Weekly Trader's Outlook
Wall Street in "Risk Off" Mode as Tech Earnings Fail to Bolster Confidence in AI Trade
The Week That Was
If you read last Friday's blog, you might recall that I had a "higher volatility" outlook for stocks this week, noting several potential market-moving catalysts (most notably earnings from three of the hyperscalers), and the technical setup in the Philadelphia (PHLX) Semiconductor Index (SOX, the index was testing support at the 200-day simple moving average, or SMA, last Friday). This week markets experienced volatility, first on the upside and then on the downside. The SOX bounced from a near-term oversold state for the first three days of this week (more on this in the "Technical Take" section below), but then reversed course, along with tech stocks and the artificial intelligence (AI) complex following several disappointing earnings/guidance from several key tech companies such as Alphabet, Amazon, Intel, ServiceNow, Fortinet, and Twilio. Microsoft delivered a strong "beat and raise" quarter and showed acceleration in Azure revenue growth (and guided for continued acceleration next quarter), but it wasn't enough to prevent a post-earnings pullback due to the broader tech sell-off. The recent tech sell-off is causing rotation into more defensive sectors such as Staples, Real Estate, Utilities, and Health Care, which is trading at an all-time high.
This week's Federal Open Market Committee (FOMC) meeting didn't provide any surprises, and if anything may have been interpreted by bond traders as net-dovish given the pullback in two-year yields. Yesterday's Personal Consumption Expenditures (PCE) Prices report was essentially in line with estimates but continues to track well above the Federal Reserve's 2% target (more on this in the "Economic Data, Rates & the Fed" section below). Also related to potential inflationary forces is WTI Crude prices, which are up nearly 3% today and at a six-week high (last seen trading at $104.88/barrel).
We are roughly two-thirds of the way through Q3 earnings season and overall, the results are thus far signaling strength. Out of the 301 S&P 500 companies that reported so far, 61% have beat on the top line and 82% have beat on the bottom line. Perhaps more importantly, the year-over-year revenue growth rate has been 13.64% and the earnings-per-share (EPS) growth rate is 29.37%.
Outlook for Next Week
At the time of this writing (2:00 p.m. ET) all the majors are lower (DJI - 565, SPX - 161, $COMP - 885, RUT - 61), as the "risk-off" tone to the markets appears to be accelerating throughout the session. As mentioned in the opener, money is rotating into defensive sectors such as Staples (+1.75%), Healthcare (+1.0%) and Utilities (+1.0%), and even two-year Treasuries (yields last seen at a six-week low of 4.777%). There are several potentially bearish developments from a technical view–the S&P 500 (market-cap) index is below key support at 7,600, the Nasdaq Composite ($COMP) is below intermediate-term support at 26,000, the SOX is below its 200-day SMA, and the Russell 2000, which was exhibiting some relative strength earlier this week, is back below its 200-day SMA today. Also noteworthy, the Cboe Volatility Index (VIX) is up 28% to 22, which suggests institutions may be reaching for protection via SPX put options. And volatility could remain elevated next week as there are several potential market-moving catalysts: a) we'll get several key tech earnings reports (ex. AAPL, ALAB, AMD, ANET, ARM, DDOG, NET, QCOM, etc.); b) mid-term election results on Tuesday; and c) the monthly jobs report on Friday. Additionally, President Donald Trump warned Gulf Arab allies and Middle Eastern partners to prepare for a potential short, intense attack on Iran after the midterms. As a result, I'm going to stay with a "higher volatility" forecast for next week along with a "moderately bearish" outlook due to today's technical damage. What could challenge my outlook? There are so many large-cap tech stocks being sold off so significantly that we could get an oversold bounce in the Nasdaq/SOX, or we could get a post-midterm bounce, so that is why the outlook is not fully "bearish."
