October 31, 2025 • 29 mins
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to the Deep Dive. Our mission, as always, is to
take a pile of complex, really high stakes market information,
cut through the noise and give you that shortcut to being
properly informed. Today we're zeroing in on the
well, the really intense close we saw on October 31st, 2025.
It finished off a strong month technically, but wow, the
(00:22):
narrative felt chaotic, fragmented even.
That's a great way to put it. Fragmented for anyone tracking
the end of the week. Yeah.
It felt like a tug of war. Didn't a really volatile scrap
between two massive forces, Definitely.
So our deep dive today focuses on that collision course, the
one that seems set for the firstweek of November.
We're looking at the sheer powerof these corporate earnings,
(00:42):
especially tech. That's the bulls for our
purposes, right? And pitting that against this
intensifying, pretty unpredictable pressure from a
Fed that looks frankly a bit fractured and, well, hawkish.
That's the Bears. Yeah, the end of October gave us
some serious whiplash, especially if you look at the
biggest names, the ones that really move the needle the
(01:04):
market, you know, on paper, close the week strong, got that
multi month winning streak for the S&P 500 locked in.
But you peek under the hood pastthose headline numbers, and it's
all about this extreme concentration and I mean real
anxiety bubbling up about where monetary policy is headed.
You know, what really jumps out at me looking through all this
is that fundamental disconnect. You've got a market where the
(01:25):
actual business performance, theprofits, especially in high
margin tech, it's demonstrably strong.
It looks sound, but then that internal strength is hitting
this. This fierce external headwind,
policy uncertainty, Fed signals it's a lot.
So the victory the Bulls got this week, it feels like it's
built on, well, an extremely narrow ledge.
(01:46):
OK, let's unpack this, starting with Section 1.
Friday's fragile victory and theoutstanding October overall.
So let's get the numbers down. 1st Friday, October 31st Yeah,
S&P 500, it was a .26%, closing at 6840.27 date.
NASDAQ deposit did a bit better,a .60%.
Right. And that move was pretty
crucial, wasn't it? Was a sharp turn around from
(02:07):
that that big tech sell off we saw on Thursday?
It really was, yeah. Felt like a bit of relief maybe,
but the sources we're looking at, they're definitely calling
it fragile. Well, yeah, fragile day-to-day,
perhaps, but zoom out to the monthly chart and it looks
fantastic. The indexes bagged their third
winning week in a row, and the S&P finished October up a solid
(02:27):
3%. Critically, like you said, that
seals its sixth straight winningmonth.
We haven't seen a streak like that since, what, late 2021?
Wow, sixth straight month. Yeah.
That kind of consistent momentum, it does suggest
there's some underlying strengththere, some real buying
pressure. And analysts keep throwing
around this term front running the seasonal tailwinds.
I hear it everywhere. For, you know, for you
(02:50):
listening. What does front running actually
mean here? What are they doing?
Yeah, it's basically market psychology mixed with fun
positioning. So November and December,
historically, they're often two of the strongest months for
stocks. Right, the holiday rally idea.
Exactly optimism about holiday spending, maybe some year end
bonus money flowing into the market, that kind of thing.
So when we say the market is front running, it means the big
(03:12):
players, the institutions, they're positioning themselves
now at the end of October to tryand capture that expected move
higher. They're essentially willing to
pay a bit more today because they think there's a high
probability that historical pattern, that seasonal strength
will play out again. It shows conviction, definitely,
but it also means the market's already kind of priced for good
(03:35):
news heading into November. Right.
OK. But that conviction seems to be
resting very, very heavily on just a couple of names, doesn't
it? And this is where that fragility
really comes in. I mean our deep dive shows
Fridays rally was well, let's behonest, it was basically A1
stock show pretending to be a broad market win.
That is the absolute key take away from Friday Amazon AMZN,
(03:57):
it's surged just, I mean a staggering 9.6% after its
earnings. 9.6%. Yeah, the speed and the sheer
size of that move just meant Amazon was, as one source put
it, by far the strongest force lifting everything.
And the analysis is pretty stark.
You take Amazon's contribution out of the equation for Friday,
the S&P 500 would have closed down negative for the day.
(04:19):
That tells you right there that while the main index number
looks OK, the underlying health,the breadth across different
stocks is actually worryingly narrow.
Yeah, this concentration risk thing, it always sparks debate,
doesn't it? I hear the experts say, OK, this
isn't 2000 all over again because, you know, fundamental
support current valuation. Right.
You hear that a lot. But look, if the top ten stocks
(04:42):
are a historically massive chunkof the S&P 500's weight, and the
whole rally balances on a knife edge depending on literally 1
stock having a blockbuster day, isn't that just systemic risk
anyway, regardless of the fundamentals?
I mean, where's the tipping point where concentration itself
becomes the bubble? That that is the $1,000,000
question, isn't it? And it's maybe less about the
profits themselves and more about the distribution of risk
(05:06):
and the potential for failure. Look back in 2000.
Yeah, you had companies with insane valuations, triple digit
PES, sometimes with hardly any actual cash flow.
Right eyeballs over earnings. Exactly.
Today these mega caps, they are generating enormous predictable
cash flows, high margins. That part is different.
(05:27):
However. The risk now is that the market
is so tilted towards them that any single point of failure gets
magnified across the whole system.
So 1 bad report from one giant. Yeah, If just one leader, say,
you know, Microsoft or an Amazon, stumbles badly next
quarter, the weight they carry is so huge now, it could easily
pull the entire index down maybe2 percent, 3%, just on its own.
(05:48):
The market's efficient at pricing information maybe, but
it's definitely not diversified right now.
It's placing this massive concentrated bet.
And that massive debt leads us perfectly into Section 2, The
Magnificent 7 Divergent, becausethe whole investment world just
spent 48 hours wrestling with two completely opposite takes on
the whole AI investment idea created some serious market
(06:11):
whiplash. Oh, absolutely.
Whiplash is the perfect word. That group, the so-called
Magnificent 7 mega cap tech stocks, they basically split
right down the middle based entirely on how they talked
about their AI spending, specifically their capital
expenditures, their CapEx. And that split became the
markets sorting mechanism this week.
OK, let's start with Thursday's story.
That was the bears view, right? Seeing AI is basically a cost
(06:35):
pit. Meta Meta was the poster child
for that, sinking a huge 11.3%. I mean that's its biggest one
day drop in three years. Why hit it so hard?
It really came down to expectation management just
going sideways. Meta's outlook, it projected
notably larger capital spending stretching out into 2026.
And they framed the spending as you know, necessary for their
(06:55):
big AI and building models, datacenters, the whole 9 yards.
But the market heard that and immediately thought lower
profits in the short term. Right, the payoff is way down
the road. Exactly.
