higher despite the typical slowdown in demand for physical gold due to China’s Golden Week holiday, finding a fresh haven bid as a result of the political standoff in Washington. Silver and copper also advanced within the metals complex. In currencies, the U.S. dollar weakened modestly against its peers while continuing to hang tough near key support levels. However, with the government shutdown likely extending into early next week, the dollar pulled back on economic growth jitters due to a potentially extended shutdown and as traders focused on weaker ADP payrolls data due to the delayed report from the BLS.

Economic Weekly Roundup

Under normal circumstances, the latest jobs report from the Bureau of Labor Statistics (BLS) scheduled for release on Friday would dominate headlines and undergo thorough analysis. But not this week. The government shutdown has delayed the release of many economic reports, including but not limited to Friday’s payrolls report and Thursday’s jobless claims data, but investors are not flying blindly as they can consult with private sector data for insights.

The last government shutdown was from December 2018 to January 2019, however the BLS was able to release its reports during that shutdown because it already received funding. But, this time is different. In more recent years, the ADP data has tracked the official government data on a three-month moving average but not as tightly on a month-to-month basis. That said, Wednesday’s weaker-than-expected ADP print confirms the trend — the demand for workers is retreating, adding support for further easing by the Federal Open Market Committee (FOMC).

The Week Ahead

The following economic data is slated for the week ahead:

• Monday: No economic releases scheduled

• Tuesday: Trade Balance (Aug), New York Fed One-Year Inflation Expectations (Sep), Consumer Credit (Aug)

• Wednesday: MBA Mortgage Applications (Oct 3), FOMC Meeting Minutes (Sep 17)

• Thursday: Initial Jobless Claims (Oct 4), Continuing Claims (Sep 27), Wholesale Trade Sales (Aug), Wholesale Inventories (Aug final)

• Friday: University of Michigan Consumer Sentiment report (Oct preliminary), Federal Budget Balance (Sep)

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.

Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

Asset Class Disclosures –

International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

Bonds are subject to market and interest rate risk if sold prior to maturity.

Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.

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Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.

Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.

High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

Precious metal investing involves greater fluctuation and potential for losses.

The fast price swings of commodities will result in significant volatility in an investor's holdings.

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