Why US Stock Indices Soared to Record Highs in October

Major US indices hit record highs in October 2025. While October is historically a month of positive returns for the US stock markets, the 2025 returns were significantly higher than average. The DJI rose by ~1.6%, while the S&P 500 surged about 2.6%. The tech-heavy Nasdaq 100 rallied nearly 4.33%. Let’s break down what drove the surge. For index traders, this could be a good opportunity to understand the factors that impact the stock markets.

Public-Private Partnerships Drive Momentum

The US Department of Energy signed an agreement with Nvidia to build seven AI-powered supercomputers. Nvidia’s CEO, Jensen Huang, also mentioned having booked $500 billion worth of chip orders.

Microsoft also signed a deal to restructure OpenAI into a “public benefit corporation.” Plus, several companies have announced investments of nearly $1.2 trillion to advance production capacity in the US. These primarily include the semiconductor, electronics and pharmaceutical sectors.

Federal support to advance AI in regulatory as well as financial initiatives, while also boosting in-house manufacturing, boosts investor confidence in the concerned sectors. The bullish sentiment is reflected in the surge in stock indices. 

Positive Earnings Reports by Tech Giants

Five of the Magnificent Seven companies reported their Q3 earnings. Three of these, Microsoft, Meta and Alphabet, beat analyst expectations. Amazon and Apple also reported modest growth in Q3 and posted a positive outlook for Q4 2025.

Earnings reports of mega-cap companies drive broader market sentiment. Positive earnings fuel bullish momentum, which is reflected in stock market growth.

Expectations of the Fed Lowering Interest Rates

The FOMC had hinted at another rate cut in October, and market participants weighed that in while making trading decisions. Expectations of a dovish stance were also supported by moderating inflation and strong job-market reports. Jobless claims in the week ending October 25 dropped to 219,000 from 232,000 in the previous week.

Lower interest rates draw investments out of the US dollar as the incentive to hold the currency declines. Traders tend to reallocate their capital, selling assets with fixed yield and buying potentially higher-yielding ones, such as stocks.

Easing of Trade Restrictions

President Trump said that he plans to reduce tariffs on Chinese goods from 20% to 10% if China cooperates with the US to curb fentanyl exports. In addition, the US and South Korea reached a new trade agreement. Under this agreement, South Korea has committed to invest $150 billion in US shipbuilding projects, while America will limit tariffs on Korean imports to 15%.

Lower import costs translate into greater trade stability. Economic cooperation lifts investor confidence in sectors impacted by global supply chains, such as technology, manufacturing and consumer goods.

Trading the Stock Market Rally

Here’s what to keep an eye on to make informed trading decisions:

Corporate Earnings and News

Corporate news and future guidance directly influence the stock markets. Keeping an eye on bellwethers, such as Nvidia, Walmart, etc., could offer insights into broader industry performance. For instance, Nvidia’s supercomputer deal drove the S&P 500 up 0.26%  and the DJI by 0.09% on the day of the announcement. Similarly, Amazon’s cloud computing growth, report on October 31, 2025, drove the Dow Jones up 0.1% and the S&P 500 0.3%. The impact of month-end news can also ripple into the new month.

Stock Splits

Stock splits signal management confidence in the company’s long-term performance. This can influence positive market sentiment for the company. Plus, a relatively lower price makes the stock more accessible, driving trading volumes up. The added volatility creates trading opportunities. Companies that split stocks historically outperform their competitors in the near term. As the fundamentals remain the same, there is no long-term impact.

If trading individual stocks seems daunting, consider trading indices to explore opportunities created by individual company news. The diversification inherent in trading indices spreads your risk.

Jobless Claims and Inflation Data

Unemployment reports are early indicators of interest rate decisions. A resilient job market, while inflation remains stable, indicates stronger growth. This fuels positive sentiment towards growth stocks, driving indices higher.

FOMC Meetings

FOMC meetings help determine the Fed’s stance on interest rates. The Fed lowered interest rates by 25 basis points to the 3.75%-4% range on October 28, 2025. It also hinted at another cut in December. This could lead traders to sell the greenback and invest in potentially higher-yielding assets.

Seasonality

End-of-quarter portfolio rebalancing and earnings seasons often create volatility in the stock markets. Index traders often explore these opportunities using derivative instruments, such as CFDs. This is because CFDs allow them to trade both rising and falling markets.

The holiday season also drives market momentum. Thanksgiving sales and the Santa Rally have historically had a positive impact on the retail, hospitality and aviation sectors. Index traders tend to explore opportunities during these periods. However, during some periods, such as the New Year, institutional investors remain largely inactive, which means the markets can have wider swings due to lower trading volumes. Risk management becomes crucial during such times.

To Sum Up

• US indices surged more than the historical average in October 2025.
• Corporate earnings, jobless claims, interest rate decisions and seasonality impact the stock market.
• Index traders use these reports to make informed trading decisions.
• Using CFDs helps trade rising and falling markets. 
• Risk management is crucial, especially during periods known for wide market swings.

Disclaimer:

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