The narrative became meta is pouring billions into this.
The actual return is conceptual,maybe years away.
It's just a huge expense that's going to weigh down the balance
sheet for, I don't know, 1824 months at least.
(07:18):
And Microsoft kind of echoed that, didn't they?
They fell what, 2.9% after reporting their own record CapEx
and saying yes, spending is going to keep rising.
Correct. So the message coming out of
Thursday was pretty clear, AI equals huge costs right now with
no immediate guaranteed return on that investment.
Pessimism. Yeah, the market's first
(07:38):
reaction was definitely pessimism.
These companies are being forcedto spend billions just to stay
in the game, and that spending is acting like a drag anchor on
their earnings per share. It made AI look like an
inflationary force, but on the cost side.
But then Friday Amazon shows up and just completely flips the
script. Totally invalidates that cost
(08:00):
focused view right? Gives us the powerful counter
narrative. AI as accelerated revenue.
That's the bull case that liftedeverything.
Amazon jumps 9.6%. What was the magic ingredient
there? The magic ingredient was proof.
Immediate, quantifiable proof delivered by Amazon Web
Services, AWS. The cloud unit.
Right. Unlike Meta where the CapEx felt
(08:21):
like it was about future proofing Facebook or Instagram,
Amazon showed its AI spending was already boosting high margin
revenue growth. Like right now AWS growth
actually accelerated to 20%. We haven't seen that kind of
pace since back in 2022. OK.
That 20% gross number, why was that specific figure so
electrifying for the market? Because it showed operating
leverage in action. You know, cloud growth across
(08:42):
the tech sector had actually been slowing down for several
quarters. People were worried.
AWS is Amazon's cash cow, right?It's high margin, sticky
enterprise revenue. So when the CEO, Andy Jassi
comes out and explicitly says AIis driving meaningful
improvements in every corner of our business, and then they back
(09:02):
it up with a 20% acceleration ingrowth in their most profitable
unit, the market instantly got it.
OK. Amazon's AI spending isn't just
defense, it's offense. It's a necessary investment
that's already accelerating profitable revenue.
It wasn't just spending to keep up like it seemed with Meta.
It was spending to immediately boost the top and bottom line.
That was the crucial difference.And that difference proving the
(09:25):
AI spend generates high margin dollars now that drove what,
over $100 billion in market cap change on Friday?
Easily. It was massive.
And you know, we shouldn't forget Apple and all this.
It sort of played the role of the anchor, didn't it?
Yeah, good point. Despite beating estimates
forecasting record holiday revenue, Apple actually finished
down .4 percent. But that was like another sign
(09:45):
of that fragility we talked about, doesn't it?
Even a positive report from Apple couldn't catch a bid.
What held it back? It really seemed to be the China
data. Apple reported a well, a
noticeable drop in sales in China and China is just such a
massive engine for them in this kind of nervous show me market,
even a hint of weakness in a really critical region like
(10:07):
China, especially with all the geopolitical tension.
It's enough to cancel out strongoverall results and just cap the
stock price makes sense. And if you look back at the
sector performance across those two days, Thursdays losses hit
consumer discretionary and communication services hard.
Because of meta and others. Right.
But then Fridays gains, Amazon basically single handedly
(10:28):
dragged the entire consumer discretionary sector back into
positive territory. So again, it just confirms that
the underlying market health is really uneven, very reliant on a
few winners. OK.
So we've laid out the strength, but also the real fragility of
that profits narrative. But the market isn't operating
in a vacuum, right? It's facing this huge macro
storm cloud, which brings us to Section 3, the monetary policy
(10:50):
headwind, and this this fractured Fed.
Yeah, the Fed meeting this week,the Federal Open Market
Committee, the FOMC, they delivered what the market
technically asked for, right? Another 25 basis point rate
cuts. Second one in a row OK brings
the Fed funds rate down to a range of 3.75% to 4.00%, but the
(11:12):
market immediately labeled it a hawkish cut.
OK. Explain that distinction for,
you know, for listeners. What makes a cut hawkish versus
dovish because the market seemedto be expecting dovish.
Right. A dovish cut is pretty
straightforward. You get the rate reduction and
you get clear signals forward guidance that more cuts are
probably coming soon. It signals the Fed is confident
(11:34):
inflation is heading down fast. And the market had priced that
in. Oh, yeah, the market had priced
in not just this 25 basis point cut, but it saw another cut in
December as almost a sure thing like that.
The odds were over 90% beforehand.
But then Fed Chair Jerome Powellsteps up to the microphone.
He delivers. There's the cut, yes, but he
immediately pours cold water on that December expectation.
Right, he explicitly said a December cut was what was it not
(11:56):
a foregone conclusion? Exactly that phrase, not a
foregone conclusion. By just removing that certainty,
that forward signal, he effectively tightened financial
conditions, even though he just cut rates.
And that one comment boom. December cut odds dropped
instantly from over 90% down to around 70%.
So Powell gave the market the rate cut it wanted with one
(12:17):
hand, but he aggressively took away the promise of more easing
with the other. And that forces a repricing of
risk assets because the cost of money isn't just falling.
The certainty about future costsjust vanished.
That's your hawkish cut. But what's maybe even more
striking here is the division within the Fed that's spilled
out afterwards. I mean, real public
(12:38):
disagreement. Dallas Fed President Lori Logan
actually came out and pushed back publicly against the feds
own decision. Yeah, this is really quite
something. Logan basically said She would
have preferred to hold interest rates steady.
No. Cut out, not.
Her reasoning Stark. Directly challenging the
majority view, she said she believes inflation remains too
high, period, and that the economic outlook may be boosted
(12:58):
by those. Strong earnings like Amazon we
just discussed simply didn't justify cutting rates right now.
OK, so this dissent, it's not just some academic debate point,
is it? You have an actual voting member
of the FOMC publicly saying the committee got it wrong.
That massively raises the stakesfor every single piece of
economic data coming out next week.
(13:19):
It absolutely does. It really underscores that the
Fed's whole data dependent mantra, well, the path forward
isn't even clear to its own members, right?
Think about it. If the jobs numbers or the
manufacturing data next week come in hotter than expected,
Logan's dissent suddenly looks really smart.
It strengthens the hand of the Hawks inside the Fed who think
they're easing too soon. This internal split just
(13:41):
confirms that future cuts are absolutely not guaranteed and
makes every day to release feel like walking a tightrope with no
safety net because there's no clear consensus driving policy
anymore. Which sets the stage perfectly
for what we saw in individual stocks this week.
Section 4 The markets show me state.
Because with this Fed uncertainty and the AI whiplash,
(14:02):
the market has become incrediblyselective, surgically precise,
even rewarding perfection, punishing any weakness
instantly. That's surgical precision.
