Eli Lilly not threatened by obesity

The past week brought some relief to investors. The sell-off two Fridays ago turned out to be so unexpected and intense that many market participants began to question the sustainability of the current uptrend. The week that followed was supposed to provide an answer to that concern.

At first glance, everything looks quite solid. All major U.S. stock indexes showed steady growth – from 1.56% for the blue-chip Dow Jones (DJIA-30) to 2.14% for the high-tech NASDAQ Composite. The main benchmark of the U.S. stock market, the S&P 500 index, also added 1.7% over the same period.

In addition, the new earnings season got off to a strong start. Both major U.S. banks and their smaller regional peers reported solid results, easing investor concerns about a potential rise in credit risks. Analysts now expect the average profit of S&P 500 companies to grow by 9.3% in the third quarter – better than the 8.8% beginning of October forecast.

However, all this represents only the visible, “bright” side of the stock market. What is happening on its “dark” side remains unclear and can only be guessed. Investors should be cautious about the growing nervousness in the market. This is reflected in the volatility index (VIX), also known as the “fear index,” which climbed to its highest level in six months during the week — 28.99 points.

Moreover, despite the overall solid performance of the indexes, only about half of the sharp decline from the previous Friday was recovered. The rebound happened almost immediately last Monday, after which the market hovered around the zero mark, fluctuating without a clear direction.

Another point of concern is the noticeable decline in demand for tech stocks. By the end of the week, the tech sector ranked only seventh out of eleven in terms of growth. The leaders were companies in the Communication Services (+3.33%), Real Estate (+3.12%), and Consumer Defensive (+2.59%) sectors.

Of course, President Trump also contributed to the overall market anxiety, continuing to shake investor sentiment with his constant threats to impose 100% tariffs on China, as well as his newly announced export control measures on “any critically important software”, set to take effect on November 1.

Pharmaceutical companies also came under fire from Trump after a period of relative stability. As a result, the pharmacy sector ended the week among the market’s underperformers, with its leader Eli Lilly (LLY) becoming one of the biggest losers in the S&P 500 index. The company’s shares dropped about 4% of their substantial market capitalization following Trump’s threats to force a price reduction on its obesity and diabetes drugs, Zepbound and Mounjaro.

Overall, despite the decent results, the past week left plenty of questions about the market’s ability to continue climbing to new highs. However, it is unlikely that any major movements will occur before the next FOMC meeting of the U.S. Federal Reserve, scheduled for the end of October.

 

 

Market expectation for October 20, 2025

The current week began on a positive note. Global stock markets are trading in the green, inspiring investors with confidence and optimism about the near future.

The main wave of optimism is coming from Japan, where parliamentary elections will be held on Tuesday to determine the fate of Sanae Takaichi’s bid for prime minister. If successful, the LDP leader would become the first woman ever to hold the office in the country’s history.

Takaichi is considered a “fiscal dove” and is expected to increase government spending while opposing further interest rate hikes by the Bank of Japan. Her election as LDP leader at the end of September has already sparked an impressive rally in Japanese markets, driven by expectations of a softer economic policy under her potential premiership.

Amid the optimism, Japan’s Nikkei 225 index hit new record highs today, easily surpassing the 49,000-point mark.

The Chinese market is also showing growth – largely thanks to positive GDP dynamics in the third quarter. Hong Kong surged by more than 2%, driven by a rebound in tech stocks.

China’s GDP grew by 4.8% year-on-year in the third quarter, slightly exceeding the forecast of 4.7%. Quarterly growth also outperformed expectations, and since the beginning of the year, the figure has remained above the government’s 5% target.

Against such a positive backdrop, it’s no surprise that futures on major U.S. indexes are also showing steady gains, rising 0.5% on Monday morning.

However, this is only the beginning of a tense and highly important week, the main event of which will be the full-scale launch of the new corporate earnings season. Investors are awaiting a flood of key and intriguing data that could significantly influence market sentiment. Particular attention will be focused on the heavyweights – Netflix (NFLX) and Tesla (TSLA), whose reports will be released after the market close on Tuesday and Wednesday, respectively.

In addition to these two giants, dozens of other major companies (General Electric, Coca-Cola, Philip Morris, General Motors, Ford, IBM, Procter & Gamble, Intel) will also release their results. Their reports should give investors a clearer picture of whether the current market rally is justified and if there’s reason to expect it to continue.

As for macroeconomic data, the situation remains uncertain. The government shutdown continues, and it’s still unclear how long this pause will last. Fortunately, market participants don’t seem overly concerned – the focus remains squarely on corporate earnings.

All that’s left is to keep our fingers crossed and hope that American business won’t disappoint. If so, by the end of the week, the market could once again approach its historic highs.