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Other Potential Market-Moving Catalysts
Economic:
- Monday (Nov. 2): Construction Spending, ISM Manufacturing Index
- Tuesday (Nov. 3): Business Inventories, Factory Orders
- Wednesday (Nov. 4): ADP Employment Change, EIA Crude Oil Inventories, ISM Non-Manufacturing Index, MBA Mortgage Applications Index, Trade Balance
- Thursday (Nov. 5): Continuing Claims, EIA Natural Gas Inventories, Initial Claims, Productivity – Preliminary, Unit Labor Costs - Preliminary
- Friday (Nov. 6): Average Hourly Earnings, Average Workweek, Consumer Credit, Nonfarm Payrolls, Unemployment Rate, University of Michigan Consumer Sentiment - Preliminary
Earnings:
- Monday (Nov. 2): Apple Inc. (AAPL), Check Point Software Technologies Ltd. (CHKP), Entergy Corp. (ETR), Estee Lauder Companies Inc. (EL), Marriott International Inc. (MAR), Palantir Technologies Inc. (PLTR), Realty Income Corp. (O), Roku Inc. (ROKU), Ryanair Holdings PLC (RYAAY), Vertex Pharmaceuticals Inc. (VRTX)
- Tuesday (Nov. 3): Advanced Micro Devices Inc. (AMD), Amgen Inc. (AMGN), Apollo Global Management Inc. (APO), Arista Networks Inc. (ANET), Astera Labs Inc. (ALAB), Booking Holdings Inc. (BKNG), Eaton Corporation PLC (ETN), Energy Transfer LP (ET), Marathon Petroleum Corp. (MPC), Pfizer Inc. (PFE), Shopify Inc. (SHOP)
- Wednesday (Nov. 4): AppLovin Corp. (APP), Arm Holdings PLC (ARM), CVS Health Corporation (CVS), Datadog Inc. (DDOG), DoorDash Inc. (DASH), Emerson Electric Co. (EMR), McDonald's Corp. (MCD), McKesson Corp. (MCK), MercadoLibre Inc. (MELI), Novo Nordisk A/S (NVO), Qualcomm Inc. (QCOM), Uber Technologies Inc. (UBER)
- Thursday (Nov. 5): Airbnb Inc. (ABNB), Atlassian Corp. (TEAM), Cardinal Health Inc. (CAH), Cloudflare Inc. (NET), ConocoPhillips (COP), Cummins Inc. (CMI), Devon Energy Corp. (DVN), Duke Energy Corp. (DUK), EOG Resources Inc. (EOG), Lumentum Holdings Inc. (LITE), Natera Inc. (NTRA), Parker-Hannifin Corp. (PH), Simon Property Group Inc. (SPG), Sony Group Corp. (SONY)
- Friday (Nov. 6): Brookfield Asset Management (BAM), Enbridge Inc. (ENB), Humana Inc. (HUM), Moderna Inc. (MRNA), Plains All American Pipeline LP (PAA), PPL Corp. (PPL), Vistra Corp. (VST), Ubiquiti Inc. (UI)
Economic Data, Rates & the Fed
There was a healthy dose of economic data this week, which was highlighted by a Federal Open Market Committee (FOMC) meeting, the monthly PCE Prices report and an advanced reading on Q3 Gross Domestic Product (GDP). Expectations for any surprises out of the FOMC meeting were low heading into this week, given the roughly 9% market probability for a hike and the absence of a dot plot or the Summary of Economic Projection (SEP). And as expected, the Fed kept rates unchanged and Fed Chair Kevin Warsh conveyed a relatively patient stance in the follow-up press conference. On the inflation front, PCE Prices were mostly in line with expectations, but both headline and core annual gains remain well above the Fed's target. Perhaps the biggest surprise from this week was the advanced reading on Q3 GDP, which is tracking above the 3.0% level for the first time in a year. Here's a breakdown of the reports:
- FOMC Meeting: As expected, the Federal Reserve voted 10-2 to leave its benchmark unchanged at a range of 3.75-4.00%. The two dissents were Lisa Cook and Beth Hammack who voted for a 25-basis-point rate hike. In the committee's statement, they continue to view inflation as "elevated," they are looking for more data to help guide future policy, and they upgraded their description of the economy from "solid" to "strong."
- PCE Prices: The September headline Personal Consumption Expenditures Prices Index increased 0.5% from the prior month (in line with expectations), which puts the annual headline increase at 3.6% (highest since March, but below the +3.7% expected). On a core basis, September PCE Prices increased 0.3%, bringing the annual core increase to +3.1% (both in line with expectations).
- Q3 GDP – Advanced: Gross Domestic Product expanded at an annual rate of 3.4% in the third quarter, according to the advanced estimate from the U.S. Bureau of Economic Analysis. The initial reading was above the 3.1% expected, and a significant jump from the 2.2% growth reported in Q2.
- Durable Orders: 1.8% vs. 1.7% est.
- New Home Sales: 676K vs. 630K est.
- Personal Income: 0.2% vs. 0.3% est.
- Personal Spending: 0.5% vs. 0.4% est.
- Employment Cost Index: 0.8% vs. 0.8% est.