Yeah. It's the classic sign of a high
anxiety market. Companies that deliver what the
Street calls clean beats, you know, beating earnings estimates
and giving strong, clear guidance for the future.
(14:22):
They're getting huge rewards, double digit pops in some cases,
but any hint of trouble, a guidance cut, even a small 1A
revenue miss. The punishment is immediate and
brutal. There's just no middle ground
right now. OK, let's run through some of
those winners, the ones that delivered the clean beats.
First Solar FSLR pops 14.5% beatearnings.
Yes, but you said the guidance was key.
(14:43):
Yeah, the guidance was the kicker.
They offered a sunnier forecast for 2025.
You have to remember the whole solar and renewable sector has
been really beaten down, higher rates, supply chain issues.
So when First Solar comes out with not just a beat but a
strong confident outlook, look for next year, it signals maybe
stability and pricing power coming back.
That triggers a big rotation back into the stock.
(15:03):
Analysts rush to upgrade, hence the big jump.
OK. And Cloudflare net up 14.0%.
Similar story all about the outlook.
They raised their full year revenue forecast to $2.14
billion. That was well above what
analysts expected. So proof their growth is
accelerating faster than people thought.
Got it. Western Digital WT sub 9.0%.
(15:25):
What was their story? They didn't just meet estimates,
they apparently crushed their Q1earnings per share and then they
give a really strong forecast for Q2 sales growth, like 20%.
Wow. 20% growth. Yeah.
In a sector like memory and datastored, which is super cyclical
and has been weak, that kind of guidance suggests a strong
recovery is underway. Even some newer names did well.
Reddit RDDT up 7.6%. Yep, beat on profit, beat on
(15:49):
revenue, and crucially showed strong growth in daily active
users. 116 million for a social media platform that user growth
is the key metric everyone watches for future ad revenue
potential. So yeah, all these are examples
of companies basically validating their current start
price with clear positive signals about the future, even
in tricky sectors. OK, now let's flip it.
(16:10):
Contrast those winners with the losers, the ones who felt the
market's wrath. Newell Brands NWL just created
28.0% after result. Ouch.
Yeah, that's a disaster. But maybe the most illustrative
example of the surgical punishment was Dexcom DXCM.
Yeah, Dexcom, leading medical device maker, right?
S&P 500's biggest loser on Friday, down 13.5%.
(16:31):
And the reason it was almost subtle.
They trimmed their full year adjusted gross margin estimate
from 62% down to 61%. Wait, a one percentage point
trim to gross margin guidance ina healthcare company, not some
high flying tech stock sends thestock down almost 14%?
That seems incredibly hard. Why does that one point matter
so much? It tells you everything about
(16:51):
market sentiment and maybe liquidity right now, look,
healthcare stocks, especially established device makers like
Dexcom, their valuations are often built on the idea of super
stable, predictable, usually expanding gross margins.
It's their quality signal. OK, so when a company cuts that
margin guidance even by just 1%,the market immediately panics.
(17:12):
It reads it as a sign of maybe unexpected pricing pressure,
maybe rising costs they didn't anticipate, maybe tougher
competition eating away at theirprofitability Moat.
I see. And because investors are
already jumpy about higher interest rates from the Fed,
they demand near perfection. That 1% cut introduced
uncertainty about future cash flow stability that forces
(17:33):
investors to adjust their models.
Apply a higher discount rate maybe and boom you get this
massive unforgiving sell off. The fear of future problems
becomes more powerful than the reality of current profits.
Brutal. We also saw straight up revenue
misses get punished hard right? Arthur J Gallagher, AJG and
Charter Communications, CHTR, both down 4.0%, just on weaker
(17:53):
than expected Q3 revenue. Yep, miss the top line?
You pay the price. And importantly, these trends
continued after the bell Friday.The extended session saw Amazon
and Western Digital attacking onmore gains, while Dexcom stayed
stuck as the top loser. The market is absolutely
screaming. Give us clarity on future cash
flow. Or else the message is
definitely loud and clear. Guidance is king and any slip up
(18:17):
is toxic right now. Undeniable.
OK, moving into Section 5, let'slook at the immediate outlook
heading into next week. Despite all this concentration
risk and the Fed warnings, the bulls definitely ended Friday
feeling pretty good. Futures were pointing higher.
S and PE minis at .11%. NASDAQ 100 E minis up .38%.
Yeah, that little green on the screen Friday evening signals
(18:40):
the market is, at least for now,consciously choosing to lean
into that profit story. You know the Amazon strength of
WBC recovery more heavily than the policy worries from the Fed.
So they're betting on that Goldilocks scenario.
Seems like it betting the economy strong enough for
profits to keep growing, but maybe not so hot that it forces
this fractured Fed into getting more aggressive with hikes or
ruling out cuts all together. They're absolutely trying to
(19:02):
front run that seasonal strengthwe talked about earlier, making
an aggressive bet. They're making this bet while
dealing with a huge blind spot, right?
This ongoing government shutdown?
How is that actually impacting the market's ability to even
figure out what's going on? The shutdown is creating a
really serious, potentially dangerous data vacuum.
Key government data releases, especially the big ones from the
(19:25):
Bureau of Labor Statistics, BLS,but others too.
They're either getting delayed or just not happening at all.
OK, now for a market where the Fed itself keeps saying we are
data dependent, this lack of official, reliable information
is a massive problem. It dramatically increases the
potential impact of the market moving power of the few data
points that are still scheduled to come out.
So if the usual official stuff is missing, what is the market
(19:48):
watching? What are these shadow data
points you mentioned that are going to cause all this
volatility? Well, it puts enormous weight on
private surveys and non governmental releases to try and
fill that gap. That's your shadow data.
Specifically, everyone's going to be glued to the ISM
Manufacturing and ISM Services reports.
Right, the Institute for Supply Management surveys.
(20:09):
Exactly. And the ADP employment report.
Now these are generally respected surveys, but
historically they don't always perfectly match up with the
official BLS numbers. Later on they can diverge.
OK. So any surprise, any deviation
from what analysts expect in these reports, it's going to get
magnified hugely. It'll be treated as the main,
(20:30):
maybe only real time signal of how the US economy is doing
guarantees maximum volatility until that official data starts
flowing again. Which leads us straight into
Section 6, the biggest macro test of them all, the jobs
report kill switch. It feels like everything next
week builds towards the October Employment Situation report
coming out Friday, November 7th.This is it.
(20:51):
This is the main event. It's the first major economic
reality check, right after that hawkish cut, and crucially,
after Lori Logan threw down the gauntlet with her public
descent. The market, as we said, is
priced for things to keep going well.
