Split Tape: Dow Gains as Chip Stocks Stumble

Grant Calloway

Yesterday the Dow ripped higher on gridlock relief. This morning, the tape has split in two. Dow futures are up somewhere around three hundred and thirty five to three hundred and seventy eight points, call it six tenths of a percent. Nasdaq 100 futures are down roughly three quarters of a percent to nearly nine tenths. That's a tape tighter than a drum, but it's pulling in two directions. Welcome to the Bull Sheet. It's Thursday, November fifth.

Grant Calloway

The headline is a second straight day of selling in chips and data center names. Reuters and CNBC tie it to the Democratic congressional gains, and to fear of more rules and local pushback on the AI build out. Per Reuters, UBS strategists say about thirty percent of the data center additions expected in 2028 are now at risk. Meanwhile Amazon, Meta and Alphabet are higher, because a slower build out is seen as helping the companies that rent the compute rather than buy the hardware. The spenders get relief, the sellers of shovels get the cold shoulder.

Grant Calloway

Overseas shows the same split. South Korea's Kospi closed down five point two eight percent, and SK hynix fell about nine. Japan's Nikkei dropped one point seven nine percent. Hong Kong was higher, with Chinese tech holding up. Europe is green: DAX up about nine tenths, CAC up around one point three, FTSE up about eight tenths. And the Bank of England hiked a quarter point to four percent, an eight to one vote, with one member wanting half a point. The bank cites the Middle East conflict and energy prices, with UK inflation at three and a half percent and seen near five percent by mid next year.

Grant Calloway

Cross assets. The ten year yield is around four point nine oh five percent, the two year near four point six one. Dollar index about one oh one point five. WTI is near eighty nine, Brent near ninety seven, both bouncing after yesterday's plunge. Gold is up about one and a half percent, near four thousand one hundred thirty. Bitcoin is down about one point three percent, near seventy nine and a half thousand.

Grant Calloway

Movers, and not all tech. Qualcomm is down ten to twelve percent pre market. It beat on overall revenue and earnings, but handset chip revenue fell twenty six percent, and guidance reflected Apple modem headwinds. Parker Hannifin is up about six percent after record quarterly earnings of eight ninety a share against eight twenty one expected, and a raised outlook. Sezzle is up nearly thirty percent after lifting its full year guidance for the fourth time. Unity jumped about twenty percent on thirty two percent revenue growth and its first GAAP profitable quarter. Fair Isaac is down roughly ten percent after earnings. And Wendy's is higher after its board rejected a seven thirty five a share Trian offer as undervaluing the company, and adopted a rights plan. Same restaurant sales fell five point seven percent, so that board is making a bold statement.

Grant Calloway

A quick word from our sponsor. Jellypod builds podcasts like this one, so if you've got a show in your head, head to jellypod.com. Now, back to the tape.

Grant Calloway

Bull versus bear. The question: can this rally hold while the chip engine stalls and central banks tighten? Bull first. Breadth is better than the Nasdaq says. Industrials like Parker Hannifin are gapping up, the Dow's carrying the load, and mega cap platforms are decoupling from hardware. Then there's the data. Jobless claims came in at one eighty nine thousand, under the roughly one ninety six expected. Productivity grew three point six percent, against two point eight expected, while unit labor costs fell. That's growth without wage push inflation. A bull says the economy is doing fine without the chip trade holding it up.

Grant Calloway

Now the bear, and I'll argue it hard. The AI build out is what pulled this market for years, and it's hitting friction. Regulatory pushback, a twenty six percent handset drop at Qualcomm, margin dilution from custom silicon. And ten year yields near four point nine percent, with the Bank of England hiking, say money isn't getting cheaper. High multiple leaders don't love that. A rotation isn't a rally if the leaders are what's rolling over.

Grant Calloway

Where do I land? Somewhere in the middle, and I'll tell you why. Two days of selling doesn't break a thesis. But a Dow up on cyclicals while yields sit this high is a market that has to keep earning it. I've seen two crashes. The wreckage is usually where the opportunity hides, but you wait for it to settle first.

Grant Calloway

On deck, all times Eastern. Claims and productivity already printed at eight thirty. Cleveland Fed's Beth Hammack speaks at eight fifty, Richmond's Tom Barkin at nine ten. Treasury bill auctions at eleven thirty. Dallas Fed's Lorie Logan at seven tonight. Tomorrow is the big one, October jobs, with consensus around fifty nine thousand payrolls and four point two percent unemployment. Watch whether Dow strength can survive Nasdaq weakness today.

Grant Calloway

That's your Bull Sheet. Markets love a story, but they pay for earnings. Tune in tomorrow, jobs day. And this podcast is for educational purposes only and is not investment advice.