October 19th Market Overview

Happy Monday

Thirty-nine years ago today, the Dow lost nearly a quarter of its value in a single session.

Today though was a lot kinder! Tech won back some of last week’s losses, and the VIX, Wall Street’s fear and volatility gauge, fell about -9%.

Let’s dig in...

Today's Big Picture

1. Tech Bounced, but Most Stocks Sat It Out 
   
   The Nasdaq bounced after its worst week since June, and chip stocks were on track to end a nine-day losing streak. But about seven in ten S&P 500 stocks fell, as traders sold October’s winners and bought its losers. I’d like to see more of the market join in before I call this a recovery.
   

2. AI Lenders Aren’t Buying the Bounce CoreWeave 
   
   $CRWV got a buy upgrade from Goldman Sachs and still slipped into the red, near a fresh 52-week low. The cost to insure its debt against default has hit distress levels. Gartner’s chief forecaster told CNBC there’s more AI computing power than demand right now. For AI companies that borrowed heavily, the bond market is the scoreboard that matters.
   

3. Housing Is Feeling Higher Rates 
   
   Homebuilder confidence hit its lowest level since June 2012. Redfin says about one in seven home deals fell apart in September, a record outside the early COVID months. In Tampa, Jacksonville and Las Vegas, it’s closer to one in five. Buyers have more choices and more bargaining power right now, and more of them are backing out.

Market Overview

Index Performance

Stock Spotlight

Intel $INTC ( ▲ 2.87% )  
got upgraded to neutral at JPMorgan, which says the stock’s slide may be ending. The bank kept its $85 price target, which is still below where shares trade.

Ameriprise $AMP ( ▼ 4.0% )  
fell after Bank of America cut it two notches, from buy to underperform. Big advisor teams are leaving, and the bank thinks retention bonuses will squeeze margins.

Sandisk $SNDK ( ▲ 5.81% )  
led a comeback in memory-chip stocks, which took a beating last week on fears of Chinese competition.

Big Name Updates

Amazon $AMZN ( ▲ 5.31% )  
was the best stock in the Dow after Morgan Stanley named it a top pick and raised its price target.

Oracle $ORCL ( ▲ 1.44% )  
bonds are sitting just above junk. A downgrade could ripple through how the rest of the AI buildout gets financed.

Blue Chips
MarketBeat lists “7 Blue-Chip Stocks to Add To Your Forever Portfolio”

JPMorgan $JPM ( ▼ 1.67% )  
CEO Jamie Dimon says the bank will “blow way past” its $1.5 trillion national-security initiative. He said it’s backing companies earlier than it normally would.

SpaceX $SPCX ( ▲ 1.12% )  
CEO Elon Musk says he’ll give a share to every child in America next year. That’s roughly $10 billion for about 73 million kids at Friday’s $146.03 close, though details aren’t out yet.

Other Notable Company News

Palantir $PLTR ( ▲ 4.18% )  
bounced after five straight losses, helped by a Knox Systems deal to speed software companies through federal security rules.

Datadog $DDOG ( ▲ 5.89% )  
rose after Bernstein upgraded it, citing strong demand tied to AI.

Strategy $MSTR ( ▲ 0.05% )  
bought back $193 million of its preferred stock last week and raised its buyback plan to $3 billion. Index provider MSCI names the companies hit by its new index rules on Nov. 11.

iShares Mortgage Real Estate ETF $REM ( ▼ 3.12% )  
hit its lowest level since April 2020, with several of its holdings at 52-week lows..

Today’s Sponsor

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This is hedging. Big companies have done it for decades, buying protection against bad weather, fuel spikes and rising rates. It used to take a broker, a trading desk, and an order size no corner shop could meet.

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See how other owners are doing it at Kalshi.com/hedging

Sector Watch

Bond Market

Treasury yields started the day lower and turned higher by the afternoon, leaving the 10-year near 5.15. JPMorgan says stocks need yields to level off, since that takes pressure off AI borrowers and household budgets.

Policy Watch

Fed

The Fed meets next week. Most traders expect a hold, with a hike priced in for December. Bank of America still expects a hike at that meeting.

• BofA says inflation has gotten worse since the September meeting.
  

• Its economists argue most Fed officials already backed two hikes this year, so doing the second one now keeps a third on the table for December.

International

France is the story in Europe. More than 500,000 people marched over living costs this weekend, and some protests turned violent.

• French 10-year yields climbed back toward 5, which would be their highest in more than two decades.

• France’s biggest banks fell, and the euro slipped against the dollar.

Oil stayed high, with Brent near $109 and U.S. crude near $103.

• Ukraine hit an oil terminal in St. Petersburg on Sunday, and two tankers were attacked off Saudi Arabia on Friday.

What to Watch

SpaceX, Netflix and Housing Data Tuesday

SpaceX, Netflix, GM, United Airlines and Capital One all report. Netflix has lost about Disney’s entire market value over the past year, so the bar is low. September housing starts and pending home sales also land, the next check on how rates are hitting buyers.

Meta and Tesla on Wednesday

The number that matters is how much these two plan to spend. A big Meta budget would tell investors the AI checks are still coming. IBM, Texas Instruments and Lam Research report the same day.

The Chip Bounce Faces a Test

Western Digital reports Thursday, an earnings check on the memory stocks that led today. Before then, watch whether the iShares semiconductor fund can climb back to $515, which would erase Friday’s drop.

Thanks for reading - you are now the more informed 🙂

- John

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