New York, October 31, 2025 – The New York Stock Exchange wrapped up a turbulent Thursday session with major indexes posting declines, underscoring investor unease over escalating corporate spending in artificial intelligence and a hawkish tone from the Federal Reserve, even as a surprise trade agreement between U.S. President Donald Trump and Chinese President Xi Jinping offered glimmers of global economic relief. The Dow Jones Industrial Average shed 0.23%, or 109.99 points, to close at 47,522.12, while the tech-heavy Nasdaq Composite plunged 1.57%, or 377.33 points, ending at 23,581.14. The S&P 500 followed suit, dipping 0.99%, or 68.25 points, to finish at 6,822.34. In a counterintuitive move, the CBOE Volatility Index, or VIX – often dubbed Wall Street's "fear gauge" – edged down just 0.06% to 16.91, reflecting a market that remains relatively composed despite the day's losses.
The session's downturn came on the heels of a whirlwind of corporate earnings reports from Big Tech giants and a pivotal bilateral meeting between Trump and Xi on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Busan, South Korea. While the leaders' discussions yielded tangible progress on trade frictions – including tariff reductions tied to fentanyl controls and a temporary thaw in restrictions on critical minerals – the positive headlines failed to fully offset domestic headwinds. Analysts noted that much of the trade optimism had already been "priced in" to recent market rallies, leaving room for disappointment elsewhere. "The market's reaction shows how selective investor sentiment has become," said Rita Nazareth, a strategist at Bloomberg Intelligence. "Trade de-escalation is welcome, but it's the here-and-now costs of AI ambition that's dominating the narrative."
The Trump-Xi summit, marking the first in-person encounter between the two leaders since Trump's return to the White House in January, unfolded against a backdrop of renewed U.S.-China tensions that had threatened to spiral into a full-blown trade war earlier this year. Held at the Gimhae Air Base near Busan's international airport, the nearly two-hour meeting – described by Trump as "amazing" and "truly great" – produced several key concessions aimed at stabilizing bilateral relations. In a post-meeting briefing aboard Air Force One, Trump announced that Washington would slash fentanyl-related tariffs on Chinese imports from 20% to 10%, effectively reducing overall duties on Beijing's goods from 57% to 47%. This move, which addresses a long-standing U.S. grievance over the influx of the synthetic opioid – responsible for over 100,000 overdose deaths annually – was framed as reciprocity for China's renewed commitments to curb precursor chemical exports.
Xi, in turn, pledged that Beijing would "work very hard to stop the flow" of fentanyl, echoing promises made during Trump's first term but often criticized for lacking enforcement. U.S. officials, including Treasury Secretary Scott Bessent, highlighted the deal as a "tactical pause" in hostilities, with China also agreeing to resume purchases of American soybeans and other agricultural products – a nod to Midwestern farmers hit hard by prior trade disruptions. Farm exports to China had plummeted more than 50% in the first seven months of 2025 amid escalating duties, exacerbating rural economic strains.
Perhaps most critically for global supply chains, the duo forged a one-year moratorium on Beijing's recently announced export controls for rare earth elements and magnets – vital components in everything from electric vehicle batteries to fighter jets and consumer electronics. China dominates over 80% of the world's rare earth processing, and its October curbs had sparked fears of shortages that could inflate U.S. manufacturing costs by up to 15%, according to estimates from the Foundation for Defense of Democracies. In exchange, the U.S. committed to a temporary suspension of expansions to its Entity List, easing restrictions on certain Chinese firms' access to American technology affiliates. "This isn't a structural reset, but it's better than unchecked escalation," noted Craig Singleton, a senior fellow at the think tank. The agreement also paves the way for Trump's planned state visit to China in April 2026, signaling potential for deeper diplomacy.
