Markets In A Minute - Halloween Frights
By: Zac Martin, CFA
Week Ending October 30th – Halloween Frights
Volatile week for US Markets, specifically around US Tech/AI. Truly a tale of two halves, with the market climbing in the first half of the week by 1.63% and then selling off Thursday and Friday to end the week down -0.57%. Which also closed the month with a S&P 500 loss of -0.91%, and -6.65% for the AI heavy Nasdaq 100. Several events drove market returns this week, the FOMC meeting for October, and earnings reports from GOOG, MSFT, AMZN & INTC.
FOMC Meeting: The Federal reserve voted to maintain the Federal Funds Rate at the current level of 3.75-4.00%, however, two voting members dissented this decision in favor of another quarter point hike. This hold was widely expected; however, the market does expect at least one more hike before the end of the year, with about a 75% chance of occurring. Fed Chair, Kevin Warsh, made several comments about the strength of the economy, noting that consumer spending remains healthy, the jobless rate is lower than last year, and CapEx spending due to AI remains high. Given that this was largely expected, the market did not react to this news.
Earnings From AI Companies: Reports from AMZN & INTC drove market returns on Friday’s trading session. Both reports reignited concerns around the AI payoff as companies like Amazon continue to increase investment to this technology. Amazon’s CapEx, or money spent on investment, was reported well over the expectations and comments regarding 2027’s spending suggested a substantial increase to this spending.
Additionally, Intel reported supply-side constraints and cut guidance due to these constraints. A possible reason as to why Intel’s report drove the semiconductor industry lower might be due to the cost of expanding capacity. Currently, demand for logic chips is high, therefore, the cost of expanding production has increased substantially. With Intel increasing their investment to increase their foundry capacity this also increases the competition for needed components, which increases prices. These higher prices can harm other semiconductor companies and hyperscalers. The chart below highlights these increased costs.
The Week Ahead:
- JOLTS (11/3)
- Non-Farm Payrolls & Unemployment Rate (11/6)
