Market Analysis (26 October 2026): Buy on Weakness

Wall Street closed lower on Friday, with the Dow Jones Industrial Average falling 1.23% to 52,215.16, the S&P 500 retreating 0.52% to 7,623.68 and the Nasdaq Composite declining 0.21% to 25,955.34.

The declines followed a volatile week, although the technology sector within the S&P 500 gained 0.35%. Consumer staples, consumer discretionary and financial shares came under the heaviest pressure, each falling by more than 1%.

Investors are preparing for a significant week, with earnings reports from major companies and a Federal Reserve monetary policy decision on the agenda.

Market sentiment: Market sentiment is clouded by concerns about the sustainability of investment in artificial intelligence (AI), particularly the scale of capital spending on data centres and companies’ ability to maintain returns on investment. Around a third of S&P 500 companies are due to report quarterly earnings next week, including Alphabet, Microsoft and Amazon. Despite these concerns, corporate earnings growth continues to support the market: according to LSEG IBES data, S&P 500 companies’ earnings are forecast to rise by more than 32% in the third quarter. US consumer sentiment, meanwhile, weakened in October to near a record low, reflecting households’ worsening view of economic conditions.

Geopolitics: Tensions in the Middle East have increased after US President Donald Trump said the conflict with Iran would not end until Tehran’s nuclear capabilities had been neutralised, although he said the US had launched no attacks on Sunday (25 October). Separately, the US Embassy ordered non-essential staff and their families to leave Saudi Arabia following Houthi attacks, reportedly involving 10 missiles, which left two people injured and caused property damage. Several Gulf countries condemned the attacks, while Iran said negotiations with Washington would be pointless until seven conditions it had set were met.

Regulation and policy: The Federal Reserve is expected to hold its benchmark interest rate at its policy meeting next Wednesday. Investors will focus on the central bank’s statement for indications of a possible policy change at its December meeting. The US midterm elections on 3 November are also a key political event, as they will determine the composition and control of Congress. In Indonesia, plans to introduce a B50 biodiesel mandate are attracting attention in commodity markets, as the policy could boost domestic demand for palm oil and affect the global supply balance.

Fixed income and currencies: The yield on the 10-year US Treasury rose to 5.00%, after falling 17 basis points in the previous session, while the two-year yield increased by five basis points to 4.69%. The moves reflect volatility in the bond market ahead of the Fed’s policy decision. In Japan, the 10-year government bond yield fell by more than 10 basis points to around 2.76%, while the two-year yield dropped four basis points to 1.86%. The US Dollar Index (DXY) weakened by 0.10% to 101.7041. The Japanese yen briefly strengthened to 156 per US dollar, its highest level in five weeks, amid increased demand for assets considered safe havens, before giving up some of its gains.

European and Asian markets: European equities fell. The UK’s FTSE 100 declined about 0.3%, bringing its weekly loss to nearly 2%. Germany’s DAX 40 fell 0.8% to 25,182, its lowest level since 9 October. France’s CAC 40 slipped 0.4% to 7,783 ahead of a Moody’s review of the country’s credit rating. The STOXX Europe 600 stood at 635.77, down 0.10% over the past four weeks.

Asian markets were mixed. The Shanghai Composite rose 0.89% to 3,690 and the Shenzhen Component surged 2.79% to 11,673, supported by purchases of state-backed ETFs. Hong Kong’s Hang Seng gained 0.7% to 23,093 as investors bought shares after the recent correction. South Korea’s KOSPI rose 0.30% to 5,550 as semiconductor shares recovered. By contrast, India’s BSE Sensex fell 0.2% to 73,124, recording a weekly decline of 2.1%. Singapore’s STI gained 0.13% to 5,422, while Malaysia’s FKLCI rose 0.21% to 1,612.

Commodities: Oil prices remained elevated and volatile. WTI crude stood at US$103.27 a barrel, up 3.82%, while Brent rose 3.14% on the day to US$116.70 a barrel. Coal held above US$150 a tonne, down 0.30%, near its highest level in three years. Among metals, gold fell 0.71% to US$3,996 an ounce, while copper rose 1.71% to about US$650.75 a pound. Malaysian palm oil gained 0.79% to MYR4,587 a tonne. Tin stood at US$50,517 a tonne on 23 October, up 0.85%, while nickel fell 1.69% to about US$15,848 a tonne.

Today’s agenda: Germany: October Ifo Business Climate. United Kingdom: October CBI Distributive Trades. Brazil: BCB Focus Market Readout. United States: September Chicago Fed National Activity Index and October Dallas Fed Manufacturing Index.

Indonesia: BPI Danantara is targeting SOE profitability of Rp334 trillion by the end of 2026 through operational efficiencies, simplifying corporate structures and optimising state assets. Restructuring has so far covered 364 companies, with a target of 700 by the end of December 2026.

Indonesia’s realised investment from October 2024 to September 2026 reached Rp3,923.2 trillion, comprising Rp1,998.7 trillion in domestic investment and Rp1,924.5 trillion in foreign investment. The investment supported about 5.49 million jobs, with 51.8% of the total realised outside Java.

Fitch Ratings expects Indonesia’s economy to grow by 5.2% in 2026, below the government’s 5.4% target. After year-on-year growth of 5.4% in the first half of 2026, growth is projected to fall below 5% in the second half. The slowdown is attributed to fading momentum in government spending after expenditure rose by almost 19% in the first half, contributing around 1.2 percentage points to growth. Higher global energy prices amid the US-Iran conflict and weaker consumer confidence are also expected to weigh on economic activity and household consumption through the end of the year.

The Jakarta Composite Index (JCI) closed 0.95% higher at 5,439.26 on Friday (23 October 2026), although foreign investors recorded net sales of Rp1.62 trillion on the regular market and Rp1.29 trillion across all markets. Cash and negotiated transactions, by contrast, recorded net purchases of Rp330.57 billion. Foreign net sales year to date have reached Rp122.20 trillion, with the heaviest selling in BBCA, BBRI, BBNI, GOTO, BRIS, TLKM, BUMI, TPIA, PTBA and BMRI. The largest foreign inflows were recorded in DSSA, ASII, AALI, EMAS, ENRG, CUAN, BUVA, UNTR, BRMS and KOTA. In the foreign exchange market, the rupiah remained around Rp18,080 per US dollar, staying above Rp18,000 for a third consecutive session despite a broad weakening of the US dollar.

Technically, the JCI again closed in positive territory. The 14-day RSI rose to 35.6, indicating the recovery could continue. If the index holds above 5,424, it could move towards resistance at 5,520 (EMA10) and then the 5,607–5,631 range. However, if profit-taking occurs and the JCI fails to hold above 5,424, it could retreat to 5,328 and potentially test support at 5,278 or 5,185.

“Investors are advised to remain cautious, apply a selective buy-on-weakness strategy and wait for further confirmation before accumulating more aggressively,” Kiwoom Sekuritas analysts said in a report on Monday (26 October).