- Chicago PMI: Came in at 55.3, which is down from the prior reading of 58.8 and below the 57.2 economists were expecting, but still in expansionary territory (above the 50.0 threshold).
- EIA Crude Oil Inventories: -1.892M barrels.
- EIA Natural Gas Inventories: +80 bcf.
- Initial Jobless Claims: Initial applications for U.S. jobless benefits dropped 1K from last week's (upwardly revised) 195K to 194K, which was below the 200K economists were expecting. Continuing Claims declined by 21K from the prior week to a seasonally adjusted 1.701M.
- The Atlanta Fed's GDPNow initial "nowcast" for Q3 GDP was revised down to 3.20% yesterday from 3.50% last Friday.
U.S. Treasury yields saw a notable decline on the front end of the curve. Net Treasury buying on the two-year was primarily driven by a relatively dovish tone from the Fed on Wednesday, and perhaps some flight to safety from investors since the tech/AI complex has been under pressure over the last 48 hours. Compared to last Friday, two-year Treasury yields are down ~8 basis points (4.621% vs. 4.701%), 10-year yields decreased ~4 basis points (4.949% vs. 4.988%), while 30-year yields are unchanged (5.315% vs. 5.315%).
Market expectations around potential rate hikes from the Federal Reserve eased some this week following this week's FOMC meeting. Per Bloomberg, market participants were putting a 84% probability of a Fed rate hike at the December FOMC meeting last Friday, which is now down to 75%. Longer term, market expectations are for 2.26 25-basis-point cuts between now and December 2027, down from 2.68 last Friday.
Technical Take
S&P 500 Index (SPX - 125 to 7,595)
The S&P 500 Index (SPX) is on track to be down slightly on the week but is down ~2% since Wednesday's close. More technically significant, however, is that the SPX is on track to close below key intermediate-term support around 7,600-7,620. The index closed below 7,600 a couple times back in mid-September, but swiftly moved back above this level, so it's possible that history repeats, but technically today's price action is bearish. Should the SPX continue to move lower in the coming weeks, the next key support level comes in around 7,300, which roughly represents the 200-day Simple Moving Average (SMA) and coincides with the July 29th close at 7,316.
Near-term technical translation: bearish (assuming close below 7,600 today)
Source: ThinkorSwim trading platform
Past performance is no guarantee of future results.
PHLX Semiconductor Index (SOX - 852 to 10,667)
Last week I noted that the PHLX Semiconductor index (SOX) could see a near-term oversold bounce, since the Relative Strength Index (RSI) was testing support at the 200-day SMA and was at a level (~32) where it bounced off the summer lows. The index ended up rallying for the first three days of this week but has reversed course over the past two days following mixed earnings results/metrics from several high-profile mega-cap tech companies, and poor post-earnings reactions from investors. Today, the SOX is down nearly 8% and on track to close below its 200-day SMA for the first time in over a year, which is technically bearish. In terms of next potential areas of support, maybe the summer low close of 10,447 provides some support, but below that I don't see potential support on the charts until roughly 8,500.
Near-term technical translation: bearish
Source: ThinkorSwim trading platform
Past performance is no guarantee of future results.
Cryptocurrencies
The Bitwise 10 Large Crypto Index is down 6% since last Friday, with bitcoin down 5% and ether down 8% at the time of writing. Yesterday, roughly $6.4 billion in assets were stolen from Binance in an attack spanning multiple blockchains. On Ethereum, the attacker used permissions enabled by EIP-7702 to make a compromised Binance hot wallet execute malicious code, accounting for roughly $2.5 billion of the losses. EIP-7702 allows a traditional Ethereum wallet to temporarily gain smart-contract functionality, enabling features such as automated transactions and more flexible transaction permissions. In this case, functionality intended to make wallets more flexible was used as part of the attack.
The attack included approximately $1.5 billion in bitcoin, as well as ether, stablecoins and other digital assets. Roughly $3 billion of the stolen assets have since been frozen on-chain. Binance has said affected customers will be made whole using its Secure Asset Fund for Users (SAFU), an emergency reserve that has typically held around $1 billion in bitcoin, alongside other company funds. DeFiLlama data show the exchange holds approximately $135 billion in assets.
The broader takeaway is that crypto's biggest vulnerabilities often exist at the edges, not necessarily at the protocol layer. Exchanges, bridges, wallets, and other on- and off-ramps introduce additional layers of counterparty and cybersecurity risk even when the underlying blockchain continues to operate as intended. As Wall Street moves on-chain, stronger protections against intermediary failures may become increasingly important. Could a decentralized version of FDIC insurance eventually be part of the solution?