But this jobs report has the absolute power to just shatter
that bullish narrative and provethose Fed dissenters were right
all along. OK, let's gain this out. 2
(21:12):
extreme scenarios for Friday morning.
Scenario one, what do we get? A hot number?
Payrolls higher than expected. Wages growing strongly.
A hot number would likely be pretty catastrophic for this
current rally for the risk on mood.
It would instantly validate LoriLogan's argument that the
economy is running too hot for rate cuts.
(21:33):
It confirms Powell's hawkish caution.
Any lingering hope for that December rate cut gone.
Odds would plummet, probably below 50%.
And the market reaction? You'd likely see a violent sell
off in bonds first, meaning yields would spike higher
because the market suddenly realizes inflation risk is still
alive and the Fed definitely isn't coming to the rescue with
easy money. Right?
(21:53):
And equities would almost certainly tumble.
Yeah, especially those rate sensitive areas like tech.
Maybe housing stocks because higher borrowing costs, higher
discount rates, they just hammergrowth stock valuations.
It would be a very sharp, very painful reality check for the
bold. OK, painful now Scenario 2:00.
What if it's a cold number? A surprisingly weak jobs report?
(22:16):
Maybe hiring slows way down. The cold number, that's your
classic double edged sword. On one hand, yeah, it absolutely
Stokes recession fears, which isobviously bad for stocks long
term. But the initial market reaction
would probably be a significant rally in risk assets.
Stocks would likely jump. That seems counterintuitive if
recession risk is rising. Because the market would
(22:37):
instantly price in a fast Fed pivot.
It's all about the Fed put the assumption, would be OK, The
economy's weakening. the Fed will now be forced to shift
focus from inflation to supporting jobs.
That means faster, maybe deeper rate cuts are coming.
So bad news is good news again. In the short term, yes, bad
economic news equals hope for cheaper money from the Fed.
(22:57):
While the underlying worry abouta recession would still be
there. That hope for lower rates boosts
valuation multiples, and that often triggers that initial risk
on a rally. The market basically bets the
Fed will be forced to bail them out.
Got it. And before we even get to
Friday's main event, we need to watch those midweek shadow data
points closely, right, To gauge the mood.
(23:19):
Absolutely critical. Monday kicks it off with the ISM
manufacturing PMI that gives us the first glimpse of how the
industrial side of the economy held up in October.
OK then Wednesday is a huge day for data.
First we get the ADP employment report.
That's the big private sector payroll number everyone watches
now. And then later Wednesday, the
ISM non manufacturing or services PMI.
(23:41):
And services because. The services sector is by far
the largest part of the US economy.
How consumers are spending, how service businesses are doing,
any sign of strength or weaknessthere will massively shape
market sentiment. Heading right into that official
jobs report on Friday, it's a crucial stepping stone.
OK, so we've covered the huge macro policy test hanging over
(24:01):
everything. Let's pivot back for Section 7,
the micro test, because the market also needs confirmation
from AI, second tier of companies, right?
The Magnificent 7 split was dramatic, but now we need to see
if the suppliers are confirming that growth.
That's exactly right. The spotlight shifts now to
confirming that Amazon style profitable growth story.
(24:22):
Is AI really boosting everyone'sboat or was Amazon somehow
unique? We need proof that all that
CapEx spending we talked about is actually flowing down the
supply chain efficiently and crucially profitably.
So which to specific company reports are central to either
proving or disproving that profitable AI growth idea next
week? Well, the real AI narrative test
(24:43):
hinges on reports from companieslike AMD Super Micro Computer.
That's SMCI, Palantir, PLTRARM Holdings, and Qualcomm QCOM.
OK, why those names? Because they are the critical
layer below the hyper scalers like Amazon and Microsoft.
They sell the chips, the specialized servers, the
software, the core infrastructure that enables AI.
Their results and especially their guidance will tell us is
(25:06):
the demand from the big guys still accelerating or is it
maybe starting to slow down raising that ugly specter of the
meta style cost sink again? Got it.
And we also have a consumer health check happening this week
too, right? Which is obviously important for
the Fed. Reports from Uber, Shopify,
Airbnb, McDonald's. Yeah, absolutely vital read on
(25:28):
the consumer. The feds been trying to engineer
this soft landing, slow down demand without crashing it.
So reports from these companies,ride sharing, e-commerce,
travel, fast food, they give us a real time pulse check on
whether the average person is still spending or starting to
pull back. OK.
If you had to pinpoint maximum volatility next week based on
earnings, where would you look? Tuesday, Tuesday, November 4th
(25:49):
looks like a potential super catalyst day, especially after
the market closes, because that's when we get the two most
important AI infrastructure reports of the whole week.
Which are AMD and Supermicro computer SMCI?
Why are those two so critical? Coming right after that Amazon
Meta Divergent. Because they are the immediate
demand signal for the actual AI compute hardware.
(26:11):
AMD is Nvidia's main challenger in AI chips, right?
Their guidance basically sets the tone for the entire AI
hardware spending outlook into 2026.
OK, and super micro smci. They build the high performance
servers that house all those expensive chips.
They're seen as a key bellwetherfor data center demand, so if
either of them signals any weakness, maybe a cautious
(26:33):
outlook hints that the big cloudcompanies are tapping the brakes
on spending. Like the meta narrative again?
Exactly. If they hint at that meta style
caution, it could stop this whole tech rally dead in its
tracks because the market would immediately fear that this
massive AI spending boom might already be peaking or cooling
off. The stakes are incredibly high
for those two reports Tuesday night.
Wow. And the volatility keeps rolling
(26:55):
into Wednesday. Oh yeah, Wednesday gives us
McDonald's during the day. That's a huge read on the
consumer across different incomelevels.
Then after the bell Wednesday, more Critical Semiconductor
reports, Qualcomm, QCOM and RM Holdings.
ARM Qualcomm is important. For mobile phones primarily,
their outlook is vital for gauging demand for smartphones
(27:15):
and other connected devices, andARM is unique because of its
licensing model. It's results give you a broad
insight across the entire chip design ecosystem.
And then we wrap up the really high impact earnings Thursday
night with Airbnb. Yep.
Airbnb gives us that final look at discretionary consumer spend,
especially in the travel sector,which has been pretty good.
So yeah, it's just a relentless week.
(27:37):
Micro level earnings tests are perfectly colliding with these
huge macro pressures. It's set up for maximum market
tension. Which brings us perfectly to our
outro the conclusion of this deep dive?
The bold, dangerous bet. We definitely ended the week
with some upward momentum, didn't we?
But that central conflict is just crystal clear now.
