Morning Wrap - Key Information to Start Your Day 💡

On the geopolitical front, there has been a glimmer of diplomatic hope—according to the *Wall Street Journal*, U.S. Vice President JD Vance sent a letter to the head of Iran’s Security Council, Mohsen Rezaei, in an attempt to resume peace negotiations. Qatari mediators presented Iran with a new draft agreement to end the war with the U.S. and Israel, though a high-ranking Iranian official rejected it as “unacceptable ideas that do not constitute an offer.” The Iranian foreign minister signaled, however, that Tehran is still giving diplomacy a chance and could complete its seven-day plan in less than a week.

Despite diplomatic signals, military tensions show no signs of easing—on Thursday morning, the Saudi-led coalition shot down a ballistic missile fired by the Houthis toward the eastern region of the kingdom, and the rebels reportedly struck Saudi Arabia’s largest refinery (550,000 barrels per day) the day before. In the background, the risk of a U.S. attack on Iran following the November midterm elections (November 3) still looms, as previously reported by The New York Times. Additionally, The Wall Street Journal reports that the U.S. has told Gulf states to prepare for a short but intense military campaign after the midterms.

The most important economic event of the past 24 hours was the Fed’s decision—as expected, the central bank kept the federal funds rate in the 3.75–4.00% range, following a 25-basis-point hike in September. The statement emphasized that inflation “remains elevated,” and the Committee is waiting for “more information to come in” before taking further action. A surprise was that two members voted in favor of a rate hike, including Governor Lisa Cook, who has not opposed any decision since taking office in 2022.

Fed Governor Kevin Warsh sounded a bit more confident about inflation at the conference, which triggered a rally in bonds, but expectations for a rate hike in December have remained virtually unchanged—the market still prices in an approximately 80–84% chance of a rate hike. The two dissenting votes underscore the continued bias toward rate hikes. A rate hike in December—and even another one in early 2027—is now widely viewed as the baseline scenario. Warsh also announced a procedural change: starting in 2027, some FOMC meetings will not include a vote on interest rates, which will limit the number of opportunities to change them.

However, Big Tech’s results proved to be the true test of the market—and they were extremely mixed. The market rewards AI spending that generates cash and punishes spending that consumes it. This is best illustrated by the contrast between Microsoft (shares up 3–5% after the close thanks to beating cash flow forecasts and a 48% year-over-year increase in Azure revenue) and Alphabet (down about 10%).

Alphabet plummeted nearly 10% after the market closed, losing nearly $400 billion in market capitalization—the company missed revenue and earnings targets for the first time in nearly four years (adjusted EPS of $2.67 versus an expected $3.02), and, most importantly, reported negative free cash flow of $-9.07 billion, marking the second consecutive quarter of burning cash. The most persistent concern, however, is weaker-than-expected growth in search ad revenue—Google acknowledged that this is a result of the increasing use of AI Mode, providing the first concrete evidence of the long-feared scenario that AI-generated answers are eroding its core advertising business. The cloud business was a bright spot (revenue up 103% year-over-year to $30.7 billion, with a backlog of approximately $560 billion), but the CFO announced that capital expenditures in 2027 will increase significantly from this year’s range of $195–205 billion.

This morning, U.S. index futures are down slightly—Nasdaq-100 futures are down about 0.4%, and S&P 500 futures are down about 0.05%. Interestingly, there’s a clear rotation: Dow futures are up about 0.3–0.4%, signaling a shift away from expensive tech stocks toward more traditional ones. CFDs on the US100 are nearly flat today (-0.05%), while those on the US500 are slightly up (+0.11%), indicating that the pressure is heavily concentrated on Alphabet and has not turned into a mass exodus from tech. The previous regular session was, in fact, successful—the S&P 500 posted its third consecutive gain, driven by semiconductors.

Smaller software companies also saw sharp declines—ServiceNow plummeted by about 18–19% following disappointing results and guidance, while Fortinet tumbled by as much as about 25% despite beating revenue expectations, due to a lower-than-expected gross margin. This adds to the overall pressure on the tech sector and shows that investors are becoming less and less forgiving of companies that spend billions without delivering sufficient returns.

In Asia, trading was volatile and uneven—Japan’s Nikkei 225 fluctuated between gains and losses before ultimately closing up about 1%, driven mainly by Advantest (shares up 5–8% after raising its earnings forecast by 14%, which contributed more than 400 points to the index). South Korea’s Kospi fell by about 1.2%, giving back part of the nearly 7% jump from the previous day, while China’s CSI 300 lost about 0.8%; the Hang Seng gained about 0.5%. The MSCI Asia-Pacific ex-Japan index fell by about 0.7%.