Despite these breakthroughs, Wall Street's focus swiftly shifted to the corporate ledger, where a trio of earnings releases from Meta Platforms, Microsoft, and Alphabet painted a picture of unbridled AI enthusiasm – and the ballooning price tag attached. Meta's shares cratered more than 11% in after-hours trading, erasing over $100 billion in market value, after the company hiked its full-year capital expenditure forecast to $70 billion-$72 billion, up from $66 billion-$72 billion previously. Although third-quarter revenue soared 26% to $51.24 billion – topping estimates of $49.41 billion – and adjusted earnings per share hit $7.25 against expectations of $6.69, the results were marred by a staggering $15.93 billion one-time tax charge linked to Trump's "One Big Beautiful Bill Act." CFO Susan Li warned of even steeper outlays in 2026, driven by AI infrastructure like the $27 billion Hyperion data center in Louisiana, a joint venture with Blue Owl Capital. "We're investing aggressively to meet computational needs, but investors are questioning the near-term ROI," said Jesse Cohen, a senior analyst at Investing.com. Meta's Reality Labs division, encompassing VR and AR hardware, deepened its losses to $4.4 billion on just $470 million in sales, further fueling skepticism.
Microsoft fared marginally better but still saw its stock dip nearly 3%, as the software behemoth disclosed accelerated capital spending of $34.9 billion in its fiscal first quarter – a 74% year-over-year surge – amid surging demand for Azure cloud services. Revenue climbed 18% to $77.7 billion, beating forecasts of $75.5 billion, with Azure growth accelerating to 40% and non-GAAP EPS at $4.13, up 23%. CEO Satya Nadella touted plans to expand AI capacity by 80% this year and double data center footprints over the next two, but flagged ongoing capacity shortages. The quarter's net income took a $3.1 billion hit from its deepened OpenAI partnership, which propelled Microsoft's market cap past $4 trillion earlier this week. "Demand outpaces supply, and we're racing to catch up," Nadella said on the earnings call. Yet, the spending spree – including billions funneled into AI talent and cloud expansions – amplified fears of margin compression across the sector.
Providing a bright spot, Alphabet's shares bucked the trend, surging 2.5% after the Google parent notched its first-ever $100 billion quarter, with revenue of $102.35 billion – a 16% increase that crushed estimates of $99.89 billion. Adjusted EPS reached $3.10, well above the $2.33 consensus, buoyed by 32% growth in Google Cloud (fueled by AI services with a $155 billion backlog) and robust YouTube ad revenue. CEO Sundar Pichai attributed the momentum to "strong demand across our ecosystem," but tempered enthusiasm by lifting 2025 capex guidance to $91 billion-$93 billion, nearly all for AI datacenters – up from $85 billion just months ago. Wall Street applauded the results, with Deutsche Bank reiterating a "buy" rating and $340 price target, citing "virtually no hair on the print." Still, the capex hike underscored the tech industry's collective wager on AI's long-term payoff, even as short-term costs mount.
Compounding the caution, Federal Reserve Chair Jerome Powell's remarks during Wednesday's post-meeting press conference cast a pall over rate-cut hopes. The Fed trimmed its benchmark rate by a quarter-point to 4.75%-5%, the second reduction of 2025, aligning with expectations. Yet Powell emphasized that a December cut "is not a foregone conclusion – far from it," citing divergent committee views and persistent inflation risks from tariffs and supply constraints. September's CPI ticked up to 3% from 2.9%, and Powell noted "strongly differing opinions" on proceeding, with a "growing chorus" advocating a pause. Markets, which had priced in a 90% chance of another cut, saw probabilities drop to 60%, spiking Treasury yields and pressuring equities. "Powell's hawkish pivot signals the Fed's data dependence amid tariff-induced inflation," observed Financial Express analysts.
Broader market dynamics amplified the day's volatility. Nvidia's earlier surge to a $5 trillion valuation – the first company to hit that milestone – provided fleeting Nasdaq lift, but a rotation out of megacaps dragged the index lower. Energy stocks offered some ballast, with oil futures up 2% on supply concerns, while gold dipped below $4,000 an ounce amid dollar strength. Sector-wise, technology fell 1.8%, consumer discretionary dropped 1.2%, but industrials eked out a 0.1% gain on trade truce hopes.
Looking ahead, Friday's payrolls data and earnings from Apple and Amazon could dictate the week's close, with investors parsing for clues on consumer resilience. The S&P 500's 19.63% year-to-date gain masks underlying fractures, as the index trades near all-time highs but grapples with valuation stretches – its forward P/E at 24x earnings. For now, the Trump-Xi detente buys time, but as Powell's words echo, the path to sustained recovery remains fraught. "Trade peace is a start, but AI's bill and Fed restraint remind us: markets reward patience, not euphoria," Nazareth concluded.