Last week, I made the case that the next cycle's winners may be hiding in plain sight, using Robinhood's launch of the Robinhood Chain and the resulting trading activity on Uniswap as an example. It appears another of the "Merry Men" has been identified this week. Yesterday, Intercontinental Exchange, the owner of the New York Stock Exchange, along with Trade [XYZ], announced plans to establish a regulated venue in the U.S. for 24/7 perpetual futures powered by Hyperliquid.
Follow the institutions, find the Merry Men
HYPE, Hyperliquid's native token, rose approximately 7% following the news. That said, the Hyperliquid Policy Center was launched in Washington, D.C., in February, and since then several government figures have discussed bringing the platform to the U.S., alongside other exchanges, so the announcement should not have been a major surprise. Historically, decentralized exchanges (DEXs) have struggled to maintain the value of their tokens over time, in part because users can move to competing exchanges offering different contracts, lower costs or more leverage. That dynamic could change if a DEX captures meaningful institutional volume, since investors typically seek to trade at the largest and most liquid venues.
While still in the early stages, global markets appear to be shifting toward 24/7 trading, so understanding the implications beyond perpetual futures can be informative. Bitcoin provides a useful example because price discovery moves around the globe. Looking at the past two years of data, market leadership has rotated among Asian, European and North American trading hours.
To quantify this, we broke the day into three eight-hour trading sessions: 1) Asia (8 p.m.–4 a.m. ET); 2) Europe (4 a.m.–noon ET); and 3) North America (noon–8 p.m. ET). We use cumulative log returns, measured from the start of the two-year period, so the contributions from each session sum to Bitcoin's total return across all trading hours. The levels shown are therefore neither annual returns nor conventional percentage returns. For example, the current 12% Bitcoin Total reading represents the cumulative log return since October 2024, while a 60% reading earlier in the period would correspond to an approximately 82% cumulative price gain from the same starting point. Session returns reflect the timing of price changes, not the location of buyers or sellers. Over the past two years, most of bitcoin's net gain has come during the European session, while the North American and Asian sessions have been roughly flat. Leadership has rotated over time, however, and no single session has demonstrated a consistent edge. Why does it matter? As markets move toward 24/7 trading, price discovery won't wait for U.S. market hours.
Bitcoin returns rotate across global trading hours
Source: Glassnode, Schwab, using hourly bitcoin prices from 10/26/2024 to 10/26/2026.
Each day is divided into three eight-hour trading sessions: Asia (8 p.m.–4 a.m. ET), Europe (4 a.m.–noon ET) and North America (noon–8 p.m. ET). ET times reflect daylight saving time and are one hour earlier during standard time. Returns are expressed as cumulative log returns, allowing the contributions from each session to sum to bitcoin's total return; as a result, the values are not directly comparable with conventional percentage returns, and the 60% level shown does not represent a 60% gain in bitcoin's price. Session returns reflect the timing of price changes, not the location of buyers or sellers. Past performance is no guarantee of future results.
Jim Ferraioli, Director of Digital Currencies Research and Strategy, authored this report.
Market Breadth
The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP), and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, breadth improved across the board this week, with the S&P 500 seeing the most notable expansion. Compared to last week, the SPX (white line) breadth moved up to 65.53% from 60.12%, the CCMP (blue line) moved up to 38.51% from 36.61%, and the RUT (red line) improved to 51.07% from 47.98%.
Source: Bloomberg L.P.
Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.
This Week's Notable 52-week Highs (118 today): Amgen Inc. (AMGN + $9.77 to $470.50), Cracker Barrel Inc. (CBRL + $0.19 to $72.64), Etsy Inc. (ETSY + $0.49 to $92.08), Gilead Sciences Inc. (GILD + $4.39 to $170.00), Hasbro Inc. (HAS + $0.73 to $120.30), Nasdaq Inc. (NDAQ + $0.88 to $106.48)
This Week's Notable 52-week Lows (206 today): Boeing Company (BA - $0.31 to $172.34), Booking Holdings Inc. (BKNG + $1.07 to $151.50), Boston Scientific Corp. (BSX - $0.12 to $42.57), C.H. Robinson Worldwide Inc. (CHRW - $0.63 to $126.79), Enphase Energy Inc. (ENPH - $0.29 to $25.67), Lennox International Inc. (LII + $4.28 to $352.40)
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