The market seems to have placed this very narrow, very bold bet
(28:00):
that profits, especially from a few tech giants, will keep
accelerating. And it seems to be largely
trying to ignore these flashing policy warning lights from a Fed
that doesn't even agree with itself.
It really is a profound bet and it's a bet on a very specific,
very optimistic and maybe narrowpath to success.
That positive momentum we saw infutures Friday night, it's real.
(28:24):
But we just have to stress the immediate dangers here.
This rally, as we've said, it's built on maybe the narrowest
foundation we've seen in a whileand the economic landscape for
this first week of November, it really does feel like a
tinderbox. You've got these make or break
AI earnings test crashing right into this critical data star
jobs report. The slightest thing goes wrong,
(28:44):
corporate results disappoint, orthat economic data surprises
badly. The risk of a broader stumble
feels really high. Yeah, that confluence of events,
it just means the market is carrying this fragile momentum
into November. So for you, the listener, you
really have to weigh these competing forces.
Look, the market closed October on a high note, no doubt, but it
could be just one hot jobs number away from facing that
(29:06):
hawkish cut reckoning we talked about that single data point on
Friday morning. It really holds the power to
validate those Fed dissenters, potentially send bond yields
soaring again, and knock risk assets right back down as those
discount rates adjust higher. So as you get ready for this
crucial first week of November, the big, big question you have
to ask yourself is which story do you believe holds more weight
(29:28):
right now? Is it the fundamental, maybe
accelerating power of these concentrated corporate profits?
Or is it the looming external threat of this restrictive,
uncertain and fractured Fed policy?
That really is the question, isn't it?
The answer will likely determinewhether it's the bulls or the
bears who truly control the market narrative as we head
(29:49):
towards the end of the year. Thank you for diving deep with
us today. We'll catch you next time.
Welcome to the Deep Dive. Our mission, as always, is to
take a pile of complex, really high stakes market information,
cut through the noise and give you that shortcut to being
properly informed. Today we're zeroing in on the
well, the really intense close we saw on October 31st, 2025.
It finished off a strong month technically, but wow, the
(00:22):
narrative felt chaotic, fragmented even.
That's a great way to put it. Fragmented for anyone tracking
the end of the week. Yeah.
It felt like a tug of war. Didn't a really volatile scrap
between two massive forces, Definitely.
So our deep dive today focuses on that collision course, the
one that seems set for the firstweek of November.
We're looking at the sheer powerof these corporate earnings,
(00:42):
especially tech. That's the bulls for our
purposes, right? And pitting that against this
intensifying, pretty unpredictable pressure from a
Fed that looks frankly a bit fractured and, well, hawkish.
That's the Bears. Yeah, the end of October gave us
some serious whiplash, especially if you look at the
biggest names, the ones that really move the needle the
(01:04):
market, you know, on paper, close the week strong, got that
multi month winning streak for the S&P 500 locked in.
But you peek under the hood pastthose headline numbers, and it's
all about this extreme concentration and I mean real
anxiety bubbling up about where monetary policy is headed.
You know, what really jumps out at me looking through all this
is that fundamental disconnect. You've got a market where the
(01:25):
actual business performance, theprofits, especially in high
margin tech, it's demonstrably strong.
It looks sound, but then that internal strength is hitting
this. This fierce external headwind,
policy uncertainty, Fed signals it's a lot.
So the victory the Bulls got this week, it feels like it's
built on, well, an extremely narrow ledge.
(01:46):
OK, let's unpack this, starting with Section 1.
Friday's fragile victory and theoutstanding October overall.
So let's get the numbers down. 1st Friday, October 31st Yeah,
S&P 500, it was a .26%, closing at 6840.27 date.
NASDAQ deposit did a bit better,a .60%.
Right. And that move was pretty
crucial, wasn't it? Was a sharp turn around from
(02:07):
that that big tech sell off we saw on Thursday?
It really was, yeah. Felt like a bit of relief maybe,
but the sources we're looking at, they're definitely calling
it fragile. Well, yeah, fragile day-to-day,
perhaps, but zoom out to the monthly chart and it looks
fantastic. The indexes bagged their third
winning week in a row, and the S&P finished October up a solid
(02:27):
3%. Critically, like you said, that
seals its sixth straight winningmonth.
We haven't seen a streak like that since, what, late 2021?
Wow, sixth straight month. Yeah.
That kind of consistent momentum, it does suggest
there's some underlying strengththere, some real buying
pressure. And analysts keep throwing
around this term front running the seasonal tailwinds.
I hear it everywhere. For, you know, for you
(02:50):
listening. What does front running actually
mean here? What are they doing?
Yeah, it's basically market psychology mixed with fun
positioning. So November and December,
historically, they're often two of the strongest months for
stocks. Right, the holiday rally idea.
Exactly optimism about holiday spending, maybe some year end
bonus money flowing into the market, that kind of thing.
So when we say the market is front running, it means the big
(03:12):
players, the institutions, they're positioning themselves
now at the end of October to tryand capture that expected move
higher. They're essentially willing to
pay a bit more today because they think there's a high
probability that historical pattern, that seasonal strength
will play out again. It shows conviction, definitely,
but it also means the market's already kind of priced for good
(03:35):
news heading into November. Right.
OK. But that conviction seems to be
resting very, very heavily on just a couple of names, doesn't
it? And this is where that fragility
really comes in. I mean our deep dive shows
Fridays rally was well, let's behonest, it was basically A1
stock show pretending to be a broad market win.
That is the absolute key take away from Friday Amazon AMZN,
(03:57):
it's surged just, I mean a staggering 9.6% after its
earnings. 9.6%. Yeah, the speed and the sheer
size of that move just meant Amazon was, as one source put
it, by far the strongest force lifting everything.
And the analysis is pretty stark.
You take Amazon's contribution out of the equation for Friday,
the S&P 500 would have closed down negative for the day.
(04:19):
That tells you right there that while the main index number
looks OK, the underlying health,the breadth across different
stocks is actually worryingly narrow.
Yeah, this concentration risk thing, it always sparks debate,
doesn't it? I hear the experts say, OK, this
isn't 2000 all over again because, you know, fundamental
support current valuation. Right.
You hear that a lot. But look, if the top ten stocks
(04:42):
are a historically massive chunkof the S&P 500's weight, and the
whole rally balances on a knife edge depending on literally 1
stock having a blockbuster day, isn't that just systemic risk
anyway, regardless of the fundamentals?
I mean, where's the tipping point where concentration itself
becomes the bubble? That that is the $1,000,000
question, isn't it? And it's maybe less about the
profits themselves and more about the distribution of risk
(05:06):
and the potential for failure. Look back in 2000.
Yeah, you had companies with insane valuations, triple digit
PES, sometimes with hardly any actual cash flow.
Right eyeballs over earnings. Exactly.