Samsung was both the star and the disappointment of the Asian trading session—despite record results, its shares fell by about 4–6.6%. The company reported a nearly ninefold increase in operating profit to a record 107 trillion won (approximately $124 billion in revenue), becoming the first technology company to exceed 100 trillion won in quarterly operating profit. However, investors were disappointed by the postponement of details regarding the capital return plan until the end of January 2027—especially in contrast to SK Hynix, which had announced approximately $45 billion in additional returns to shareholders the day before. This shows that in the memory sector, investors are no longer valuing profits alone, but rather capital returns.

It’s worth taking a closer look at SK Hynix, as its results from the day before were a prime example of how an AI company can win over a skeptical market—its shares in New York soared by more than 13%. Jim Cramer pointed to a combination of a low valuation (just 4 times 2027 earnings), revenue that beat expectations by about 6% with a gross margin of 85.7%, accelerating shipment growth, and production that is virtually sold out through 2029 under long-term contracts. The company announced further investments in production capacity, acknowledging that demand is so strong that additional supply will not saturate the market—which also bodes well for Micron.

In the foreign exchange market, the dollar is stable against major currencies (index at approx. 102.2 after falling 0.2% the previous day) — CFDs on the USDIDX are up by about 0.11% to around 102.1. EUR/USD is edging lower (CFDs down 0.12% to about 1.1137), while USD/JPY is nearly flat (around 157.9). The New Zealand dollar stands out, having lost another 0.2% to around 0.5615 after plummeting 1% the previous day—the RBNZ surprised the market by leaving rates unchanged. Additionally, the Bank of Canada raised rates for the first time in over three years and warned of further hikes.

On the commodities market, oil prices are falling, giving back some of the previous day’s gains, as hopes for peace talks outweighed concerns about supply disruptions—Brent is down today to around $110 per barrel, and WTI to about $101.50. Oil CFDs are slightly down today (OIL -0.38%, OIL.WTI -0.45%). Prices remain supported by the intensification of Houthi attacks and the risk of a U.S. strike on Iran following the midterms, but are weighed down by reports of a rebound in Russian production—since the October 15 attack on the refinery in Ryazan, there have been no further confirmed strikes, allowing Russian refining output to rise by 350,000 bpd. U.S. crude oil inventories fell by 1.9 million barrels, contrary to expectations of an increase.

Precious metals are also under pressure—gold is down about 0.58% to about $4,028 per ounce (GOLD CFD), continuing its decline below the key support level of $4,100 seen in recent days, against the backdrop of 10-year yields still hovering around 5% and expectations of further Fed tightening. Silver is falling even more sharply—CFDs are down by about 2.05% to about $52.7.

Beyond Big Tech, earnings season brought several significant moves—Chipotle gained about 5–7% after the close thanks to better-than-expected comparable sales, and Carvana rose about 10% after beating revenue estimates and the SEC investigation was closed without action. On the other hand, Sprouts Farmers Market plummeted about 18% after disappointing results across the board. In the M&A arena, Lumentum soared by about 9–11% on Bloomberg reports that Marvell (stock down 8%) is negotiating its acquisition, and DoorDash may announce the purchase of Instacart as early as Thursday (Maplebear up 3%).

A separate story involves neo-cloud companies, which fell after Microsoft’s capex came in at $45.2 billion, below the expected $50.7 billion—the lower spending suggests that infrastructure partners are continuing to provide capacity. CoreWeave and Nebius each lost about 5%, while IREN fell about 3%. In the background, Elon Musk predicts the collapse of more than 200 neo-cloud companies, arguing that “debt markets have almost completely cut off access to money” for companies without significant revenue outside of AI data centers, while Gartner forecasts that by 2030, 80% of neo-cloud companies will be acquired or disappear.

The cryptocurrency market is experiencing a sell-off in the wake of a general risk-off sentiment surrounding AI — Bitcoin is down about 1.5% to around $79,900, falling below the psychological threshold of $80,000.

What to Expect from Today’s Session — The focus will be on the September PCE inflation reading (the Fed’s preferred measure), released this afternoon, along with the first estimate of third-quarter GDP and weekly jobless claims. The consensus forecast calls for core PCE to rise 0.3% month-over-month and 3.1% year-over-year, with consumer spending up 0.5% month-over-month. With the December rate hike almost fully priced in, the balance of risk tilts toward a reaction to a weaker reading—a hot reading won’t change much, but a cooler one could prompt traders to doubt the tightening scenario. On the earnings front, Caterpillar, Merck, and Eli Lilly are reporting this morning, while after the market closes, Amazon (particularly AWS growth and comments on AI capex) and Intel will be key—following the reaction to Alphabet, Amazon faces the thankless task of restoring broader market confidence. The ECB is also set to announce its interest rate decision today (expected to remain unchanged), and the BoJ meeting is scheduled for tomorrow.