Tech rally fades fast, AI doubts, and Middle East alert triggers global weakness

And bang, just like that stocks pushed higher yesterday….as investors found fresh reasons to step back into technology…and the buying continued after the closing bell as earnings gave the AI trade another shot in the arm. (Well, that was until they digested all the earnings…more below).

At the end of the day – the Dow gained 0.7%, the S&P up 0.6%, the Nasdaq ended the day up 280 pts or 1.05%, the Russell up 0.3%, the Transports added 0.2%, the Equal Weight S&P gained 0.35% while the Mag 7 rose 0.9%.

Yesterday morning started with HEALTHCARE. Elevance blew thru the earnings estimate and raised its full-year outlook and they sold it.

Then you’ve got Thermo Fisher and Danaher—the picks and shovels of biotech and pharma. Both ended the day higher.

Abbott offered a softer read. It trimmed its sales-growth outlook while reaffirming full-year EPS guidance. It ended the day lower.

Away from healthcare, AT&T delivered a lesson in the difference between a good report and a good stock reaction. Revenue rose, beating expectations, and management lifted its adjusted earnings outlook to around $2.40 a share. Yet stock fell 6.3% as concerns about competition from Starlink overshadowed the results.

The company-maintained plans to return more than $45 billion to shareholders through dividends and buybacks during 2026–2028.

But THIS morning? A different story. Stocks are under pressure here and around the world as investors reconsider what those results and what those spending plans actually mean. Before we get into what changed overnight, let’s look at what drove yesterday’s buying.

Earnings yes, but you also had to consider the latest headline – Musk considers a merger of SPCX & TSLA.

SpaceX’s blowout report helped ease some of the concern about whether all this AI investment can produce a payoff. But the bonus was the SPCX and TSLA potential merger news.

Musk announced that he established special committees at BOTH Tesla and SpaceX to explore a combination. A surprise? Not entirely. The market had been speculating about this ever since SPCX went public. But setting up committees gave investors something more concrete to consider—and helped lift both stocks and the overall tone of the market.

Now, depending on the structure and valuation, a transaction could challenge the record books. But there is a long road between exploring a merger and closing one. Valuation, governance, shareholder treatment, regulatory scrutiny, and potential national-security questions would all need attention.

So – as you might expect – investors, traders and algo’s ran right back into the tech trade…. So, on Tuesday, the Troops did the heavy lifting while the Generals took a breather. Yesterday, the Generals stepped back onto the field. All subsets of tech surging higher…. the XLK up 1.7%, Semis +2.1%, Cyber +2.7%, Disruptive Tech +2.4%, Software +1.8%, Memory names +3%, Quantum names rose by more than 3% while the Space Trade (UFO) advanced by a whopping 3%. (Space trade is also considered TECH).

From the sector perspective – 4 of the 11 sectors ended the day lower – Consumer Staples, Communications, Healthcare and Real Estate. The others ended the day higher with TECH being the clear winner – up more than 1%.

And so, the markets waited all day for results from META, TSLA, IBM and LRCX.

After the bell, Tesla’s profit beat expectations, while Meta delivered strong revenue and raised the lower end of its capital spending outlook. Meta’s message was clear: management believes the investment is producing results, and it intends to keep spending. Both names initially moved higher after the bell—but that enthusiasm didn’t hold across the board.

IBM delivered as well. Revenue topped expectations, while adjusted earnings of $2.95 a share beat the $2.86 estimate. Software revenue grew 8.3%, and management raised the lower end of its annual software growth outlook as delayed deals started closing. All good…and investors took the stock up 4% in after-hours trading.

But Lam Research threw cold water on the celebration. Its weaker-than-expected guidance sent shares down more than 7%, putting pressure on other chip-equipment names this morning.

Remember, Lam supplies the equipment used to manufacture semiconductors, so its forecast offers a window into its customers’ investment plans. It doesn’t tell the whole AI story—but when expectations are this high, a disappointing outlook gives investors another reason to question the pace of the buildout. This morning, Lam is trading down nearly 8%.

And THAT brings us back to the bigger AI discussion. The anxiety in recent weeks has centered on a straightforward question: How much money goes out the door BEFORE enough profit comes back in? Yes, investors understand chips, data centers, electricity, and talent cost money but what they want is evidence that the future earnings will justify the spending—and that companies can finance the buildout along the way.

In addition- Ken Griffin of Citadel fame came out swinging – telling us that we are ‘almost certainly’ in the middle of an AI bubble….and Larry Fink (Blackrock) warned that delays in building data centers could keep computing costs elevated and threaten economic growth.

Now, this morning it’s about the geopolitical temperature in the middle east. The Saudis telling all US personnel at the embassy and in general to leave the country – for fear of renewed Iranian/Houthi attacks on that country that may target Americans.

And then finally, it’s about the US mid-term elections that are now only 2 weeks away…. Democrats have made great strides, and the prediction markets are pointing to a sweep of both houses…. None of this is really helpful when the tone is already negative.

Put it together, and yesterday’s enthusiasm has given way to another round of selling. While the traders & algos liked what they saw initially in the earnings, after they got a chance to ‘digest’ it all – they are rethinking the story…. Couple that with all the other noise and BAM – down we go.