Today these mega caps, they are generating enormous predictable
cash flows, high margins. That part is different.
(05:27):
However. The risk now is that the market
is so tilted towards them that any single point of failure gets
magnified across the whole system.
So 1 bad report from one giant. Yeah, If just one leader, say,
you know, Microsoft or an Amazon, stumbles badly next
quarter, the weight they carry is so huge now, it could easily
pull the entire index down maybe2 percent, 3%, just on its own.
(05:48):
The market's efficient at pricing information maybe, but
it's definitely not diversified right now.
It's placing this massive concentrated bet.
And that massive debt leads us perfectly into Section 2, The
Magnificent 7 Divergent, becausethe whole investment world just
spent 48 hours wrestling with two completely opposite takes on
the whole AI investment idea created some serious market
(06:11):
whiplash. Oh, absolutely.
Whiplash is the perfect word. That group, the so-called
Magnificent 7 mega cap tech stocks, they basically split
right down the middle based entirely on how they talked
about their AI spending, specifically their capital
expenditures, their CapEx. And that split became the
markets sorting mechanism this week.
OK, let's start with Thursday's story.
That was the bears view, right? Seeing AI is basically a cost
(06:35):
pit. Meta Meta was the poster child
for that, sinking a huge 11.3%. I mean that's its biggest one
day drop in three years. Why hit it so hard?
It really came down to expectation management just
going sideways. Meta's outlook, it projected
notably larger capital spending stretching out into 2026.
And they framed the spending as you know, necessary for their
(06:55):
big AI and building models, datacenters, the whole 9 yards.
But the market heard that and immediately thought lower
profits in the short term. Right, the payoff is way down
the road. Exactly.
The narrative became meta is pouring billions into this.
The actual return is conceptual,maybe years away.
It's just a huge expense that's going to weigh down the balance
sheet for, I don't know, 1824 months at least.
(07:18):
And Microsoft kind of echoed that, didn't they?
They fell what, 2.9% after reporting their own record CapEx
and saying yes, spending is going to keep rising.
Correct. So the message coming out of
Thursday was pretty clear, AI equals huge costs right now with
no immediate guaranteed return on that investment.
Pessimism. Yeah, the market's first
(07:38):
reaction was definitely pessimism.
These companies are being forcedto spend billions just to stay
in the game, and that spending is acting like a drag anchor on
their earnings per share. It made AI look like an
inflationary force, but on the cost side.
But then Friday Amazon shows up and just completely flips the
script. Totally invalidates that cost
(08:00):
focused view right? Gives us the powerful counter
narrative. AI as accelerated revenue.
That's the bull case that liftedeverything.
Amazon jumps 9.6%. What was the magic ingredient
there? The magic ingredient was proof.
Immediate, quantifiable proof delivered by Amazon Web
Services, AWS. The cloud unit.
Right. Unlike Meta where the CapEx felt
(08:21):
like it was about future proofing Facebook or Instagram,
Amazon showed its AI spending was already boosting high margin
revenue growth. Like right now AWS growth
actually accelerated to 20%. We haven't seen that kind of
pace since back in 2022. OK.
That 20% gross number, why was that specific figure so
electrifying for the market? Because it showed operating
leverage in action. You know, cloud growth across
(08:42):
the tech sector had actually been slowing down for several
quarters. People were worried.
AWS is Amazon's cash cow, right?It's high margin, sticky
enterprise revenue. So when the CEO, Andy Jassi
comes out and explicitly says AIis driving meaningful
improvements in every corner of our business, and then they back
(09:02):
it up with a 20% acceleration ingrowth in their most profitable
unit, the market instantly got it.
OK. Amazon's AI spending isn't just
defense, it's offense. It's a necessary investment
that's already accelerating profitable revenue.
It wasn't just spending to keep up like it seemed with Meta.
It was spending to immediately boost the top and bottom line.
That was the crucial difference.And that difference proving the
(09:25):
AI spend generates high margin dollars now that drove what,
over $100 billion in market cap change on Friday?
Easily. It was massive.
And you know, we shouldn't forget Apple and all this.
It sort of played the role of the anchor, didn't it?
Yeah, good point. Despite beating estimates
forecasting record holiday revenue, Apple actually finished
down .4 percent. But that was like another sign
(09:45):
of that fragility we talked about, doesn't it?
Even a positive report from Apple couldn't catch a bid.
What held it back? It really seemed to be the China
data. Apple reported a well, a
noticeable drop in sales in China and China is just such a
massive engine for them in this kind of nervous show me market,
even a hint of weakness in a really critical region like
(10:07):
China, especially with all the geopolitical tension.
It's enough to cancel out strongoverall results and just cap the
stock price makes sense. And if you look back at the
sector performance across those two days, Thursdays losses hit
consumer discretionary and communication services hard.
Because of meta and others. Right.
But then Fridays gains, Amazon basically single handedly
(10:28):
dragged the entire consumer discretionary sector back into
positive territory. So again, it just confirms that
the underlying market health is really uneven, very reliant on a
few winners. OK.
So we've laid out the strength, but also the real fragility of
that profits narrative. But the market isn't operating
in a vacuum, right? It's facing this huge macro
storm cloud, which brings us to Section 3, the monetary policy
(10:50):
headwind, and this this fractured Fed.
Yeah, the Fed meeting this week,the Federal Open Market
Committee, the FOMC, they delivered what the market
technically asked for, right? Another 25 basis point rate
cuts. Second one in a row OK brings
the Fed funds rate down to a range of 3.75% to 4.00%, but the
(11:12):
market immediately labeled it a hawkish cut.
OK. Explain that distinction for,
you know, for listeners. What makes a cut hawkish versus
dovish because the market seemedto be expecting dovish.
Right. A dovish cut is pretty
straightforward. You get the rate reduction and
you get clear signals forward guidance that more cuts are
probably coming soon. It signals the Fed is confident
(11:34):
inflation is heading down fast. And the market had priced that
in. Oh, yeah, the market had priced
in not just this 25 basis point cut, but it saw another cut in
December as almost a sure thing like that.
The odds were over 90% beforehand.
But then Fed Chair Jerome Powellsteps up to the microphone.
He delivers. There's the cut, yes, but he
immediately pours cold water on that December expectation.
Right, he explicitly said a December cut was what was it not
(11:56):
a foregone conclusion? Exactly that phrase, not a
foregone conclusion. By just removing that certainty,
that forward signal, he effectively tightened financial
conditions, even though he just cut rates.
And that one comment boom. December cut odds dropped
instantly from over 90% down to around 70%.
So Powell gave the market the rate cut it wanted with one
(12:17):
hand, but he aggressively took away the promise of more easing
with the other. And that forces a repricing of
risk assets because the cost of money isn't just falling.
