November 5th Pre-Market Brief

Good Morning.

Day two of the election trade, and chip stocks are taking it on the chin again. This time the Nasdaq is pulling the S&P lower with it.

Small caps are up while the Nasdaq slides, so traders seem happy to keep buying, just not tech.

Let's dig in...

Today's Big Picture

1. Chip Stocks Are Being Sold For A 2028 Problem

Broadcom and Nvidia are lower premarket after memory makers SK Hynix and Samsung sank in Seoul overnight. The fear is fewer U.S. data centers, but Nomura says most of the ones due in 2027 are already being built. Today’s problem is the opposite, and Qualcomm is down hard because memory chips are still scarce and pricey.

2. Wall Street Wants Big Tech To Spend Less

Amazon and Microsoft rallied hard yesterday on the same news that’s sinking chip stocks. Wall Street’s biggest worry about Big Tech this year was the cost of building for AI. Fewer new data centers means smaller construction bills, so the companies spending the money rally while their suppliers fall.

3. The Bank Of England’s Hike Isn’t A Fed Preview

The Bank of England raised rates this morning, worried UK workers will demand big raises to cover higher heating bills. Here, labor costs per unit produced fell last quarter, data showed this morning. Layoffs are near their lowest since 1969, yet workers’ share of what the economy produces fell to a record low. That makes a December Fed hike look shakier than traders think.

Market Overview

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Stock Spotlight (pre-market)

AppLovin $APP ( ▲ 10.69% )

AI powered ad platform for mobile apps and games, is rallying after its third quarter results and its outlook both beat estimates. Revenue hit $2.18 billion against $2.07 billion expected, and a key profit measure also came in ahead.

Snap $SNAP ( ▼ 7.94% )  

Snapchat parent, is down big because its ad business barely grew last quarter as big consumer brands cut spending. Revenue of $1.72 billion and 495 million daily users also fell just short of estimates.

Zillow $Z ( ▲ 9.43% )  

online real estate marketplace, is falling hard after traffic to its apps and sites dropped in what it called “one of the toughest housing markets in a generation.” Revenue of $724 million missed the $754 million expected, and profit came in short too.

Unity Software $U ( ▲ 10.32% )  

makes software for building video games, is sharply higher after third quarter profit came in at five times what analysts expected. It earned 25 cents a share against 5 cents expected, on revenue of $622 million versus $567 million.

Expedia $EXPE ( ▲ 10.54% )

lower because its holiday quarter forecast came in light, even though the third quarter beat. It sees revenue of $3.69 billion to $3.75 billion, mostly below the $3.74 billion analysts expected.

Peloton $PTON ( ▲ 6.04% )

the fitness equipment maker, is higher after fiscal first-quarter revenue of $559 million topped the $554 million expected. Earnings of 19 cents a share missed the 21 cents analysts wanted.

What to Watch

IREN Earnings (After The Bell)

IREN builds AI data centers, and its 2 gigawatt Sweetwater campus is in Texas, where the governor elect wants to pause new permits. Projects already under construction would reportedly be exempt. If IREN says Sweetwater qualifies, smaller AI cloud names like CoreWeave get a reason to bounce. If it can’t, expect more pressure on the group.

October Jobs Report (Friday, 8:30 AM ET)

Economists expect employers added about 59,000 jobs, with unemployment holding at 4.2%. The number to watch is hourly pay, which forecasters see lagging inflation again. A surprise jump in pay would lock in a December rate hike. Another soft number backs the case for the Fed to wait.

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