Fed Cuts, Tech Splits: Navigating Market Divergence

Fresh news and strategies for traders. SPY Trader episode #1411. The market is navigating extreme volatility and selection following a Fed rate cut and divergent megacap tech earnings. While Nvidia surged to a $5 trillion valuation, confirming the intense concentration in AI growth, stocks like Meta plunged on guidance concerns. Recommendations focus on maintaining selective AI exposure (QQQ) while balancing risk with cyclical value (VTI, CAT) and defensive fixed income (BND) amid confirmed Fed easing.

Episode Transcript

(00:00):
Welcome back to Spy Trader , your early morning guide to navigating the market currents .
I'm Bullish Barry , and it's 6 am on Thursday , October 30th , 2025 , Pacific time .
We've just navigated a massive wave of earnings reports and a critical Federal Reserve rate decision , leaving the market looking highly selective and incredibly volatile .

(00:23):
Let’s dive into what you need to know before the opening bell , focusing on where the money is flowing and where the risks are hiding .
The market is near alltime highs , but the strength is intensely concentrated .
First , the Fed delivered a widely expected quarterpoint interest rate cut , the first since July , signaling support amid trade uncertainty and a softening labor market .

(00:47):
However , Chairman Powell introduced caution by leaving uncertainty about another December rate cut , despite the market expecting one .
Second , the Megacap technology earnings storm delivered huge divergence .
Nvidia officially confirmed its status as the leader of the market cycle , becoming the first company to hit a 5 trillion market cap .

(01:10):
Alphabet also soared nearly 7% after reporting a blockbuster quarter , highlighting strength in its core business .
But the high flyers weren't universally loved .
Meta Platforms plunged premarket despite beating estimates , as investors reacted harshly to weak engagement data and higher capital expenditure guidance for AI .

(01:32):
Microsoft also dropped after revealing its substantial investment in OpenAI created a tangible drag on quarterly earnings .
Finally , the USChina talks provided only modest progress , not the major trade breakthrough investors hoped for , causing stock futures to turn lower this morning .
The key insight today is the intense ‘ RiskOn ’ concentration in growth .

(01:58):
The Nasdaq Composite , which is outperforming the S&P 500 , is now trading at 35 times earnings , which is a significant premium to its 10year average of 26 times .
The market is paying top dollar for AIlinked growth but punishing anyone showing operational weakness .
We are seeing strong underlying economic resilience outside of tech , however .

(02:24):
For instance , the Industrials sector is positive , exemplified by Caterpillar jumping 9.3% on robust demand for its equipment .
Conversely , high commodity costs are hitting Consumer Staples .
Companies like Mondelez fell 3.3% as rising cocoa prices prove difficult to pass on fully to the consumer .

(02:44):
This confirms we are in a highly stockspecific market right now .
Given the momentum , we need to maintain selective growth while hedging against high valuations .
For our trading recommendations , first , maintain concentrated exposure to the AI engine using ETFs .
The growth story , driven by companies like Nvidia and Alphabet , is real .

(03:07):
To capture this trend while mitigating the huge singlestock volatility we saw with Meta , I recommend maintaining a position in the Invesco QQQ Trust ( QQQ ) or the Technology Select Sector SPDR Fund ( XLK ) .
This gives you diversified access to the Nasdaq100 leaders .
Second , seek value and cyclical resilience outside the most crowded trade .

(03:32):
The strength in Industrials suggests stability , so look to companies like Caterpillar ( CAT ) directly , or consider a broad market fund like the Vanguard Total Stock Market ETF ( VTI ) .
VTI offers crucial exposure to stocks outside the megacaps that currently present better relative value compared to the highly valued Nasdaq names .

(03:54):
Finally , use fixed income for defensive positioning .
The Fed’s rate cut confirms an easing cycle , which is supportive of bonds .
With the 10year Treasury yield still elevated at 3.98% , core bond ETFs offer attractive income and stability .
Look to the Vanguard Total Bond Market ETF ( BND ) or the iShares Core U.S.

(04:17):
Aggregate Bond ETF ( AGG ) to balance your portfolio against equity volatility .
That’s all for this morning’s Spy Trader .
Trade smart , stay safe , and I’ll catch you on the next move !