Shesa's Stock Market Weekend's Update - 10|18|26

Welcome to my Weekend's Updates

Key Takeaway

U.S. stocks had a difficult week as technology and AI-related stocks sold off sharply amid hotter-than-expected inflation and concerns about the debt used to finance data-center expansion. September CPI rose to 3.7% year over year, while PPI increased 6.3% year over year, as iInflation accelerated in September.The Nasdaq fell 4.5% for the week, while the S&P 500 dropped 1.9%. Both recorded their worst weekly performance since June. The Dow managed a 0.7% gain. 

Technology and semiconductor stocks led the decline as investors reassessed the returns on massive AI investments. Despite the pullback, all four major indexes remain positive year to date. Brent crude closed near $110 per barrel on Friday. Today, Ukrainian drone strikes set fire to an oil export terminal and an oil depot in Russia. 

Stock Market Indices

IndexWeekly Change         Closing Level       YTD
S&P 500🔴 -1.9%7,659.44🟢 +11.9%
Nasdaq Composite🔴 -4.5%26,140.03🟢 +12.5%
Dow Jones🟢 +0.7%52,002.41🟢 +8.2%
Russell 2000🔴 -3.0%2,721.37🟢 +9.6%

Economic Reports Last Week

  • CPI: Increased 0.6% month over month and 3.7% year over year, up from 3.4% in August.
  • PPI: Increased 1.3% in September month over month and 6.3% year over year.
  • Retail Sales: Rose 0.8% in September, ahead of expectations of 0.3%, although much of the increase reflected higher gasoline prices.

The 10-year Treasury yield eased to around 5.09% by Friday, providing some relief for stock valuations, although interest-rate uncertainty remains a concern.

Economic Report This Coming Week

Friday, October 23: October Manufacturing and Services PMI; University of Michigan Consumer Sentiment. These are not very critical. 

Earnings Last Week

Major U.S. banks delivered mixed results for Q3, with some beating estimates while others missed expectations.

  • JPMorgan Chase (JPM): Revenue $50.17B vs. $51.23B expected; EPS $5.57 vs. $5.93 expected — missed both.
  • Citigroup (C): Revenue $23.85B vs. $23.72B expected; EPS $2.85 vs. $2.66 expected -beat both.
  • Bank of America (BAC): Revenue $29.96B vs. $30.58B expected; adjusted EPS $1.08 vs. $1.10 expected — missed both. 
  • Wells Fargo (WFC): Revenue $21.87B vs. $22.31B expected; EPS $1.87 vs. $1.85 expected — revenue missed, EPS beat.
  • Morgan Stanley (MS): Revenue $20.34B vs. $19.93B expected; EPS $3.03 vs. $2.93 expected — beat both.
  • Goldman Sachs (GS): Revenue $18.68B vs. $16.83B expected; EPS $17.01 vs. $12.86 expected — beat both.
  • TSMC / ASML: TSMC reported quarterly profit up 69% YoY, while ASML raised its full-year sales outlook. However, both stocks fell amid the broader semiconductor sell-off.

Key Earnings This Week

  • Tuesday, October 20: SpaceX (SPCX).
  • Wednesday, October 21:  Tesla (TSLA), Meta (META), Lam Research, and IBM.
  • Thursday, October 22: Western Digital (WDC).

Analysts expect S&P 500 companies to deliver more than 30% year-over-year earnings growth in Q3, which could help support the market.

I will be watching SpaceX, TSLA and Meta earnings for updates on AI spending, business growth and future investment plans. These are key along wth META. Tesla's update about CyberCab, Optimus, FSD would be key. There are rumors that SPCX and TSLA may merge sooner than expected...

Other News

  • AI / Technology Sell-Off: Concerns about debt financing for AI data centers weighed on technology stocks as investors questioned whether the massive spending will deliver sufficient returns.
  • Middle East / Oil: Brent crude closed near $110 per barrel on Friday as regional tensions raised concerns about supply disruptions. 
  • Tesla Roadster: Tesla unveiled its redesigned Roadster on October 15, showcasing SpaceX-inspired thrusters and dramatic stunts. Production is now planned for 2028.
  • Starlink / India: Starlink says it has established 20 gateway sites across India and developed India-specific security controls to keep Indian users’ data within the country. 

Stocks to Watch

SPCX, TSLA, META, NVDA, MU, MRNA, RXRX, GOOG, TEM, NBIS, PANW, SOXL

  • SPCX: SpaceX reports earnings on October 20. I will watch business growth, Starlink performance, AI investments and any updates related to the rumored Tesla merger. The merger remains speculation, not a confirmed announcement.
  • TSLA: Tesla reports earnings on October 21. I will watch vehicle margins, cash flow and management commentary on CyberCab, Optimus and FSD.
  • META: Meta reports earnings on October 21. I will focus on AI spending, advertising growth and whether its investments are generating sufficient returns.

NOTE: These are not recommendations - just a watch list.

Going Forward

The next couple of weeks will be especially important as key technology companies report earnings. Results from Meta, Tesla, SpaceX and other major technology companies may influence confidence in AI spending and help determine market direction. The November 3 U.S. midterm elections are also approaching, and potential changes to taxes, regulation and government spending could affect investor sentiment.

In my view, it would be important to stay invested, remain selective, trim wherever needed and maintain some cash position to use slowly and gradually in companies with solid long-term potential. This is not the time to chase any stock. Caution is warranted!

Have a good rest of the weekend!

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