The certainty about future costsjust vanished.
That's your hawkish cut. But what's maybe even more
striking here is the division within the Fed that's spilled
out afterwards. I mean, real public
(12:38):
disagreement. Dallas Fed President Lori Logan
actually came out and pushed back publicly against the feds
own decision. Yeah, this is really quite
something. Logan basically said She would
have preferred to hold interest rates steady.
No. Cut out, not.
Her reasoning Stark. Directly challenging the
majority view, she said she believes inflation remains too
high, period, and that the economic outlook may be boosted
(12:58):
by those. Strong earnings like Amazon we
just discussed simply didn't justify cutting rates right now.
OK, so this dissent, it's not just some academic debate point,
is it? You have an actual voting member
of the FOMC publicly saying the committee got it wrong.
That massively raises the stakesfor every single piece of
economic data coming out next week.
(13:19):
It absolutely does. It really underscores that the
Fed's whole data dependent mantra, well, the path forward
isn't even clear to its own members, right?
Think about it. If the jobs numbers or the
manufacturing data next week come in hotter than expected,
Logan's dissent suddenly looks really smart.
It strengthens the hand of the Hawks inside the Fed who think
they're easing too soon. This internal split just
(13:41):
confirms that future cuts are absolutely not guaranteed and
makes every day to release feel like walking a tightrope with no
safety net because there's no clear consensus driving policy
anymore. Which sets the stage perfectly
for what we saw in individual stocks this week.
Section 4 The markets show me state.
Because with this Fed uncertainty and the AI whiplash,
(14:02):
the market has become incrediblyselective, surgically precise,
even rewarding perfection, punishing any weakness
instantly. That's surgical precision.
Yeah. It's the classic sign of a high
anxiety market. Companies that deliver what the
Street calls clean beats, you know, beating earnings estimates
and giving strong, clear guidance for the future.
(14:22):
They're getting huge rewards, double digit pops in some cases,
but any hint of trouble, a guidance cut, even a small 1A
revenue miss. The punishment is immediate and
brutal. There's just no middle ground
right now. OK, let's run through some of
those winners, the ones that delivered the clean beats.
First Solar FSLR pops 14.5% beatearnings.
Yes, but you said the guidance was key.
(14:43):
Yeah, the guidance was the kicker.
They offered a sunnier forecast for 2025.
You have to remember the whole solar and renewable sector has
been really beaten down, higher rates, supply chain issues.
So when First Solar comes out with not just a beat but a
strong confident outlook, look for next year, it signals maybe
stability and pricing power coming back.
That triggers a big rotation back into the stock.
(15:03):
Analysts rush to upgrade, hence the big jump.
OK. And Cloudflare net up 14.0%.
Similar story all about the outlook.
They raised their full year revenue forecast to $2.14
billion. That was well above what
analysts expected. So proof their growth is
accelerating faster than people thought.
Got it. Western Digital WT sub 9.0%.
(15:25):
What was their story? They didn't just meet estimates,
they apparently crushed their Q1earnings per share and then they
give a really strong forecast for Q2 sales growth, like 20%.
Wow. 20% growth. Yeah.
In a sector like memory and datastored, which is super cyclical
and has been weak, that kind of guidance suggests a strong
recovery is underway. Even some newer names did well.
Reddit RDDT up 7.6%. Yep, beat on profit, beat on
(15:49):
revenue, and crucially showed strong growth in daily active
users. 116 million for a social media platform that user growth
is the key metric everyone watches for future ad revenue
potential. So yeah, all these are examples
of companies basically validating their current start
price with clear positive signals about the future, even
in tricky sectors. OK, now let's flip it.
(16:10):
Contrast those winners with the losers, the ones who felt the
market's wrath. Newell Brands NWL just created
28.0% after result. Ouch.
Yeah, that's a disaster. But maybe the most illustrative
example of the surgical punishment was Dexcom DXCM.
Yeah, Dexcom, leading medical device maker, right?
S&P 500's biggest loser on Friday, down 13.5%.
(16:31):
And the reason it was almost subtle.
They trimmed their full year adjusted gross margin estimate
from 62% down to 61%. Wait, a one percentage point
trim to gross margin guidance ina healthcare company, not some
high flying tech stock sends thestock down almost 14%?
That seems incredibly hard. Why does that one point matter
so much? It tells you everything about
(16:51):
market sentiment and maybe liquidity right now, look,
healthcare stocks, especially established device makers like
Dexcom, their valuations are often built on the idea of super
stable, predictable, usually expanding gross margins.
It's their quality signal. OK, so when a company cuts that
margin guidance even by just 1%,the market immediately panics.
(17:12):
It reads it as a sign of maybe unexpected pricing pressure,
maybe rising costs they didn't anticipate, maybe tougher
competition eating away at theirprofitability Moat.
I see. And because investors are
already jumpy about higher interest rates from the Fed,
they demand near perfection. That 1% cut introduced
uncertainty about future cash flow stability that forces
(17:33):
investors to adjust their models.
Apply a higher discount rate maybe and boom you get this
massive unforgiving sell off. The fear of future problems
becomes more powerful than the reality of current profits.
Brutal. We also saw straight up revenue
misses get punished hard right? Arthur J Gallagher, AJG and
Charter Communications, CHTR, both down 4.0%, just on weaker
(17:53):
than expected Q3 revenue. Yep, miss the top line?
You pay the price. And importantly, these trends
continued after the bell Friday.The extended session saw Amazon
and Western Digital attacking onmore gains, while Dexcom stayed
stuck as the top loser. The market is absolutely
screaming. Give us clarity on future cash
flow. Or else the message is
definitely loud and clear. Guidance is king and any slip up
(18:17):
is toxic right now. Undeniable.
OK, moving into Section 5, let'slook at the immediate outlook
heading into next week. Despite all this concentration
risk and the Fed warnings, the bulls definitely ended Friday
feeling pretty good. Futures were pointing higher.
S and PE minis at .11%. NASDAQ 100 E minis up .38%.
Yeah, that little green on the screen Friday evening signals
(18:40):
the market is, at least for now,consciously choosing to lean
into that profit story. You know the Amazon strength of
WBC recovery more heavily than the policy worries from the Fed.
So they're betting on that Goldilocks scenario.
Seems like it betting the economy strong enough for
profits to keep growing, but maybe not so hot that it forces
this fractured Fed into getting more aggressive with hikes or
ruling out cuts all together. They're absolutely trying to
(19:02):
front run that seasonal strengthwe talked about earlier, making
an aggressive bet. They're making this bet while
dealing with a huge blind spot, right?
This ongoing government shutdown?
