Wednesday US Stocks Morning Brief | Nasdaq rises 1.18% to 26477, chip index gains 3.6%, confidence exceeds expectations at 91.7, Boeing plunges 10.7%, WTI retreats to around $100
(Cash-market closes are for Tuesday, 27 October, US Eastern Time; futures, commodities and European closing quotes are the data available as of this edition.)
On Tuesday, the S&P 500 rose 0.60% to 7722.60 points, the Dow rose 0.03% to 52377.57 points, the Nasdaq rose 1.18% to 26477.81 points, and the equal-weight S&P ETF (RSP) rose about 0.11% to $217.52 (Reuters) (RSP closing data). The 10-year US Treasury yield closed near 4.99%, little changed; WTI crude fell about 1.7% to around $100 per barrel, and Brent fell below $114 (Reuters); gold futures rose about 0.9% to $4075 per ounce; and the US dollar index rose about 0.3% to 102.29 (Investopedia market recap).
Market theme
Tuesday’s market did just one thing: ahead of the Federal Reserve decision and earnings from Microsoft and Alphabet, it shifted positions back into chips and AI hardware, rather than betting on a broad rally. The Nasdaq rose 1.18%, the Dow was nearly flat, and the equal-weight S&P rose just 0.11%; of the S&P’s 11 sectors, 6 rose and 5 fell. This was not a broad recovery in risk appetite, but a concentration of capital in a handful of AI names. Better-than-expected confidence and lower oil prices provided reasons for the gains, but the real test comes in the early hours tonight: Will the Fed soften or firm up its stance on a rate hike in December, and can Microsoft and Alphabet prove that enormous capital spending is turning into profit? Tuesday’s gains are merely a down payment ahead of those two answers.
I. Data and consumption: Confidence beats expectations by a wide margin, but the rebound’s quality deserves scrutiny
- The Conference Board’s consumer confidence index for October rose to 91.7, well above the revised 84.2 for September and market expectations of about 81. The present situation index rose 8.6 points to 120.4, while the expectations index climbed 6.9 points to 72.6 (Reuters). Reuters quoted Conference Board senior economist Fergus McCormick as saying that the rebound coincided with a decline in retail gasoline prices from September to October, but consumers continued to complain about rising living costs, with more mentions of prices, groceries and gasoline. The recovery in confidence is real, but it is driven by oil prices rather than income expectations—which is why its ability to translate into spending remains in question.
- Housing data was half good, half weak: new-home sales in September fell 0.6% month on month to an annualized 676 thousand units, but beat expectations of 615 thousand. There were 476 thousand homes for sale, equivalent to 8.4 months of supply; the median price rose 3.9% month on month to $400.4 thousand, still below $416.8 thousand a year earlier (data recap). The S&P CoreLogic Case-Shiller 20-city home price index for August rose 0.3% month on month and 2.7% year on year. New-home sales that “beat expectations but still fell” tell the same story as the confidence index: households are no more pessimistic, but they have not started spending freely either.
II. Bonds, the dollar and commodities: The 10-year yield stays below 5%, the dollar rises for a third day and oil falls for a second
- Tuesday’s bond-market mix was a notch gentler than Monday’s, but none of its components truly turned: the 10-year yield closed near 4.99%. Reuters’ daily recap said the US 5-year Treasury auction was acceptable, with a bid-to-cover ratio of 2.33, matching the average of the past 12 auctions; overseas demand was soft, while domestic demand offset the drag (Reuters). The dollar index rose for a third straight day. The uneventful auction is precisely why the bond market can remain around 5%—no one wants to make the first move on the eve of the decision.
- Oil fell for a second straight day but remained high: WTI dropped about 1.7% to around $100, and Brent fell below $114 (Reuters). Gold futures rose about 0.9% to $4075 per ounce, showing that demand for a safe haven has not disappeared as stocks rose. The oil pullback offers relief, not a way out: as long as the Tehran talks yield no substantive results and Houthi attacks continue, oil will struggle to return below $110 in one move.
- European shares fell before rebounding on Tuesday: the pan-European STOXX 600 closed up 0.47% at 643.68 points after falling as much as 0.41% in early trading. HSBC closed down more than 5% after its third-quarter revenue missed expectations and wealth-management growth slowed, dragging Britain’s FTSE 100 down 0.75% (Reuters, as reported). Europe’s gains today came from chips and lower oil prices, not banks. The fact that HSBC alone could drag the market down in early trading also shows that Europe’s rebound lacks broad support.