Nasdaq is taking it the hardest…. futures are down 1.8%, while S&P futures are off about 1%, Dow -0.5% while the Russell is down 0.8%. Tech is coming under pressure all around the world. South Korea and Taiwan – down 3.5% and 1.8% respectively. Japan – 2.6%, Hong Kong – 3%. Australia (not tech intensive) lost 0.4%. European markets are also all lower this morning…. down between 1.5% - 2% across the continent.

This morning - META -1.2%, TSLA -4.5%, IBM – 4.8%, LRCX – 8%, SPCX -2.5%, MU – 3.3%, You get it, right? Here we go again, throw the baby out with the bathwater! Everything goes!

Next week – brings us GOOG, AMZN & MSFT and the FOMC rate decision. Monday the 2^nd is AAPL, NVDA does not report until November 19^th.

Oil – it is up 2.4% or $2.30 at $99.47…..Brent is trading up 2.8% at $111.80 on the back of those middle east headlines. Trendlines don’t mean anything at the moment, because it is all about the tone…..

Tensions are running hot and even though we are shipping MORE oil out thru the Strait today than before the conflict began – it is the idea of renewed conflict that is unsettling global markets….and when oil rises, the temperature rises as well reminding us that any geopolitical (and US political) chaos can cause short term, exaggerated moves that don’t typically price stocks in the long term, but create opportunities in the short term.

Bond yields are down…the 10 yr is down 5 bps this morning at 5.06% while the 30 yr is down 3 bps at 5.37%. The move is a direct ‘flight to safety’ trade as investors ‘store’ money in our treasury market. Nothing more, nothing less.

And gold? That continues to wrestle within the current trading range - $4,000/$4,250. This morning, it is down $50 at $4,090 as higher oil fuels that whole inflation fear narrative ahead of the Fed rate decision next week.

And speaking of that – we are now in ‘blackout’ mode for any FOMC member – no one on the committee is talking to the media out loud, but if there is a change in the mindset, you can bet that ‘Deepthroat’ Nicky T of the WSJ or our dear friends at Goldman will be the first to write a story or a report titled – ‘FED to RAISE RATES’! Remember – the fed fund futures markets is only pricing in a 12% chance of a hike next week – so if that changes, someone has to alert the markets!!

Now my gut says they won’t raise rates next week, but you never know! Remember, raising rates will do NOTHING about the middle east conflict and higher oil prices that threatens to keep inflation HOT. So, they can’t use that as an excuse, because even if prices of other things are going up because oil is going up, raising rates by 25 bps or even 50 bps will do nothing to change that narrative….

Eco data today – Initial Jobless Claims and Cont. Claims…nothing that will drive the markets…the story will continue to be the tech narrative and the range of earnings coming today and tonight….as we start to see, what is happening in the broader economy.

This morning, we will hear from HON, DOW, (both beat), PCG (missed), AAL, PG, ROP, DGX, LMT (beat), VLO (beat)…. these companies represent – Industrials, Materials, Utilities, Airlines, Consumer Staples, Info Tech, Healthcare & Aerospace & Defense.

After the bell – there are half a dozen more, but none that everyone is focused on. DECK, WDC, BE, MXL, NEM – and these represent - Consumer Discretionary, Industrials, Mining, Tech/Data Storage.

US futures remain lower….. and earnings so far are causing HON - lower, DOW, LMT & VLO all a bit higher.

My gut says sit tight…. This back and forth should surprise no one. We discussed how sensitive the markets could be during the fall season.

The S&P closed at 7,757, up 44 pts – we are just 50 pts above the trendline….and if S&P futures continue to stay under pressure this morning – we will test the trendline on the opening…. The key will be what happens next……Will it fail to hold or not…. A hold will help markets settle down, a fail will cause the algo’s to sell more aggressively, putting the intermediate term trendline at 7,600 in focus. Recall what I said yesterday – “I think we continue to test (lower) and then end the year around 7850 ish”.

Linguine with artichokes and pancetta

Here is a dish that incorporates the great tastes of Artichokes and Pancetta.....this is a classic Italian dish that I first had years ago at the home of very dear friends.... This is easy to make and always, always a great first dish to serve at a dinner party.

Prep time: 20m

Cook time:20m

Cook time: 40m

Serves: 4-6

Ingredients

1 lb. Linguine

8 Small Artichokes, (use frozen then thaw), Olive oil, diced onion.

2 cloves of garlic - chopped, diced Pancetta.

1/2 c Dry white Wine, s&p Chopped Fresh Parsley, Splash of Lemon juice, Fresh Grated Cheese..

Preparation

Step 1

Bring a pot of salted water to a rolling boil.

Step 2

In a sauté pan, heat the oil and add the onion and pancetta.   Cook over medium heat until the onion is soft and the pancetta is cooked maybe 10 minutes.

Step 3

Now add the garlic and cook another minute or two.

Step 4

Next add the artichokes, some white wine and a squeeze of fresh lemon juice - bring to a boil.

Step 5

Reduce the heat to low and cook until the artichokes are tender - maybe 10 minutes. Season with s&p.  Toss in the chopped parsley and mix.

Step 6

Now cook the linguine until al dente - like 8 mins or so.....Using tongs, add the linguine to the sauté pan. 

Step 7

Mix well.  Keeping the heat on low.  If the pasta absorbs all of the liquid - add in some of the reserved water to remoisten. 

Step 8

Add a handful of cheese - toss again and serve immediately in warm bowls. 

Step 9

Have extra cheese on the table for your guests.  Serve with your favorite chilled white wine.