Big Tech Beats, Chips Break: Is This a Dip or a Breakdown?

Grant Calloway

Yesterday I left you with a question. Could Tesla and Meta prove that Big Tech spending earns its keep, with crude already sitting near a hundred dollars? The jury's back, and it's not impressed. Welcome to Markets Daily. I'm Grant Calloway, and this is your pre bell brief.

Grant Calloway

Here's the headline. Both of those companies beat on something, and both stocks are lower anyway. Meta topped third quarter revenue estimates, yet it's down somewhere between 3% and 6.6% in premarket, depending on when you looked. The reason is spending. Meta unveiled a plan to issue nonvoting Class C shares, which Yahoo Finance describes as a two for one split, and Reuters says that revived worries about its mounting capital commitments. Then, overnight, a judge in New Mexico ordered Meta to pay a $25 billion penalty to the state in a data privacy case, per Reuters.

Grant Calloway

Tesla beat too. Adjusted earnings of forty eight cents against forty four expected. Revenue of $28.05 billion landed a hair under the $28.13 billion consensus. But the stock is down, anywhere from about half a percent to 3.7%, because investors weighed lower capital spending this year against higher spending in 2027 and 2028 on Optimus, Cybercab, and Terafab. The market heard the beat, then looked at the bill.

Grant Calloway

And the bill got bigger overnight. Lam Research, the chip equipment bellwether, gave an outlook that disappointed. The shares are down roughly 8.5% to 9%. Applied Materials and KLA are each off about 6%. AMD, Intel, and Sandisk are down 4% to 5%, and Nvidia, the mild one, is off about 2%. The iShares Semiconductor ETF is down around 4% premarket, below Tuesday's intraday low of $489.70. That's the level where chip bulls sprang a bear trap on Tuesday. Two sessions later, as Yahoo's Jared Blikre puts it, they're the ones getting caught.

Grant Calloway

That's the Nasdaq 100 futures story: down between 1.5% and 1.7%. S&P 500 futures are off about 0.9% to 1%. Dow futures are holding up better, down 0.3% to 0.5%, and Russell 2000 futures are off around 0.6%. Growth and chips are handing back Wednesday's relief.

Grant Calloway

Overnight, Tokyo felt it first. The Nikkei fell 2.65% to 62,908, a near three month low. Tokyo Electron dropped 7%, SoftBank 6.9%, Kioxia 6.8%, Advantest 6%. Higher oil import costs didn't help, and neither did Bank of Japan Deputy Governor Ryozo Himino signaling readiness to raise rates. The yen caught a haven bid, with the dollar down 0.7% at about 157.1. Hong Kong and Shanghai were roughly flat, waiting on stimulus from Beijing. In Europe, the STOXX 600 slid 0.7%, with ASML, Schneider Electric, and Siemens Energy leading it down.

Grant Calloway

Now the oddest corner of the tape. French ten year yields jumped 11 basis points to 5.107%, the highest since 2002, on social unrest and deficit worries. That put them above the US ten year yield for the first time in thirteen years. Meanwhile Treasuries rallied on haven demand, and the US ten year yield fell about 10 basis points to roughly 5.05%.

Grant Calloway

Oil is the other pressure. Brent jumped nearly 3% to about $112, a five month high, and WTI is hovering near a hundred. Two drivers. Reported Houthi attacks on Saudi Arabia's Dammam airport and an Aramco oil field, and a New York Times report, citing unnamed US officials, that the US and Israel have drawn up plans for renewed attacks on Iran after the November third midterms. That's a report, not a confirmed plan. Gold, funny enough, missed the safety trade. It's down 1.8% at about $4,070. Bitcoin and Ether are each off 3.5%, around $81,837 and $2,405.

Grant Calloway

Now the movers, and this tape's not all chips. Lockheed Martin is up about 8.4% after earnings of $7.97 a share against $7.52 expected. Procter and Gamble is up nearly 6% on $2.00 versus $1.89, with revenue of $23.28 billion, ahead of the $22.82 billion estimate. Union Pacific is up about 2.3% on a $3.53 beat, though its CFO, Jennifer Hamann, is retiring after 35 years. Spotify is up almost 10%, even though earnings of $2.48 missed the $2.84 estimate. The market's looking past the miss. Now the other side. Valero is down 1.6% despite earnings of $23.90 against $20.90 expected, and the read is that crude costs are weighing on refining margins. Honeywell is down 4.3%. Adjusted earnings beat, but revenue of $4.99 billion just missed the $5.01 billion estimate.

Grant Calloway

A quick word from our sponsor. Jellypod turns your sources into a podcast that sounds like a real show, and you're listening to one right now. Take a look at jellypod.com.

Grant Calloway

Bull versus Bear. The question: is this chip selloff a dip or a breakdown? I'll take both seats, and I'll tell you where I land.

Grant Calloway

The bull says, look at the flows. Bloomberg's Eric Balchunas noted semiconductor ETFs just saw record inflows over the past week, and he wrote that buying the dip has a pretty good record of working. The bull adds that Meta and Tesla both beat on earnings, and Nasdaq's own research notes that about 15% of S&P 500 results are in and the season looks broadly strong. A weak guide from one equipment maker, says the bull, shouldn't rewrite the whole AI story.

Grant Calloway

The bear says, that's exactly the problem. Good news isn't getting paid. Beats on Meta and Tesla, and both stocks are lower. Chips are breaking below a floor that bulls defended two days ago. SOXX is on track for its lowest close since July 29. And there's nowhere to hide. Manulife John Hancock's Matt Miskin said on Yahoo Finance, quote, every index on the planet is basically an AI index. Add Brent at $112 and a ten year yield around 5%, and the bear says the cushion is gone.

Grant Calloway

Where do I land? Somewhere dry and unpopular. The bull is right that dip buyers keep showing up, but record inflows tell me everyone already agrees, and that's not an edge. The bear is right about the price action, and I won't argue with a broken level. So I'm watching one thing. Does SOXX close back above roughly $490? If it does, the bulls live to fight again, barely. If it doesn't, the dip buyers are in a fight with the tape. I'm not calling it either way. Opening bell's the greatest four hundred milliseconds in capitalism. It's also where opinions go to get audited.

Grant Calloway

On deck. Initial jobless claims printed at 194,000, the lowest since July, beating the 200,000 consensus. Continuing claims came in at 1.728 million against 1.72 million expected. At 10:00 Eastern, existing home sales, consensus 3.88 million annualized against 3.86 million prior, plus the Conference Board leading index, expected minus 0.1%. At 10:30, the natural gas storage report, with a 79 billion cubic foot build expected. At 11:00, the Kansas City Fed manufacturing index, forecast 18 versus 20. And at 1:00, a five year TIPS auction.

Grant Calloway

After the close, watch Western Digital, Newmont, Bloom Energy, Comfort Systems USA, VeriSign, and Deckers Outdoor. Good spread: storage, gold, power equipment, and shoes. Tomorrow brings the flash PMIs at 9:45 Eastern, so tune in.

Grant Calloway

What matters most today: whether chips find a floor, and whether oil keeps climbing. If crude holds near a hundred dollars and the Iran headlines get louder, that's the story that outlasts any earnings call. Remember, nobody rings a bell at the bottom, but they sure send a memo afterward. This podcast is for educational purposes only and is not investment advice. I'm Grant Calloway. See you tomorrow.