III. Stock and sector moves, including earnings: Chips lead gains, Boeing leads losses, and rewards for good earnings are getting stingier
- Sector divergence was Tuesday’s clearest pattern: of the S&P’s 11 sectors, 6 rose and 5 fell. Technology led with a gain of about 1.5%, while energy lagged with a decline of about 2%. The Philadelphia Semiconductor Index rose 3.6%, with all 30 constituents advancing; Dell and Super Micro Computer each rose about 7.5% (Reuters). Individual stocks also diverged during the session: SoFi rose about 13%, JetBlue about 19%, UPS about 6%, Royal Caribbean about 6.5% and PayPal about 2%; Sherwin-Williams fell about 3% and Coca-Cola about 1.5% (Investopedia market recap). The winners were “AI hardware and the travel recovery”; the losers were names that had already risen and struggled to gain further even on another earnings beat. Tuesday’s yardstick remained how much the share price had already priced in.
- Boeing was Tuesday’s leading large-cap decliner: its shares plunged 10.69% to $168.18. Third-quarter revenue was $24.19 billion, up about 4% year on year, while its core loss per share of $0.34 was wider than the expected loss of about $0.24. The company said it would miss its full-year target of delivering 500 737 Max aircraft, with production ramping up more slowly than originally expected (earnings recap). However, its GAAP net loss narrowed to $116 million, far better than $5.339 billion a year earlier; operating cash flow was $1.5 billion and the total order backlog reached a record $745 billion. The sharply narrower loss could not save the stock because the market was penalizing another delay to the production ramp-up timetable, not the past quarter. The recovery story is still progressing, but its conversion into cash flow has slowed.
- After-hours earnings also diverged: Visa’s fiscal fourth-quarter net revenue was $12.1 billion, up 13% year on year, and adjusted earnings per share were $3.48, up 17%; both beat expectations. Payment volume grew 9%, cross-border volume rose 14% and processed transactions increased 10%. Full-year net revenue hit a record $45.9 billion, but the stock still fell after hours (Barron’s). Robinhood reported record third-quarter revenue of $1.42 billion, up 12% year on year, but profit fell to $476 million and diluted earnings per share were $0.51. Crypto trading revenue plunged 55% to $120 million, and the stock fell about 6% after hours (Reuters, as reported) (Reuters). Visa’s story is that consumption remains resilient; Robinhood’s is that the composition of retail trading has changed. Both reports beat expectations or set records, yet both stocks fell after hours, suggesting the market now rewards only the combination of a beat and undiminished guidance.
IV. AI news: $63 billion financing buys computing capacity for Anthropic; Nvidia invests $3 billion in Meta
- Financing remained the main catalyst for Tuesday’s AI trade: Bank of America, Blackstone, Citi and Morgan Stanley announced a $63 billion deal to procure Broadcom computing capacity for Anthropic, with delivery expected to begin in 2027 (closing recap). Nvidia will invest $3 billion in Meta’s equity financing, which Meta has increased to $97.5 billion, its largest ever (Investopedia market recap). Chipmakers putting up money to help major customers finance themselves and then selling chips to those customers is the “circular trade” the market repeatedly questions: the orders are real, but so is the closed funding loop.
- Reuters’ daily recap identified the substance of the test coming in the early hours tonight: Microsoft, Alphabet and Amazon together have nearly $1.7 trillion in order backlogs and plan capital spending of as much as $600 billion this year, but investors are becoming less tolerant of spending that erodes free cash flow. Meta provided an example last week: encouraging revenue growth came alongside an increase in spending plans that weighed on its share price (Reuters). Strong AI demand alone is no longer enough; the market wants evidence of monetization, margins and cash flow. Microsoft’s and Alphabet’s earnings early Wednesday morning are the first formal test of that proposition.
V. Looking ahead: Calendar (Hong Kong time)
- 28 October (Wednesday): UK budget; second day of the Federal Reserve meeting.
- 29 October (Thursday), 02:00 a.m.: FOMC decision (the market expects rates to remain at 3.75–4.00%; no dot plot this round; holding steady this week is almost the consensus, while the probability of a hike in December remains high); 02:30 a.m., Federal Reserve Chair’s press conference; Microsoft and Alphabet report after-hours earnings early the same morning (after Wednesday’s US Eastern Time close).
- 29 October (Thursday): 20:30, preliminary Q3 GDP (market expectation: annualized growth of 3.2%, above the previous 2.2%) and PCE for September; 21:15, ECB rate decision; before the open, Eli Lilly and Mastercard; after the close, Amazon and Intel.
- 30 October (Friday): Bank of Japan decision; 20:30, employment cost index (market expectation: 0.8%, below the previous 0.9%); before the open, Exxon Mobil and Chevron.
- 31 October (Saturday): Another protest in France, called by unions and the Yellow Vests; 3 November (Tuesday): US midterm elections; 5 November (Thursday): major French union strike.