October 16th Market Overview

Happy Friday

Thanks everyone for the congrats yesterday, really heart warming.

Well tech closed out a rough week with another down day, and AI stocks took the worst of it. All week, investors have been asking how the companies building data centers will pay off all that debt. We saw real money start rotating out of AI stocks this week and into some traditionally “safer” sectors and names.

More on that tomorrow for Saturdays premium letter (free signup this weekend)

Lets dig in….

Today's Big Picture

1. The AI Selloff Reached Software

The Nasdaq is headed for its worst week since June, while the Dow is on track for a gain. Chip stocks fell for a ninth straight day, their longest losing streak since 2006, and software went down with them. Goldman Sachs says investors this week demanded record extra yield on risky AI bonds, while other risky bonds barely moved. So far, the trouble is staying inside AI.

2. U.S. Crude Crossed $100

U.S. crude topped $100 a barrel, and global Brent crude hit $109. Iran stepped up attacks in the Strait of Hormuz this week, and Ukraine vowed to keep hitting Russian refineries. Energy was the best sector in the S&P 500, and Chevron $CVX helped keep the Dow’s losses small. Expensive fuel is a big reason inflation keeps running hot.

3. Rate Hike Bets Faded After Warsh

Fed Chair Kevin Warsh gave no hint about this month’s meeting, and traders took that as no rush. Odds of an October hike fell to about one in seven, from more than one in four on Thursday. Bank of America still expects a hike Oct. 28. Its economists say more than half of prices outside food and energy are rising faster than the Fed’s target.

Market Overview

Index Performance

Stock Spotlight

CoreWeave $CRWV ( ▼ 12.44% )  
gave back Thursday’s bounce and then some, landing near $60, the low buyers defended a day earlier. Its debt now tops $51 billion, though Bank of America still has a $140 price target.

Palantir $PLTR ( ▼ 7.23% )  
fell with nearly every other software stock, wiping out about $34 billion in market value. A close below $188.15 puts it in a correction, just a week after its record high.

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Micron $MU ( ▼ 5.77% )  
kept falling on fears that China’s CXMT is catching up in memory chips. Citi pushed back, saying CXMT is four manufacturing generations behind and unlikely to mass-produce before 2028.

Big Name Updates

Tesla $TSLA ( ▼ 2.99% )  
gave up an early gain and turned lower after Thursday’s Roadster reveal. Tesla calls it the world’s first flying car, but production doesn’t start until 2028.

Nvidia $NVDA ( ▼ 1.26% )  
slid again, and CoreWeave is part of the reason. Nvidia owns about a tenth of it and sells it the chips it rents out.

Netflix $NFLX ( ▼ 3.36% )  
fell after its chief content officer left, a day after laying out job cuts as growth slows. It reports earnings next week.

Berkshire Hathaway $BRK.B ( ▲ 0.69% )  
put another $330 million into Bending Spoons, an Italian company that grows by buying other businesses. Morningstar says CEO Greg Abel is finally pushing Berkshire out of its comfort zone.

Other Notable Company News

Trump Media $DJT is sinking toward an all-time low, weeks after agreeing to merge with fusion company TAE Technologies. A filing shows TAE had “substantial doubt” about staying in business before the deal.

Travelers $TRV ( ▲ 1.59% )  
earned $9.18 a share, way above the $7.42 analysts expected, and the stock recovered from an early drop.

Workday $WDAY ( ▼ 3.24% )  
has held up this week while most software stocks sank. First Eagle’s Manish Gupta, who bought during this year’s software crash, says it’s still cheap.

J.B. Hunt $JBHT ( ▼ 3.2% )  
slipped after warning that higher fuel prices are weighing on its business.

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Sector Watch

Bond Market

Treasurys are headed for their best week since mid-February, before the Iran war started. Wells Fargo’s investment arm still isn’t buying long-term bonds, saying rates haven’t peaked yet.

Policy Watch

Fed

Speaking in Bangkok, Warsh made it clear the Fed won’t preview its moves anymore. “It’s a new chapter at the Fed, and we’re not in that business anymore,” he said.

• Futures still price in one quarter-point hike by December.

International

• IMF officials warned the world economy is betting heavily on AI. If it goes bust, they say stock investors won’t be the only ones hurt.
  

• South Korea’s finance ministry is stepping up market monitoring after the Kospi’s worst week since October 2008.
  

• Indonesian stocks fell the most in 28 years after MSCI warned it may cut the country from its emerging-market indexes. MSCI decides by the end of June 2027.

What to Watch

Fed Decision, Then Inflation

The Fed announces its next move Oct. 28, and its preferred inflation report comes out the next day. A hot reading would firm up bets on a hike in December.

Tesla Reports Next Week

Tesla $TSLA posts third-quarter results next week. Wall Street values it on self-driving and robots. Cars still bring in most of its revenue, though, so watch car sales.

Meta’s AI Spending

Meta $META also reports next week, and it’s one of CoreWeave’s customers. After this week, its AI spending plans will get a close look.

Thanks for reading - you are now the more informed 🙂

- John

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