How is that actually impacting the market's ability to even
figure out what's going on? The shutdown is creating a
really serious, potentially dangerous data vacuum.
Key government data releases, especially the big ones from the
(19:25):
Bureau of Labor Statistics, BLS,but others too.
They're either getting delayed or just not happening at all.
OK, now for a market where the Fed itself keeps saying we are
data dependent, this lack of official, reliable information
is a massive problem. It dramatically increases the
potential impact of the market moving power of the few data
points that are still scheduled to come out.
So if the usual official stuff is missing, what is the market
(19:48):
watching? What are these shadow data
points you mentioned that are going to cause all this
volatility? Well, it puts enormous weight on
private surveys and non governmental releases to try and
fill that gap. That's your shadow data.
Specifically, everyone's going to be glued to the ISM
Manufacturing and ISM Services reports.
Right, the Institute for Supply Management surveys.
(20:09):
Exactly. And the ADP employment report.
Now these are generally respected surveys, but
historically they don't always perfectly match up with the
official BLS numbers. Later on they can diverge.
OK. So any surprise, any deviation
from what analysts expect in these reports, it's going to get
magnified hugely. It'll be treated as the main,
(20:30):
maybe only real time signal of how the US economy is doing
guarantees maximum volatility until that official data starts
flowing again. Which leads us straight into
Section 6, the biggest macro test of them all, the jobs
report kill switch. It feels like everything next
week builds towards the October Employment Situation report
coming out Friday, November 7th.This is it.
(20:51):
This is the main event. It's the first major economic
reality check, right after that hawkish cut, and crucially,
after Lori Logan threw down the gauntlet with her public
descent. The market, as we said, is
priced for things to keep going well.
But this jobs report has the absolute power to just shatter
that bullish narrative and provethose Fed dissenters were right
all along. OK, let's gain this out. 2
(21:12):
extreme scenarios for Friday morning.
Scenario one, what do we get? A hot number?
Payrolls higher than expected. Wages growing strongly.
A hot number would likely be pretty catastrophic for this
current rally for the risk on mood.
It would instantly validate LoriLogan's argument that the
economy is running too hot for rate cuts.
(21:33):
It confirms Powell's hawkish caution.
Any lingering hope for that December rate cut gone.
Odds would plummet, probably below 50%.
And the market reaction? You'd likely see a violent sell
off in bonds first, meaning yields would spike higher
because the market suddenly realizes inflation risk is still
alive and the Fed definitely isn't coming to the rescue with
easy money. Right?
(21:53):
And equities would almost certainly tumble.
Yeah, especially those rate sensitive areas like tech.
Maybe housing stocks because higher borrowing costs, higher
discount rates, they just hammergrowth stock valuations.
It would be a very sharp, very painful reality check for the
bold. OK, painful now Scenario 2:00.
What if it's a cold number? A surprisingly weak jobs report?
(22:16):
Maybe hiring slows way down. The cold number, that's your
classic double edged sword. On one hand, yeah, it absolutely
Stokes recession fears, which isobviously bad for stocks long
term. But the initial market reaction
would probably be a significant rally in risk assets.
Stocks would likely jump. That seems counterintuitive if
recession risk is rising. Because the market would
(22:37):
instantly price in a fast Fed pivot.
It's all about the Fed put the assumption, would be OK, The
economy's weakening. the Fed will now be forced to shift
focus from inflation to supporting jobs.
That means faster, maybe deeper rate cuts are coming.
So bad news is good news again. In the short term, yes, bad
economic news equals hope for cheaper money from the Fed.
(22:57):
While the underlying worry abouta recession would still be
there. That hope for lower rates boosts
valuation multiples, and that often triggers that initial risk
on a rally. The market basically bets the
Fed will be forced to bail them out.
Got it. And before we even get to
Friday's main event, we need to watch those midweek shadow data
points closely, right, To gauge the mood.
(23:19):
Absolutely critical. Monday kicks it off with the ISM
manufacturing PMI that gives us the first glimpse of how the
industrial side of the economy held up in October.
OK then Wednesday is a huge day for data.
First we get the ADP employment report.
That's the big private sector payroll number everyone watches
now. And then later Wednesday, the
ISM non manufacturing or services PMI.
(23:41):
And services because. The services sector is by far
the largest part of the US economy.
How consumers are spending, how service businesses are doing,
any sign of strength or weaknessthere will massively shape
market sentiment. Heading right into that official
jobs report on Friday, it's a crucial stepping stone.
OK, so we've covered the huge macro policy test hanging over
(24:01):
everything. Let's pivot back for Section 7,
the micro test, because the market also needs confirmation
from AI, second tier of companies, right?
The Magnificent 7 split was dramatic, but now we need to see
if the suppliers are confirming that growth.
That's exactly right. The spotlight shifts now to
confirming that Amazon style profitable growth story.
(24:22):
Is AI really boosting everyone'sboat or was Amazon somehow
unique? We need proof that all that
CapEx spending we talked about is actually flowing down the
supply chain efficiently and crucially profitably.
So which to specific company reports are central to either
proving or disproving that profitable AI growth idea next
week? Well, the real AI narrative test
(24:43):
hinges on reports from companieslike AMD Super Micro Computer.
That's SMCI, Palantir, PLTRARM Holdings, and Qualcomm QCOM.
OK, why those names? Because they are the critical
layer below the hyper scalers like Amazon and Microsoft.
They sell the chips, the specialized servers, the
software, the core infrastructure that enables AI.
Their results and especially their guidance will tell us is
(25:06):
the demand from the big guys still accelerating or is it
maybe starting to slow down raising that ugly specter of the
meta style cost sink again? Got it.
And we also have a consumer health check happening this week
too, right? Which is obviously important for
the Fed. Reports from Uber, Shopify,
Airbnb, McDonald's. Yeah, absolutely vital read on
(25:28):
the consumer. The feds been trying to engineer
this soft landing, slow down demand without crashing it.
So reports from these companies,ride sharing, e-commerce,
travel, fast food, they give us a real time pulse check on
whether the average person is still spending or starting to
pull back. OK.
If you had to pinpoint maximum volatility next week based on
earnings, where would you look? Tuesday, Tuesday, November 4th
(25:49):
looks like a potential super catalyst day, especially after
the market closes, because that's when we get the two most
important AI infrastructure reports of the whole week.
Which are AMD and Supermicro computer SMCI?
Why are those two so critical? Coming right after that Amazon
Meta Divergent. Because they are the immediate
demand signal for the actual AI compute hardware.
(26:11):
AMD is Nvidia's main challenger in AI chips, right?
Their guidance basically sets the tone for the entire AI
hardware spending outlook into 2026.
OK, and super micro smci. They build the high performance
servers that house all those expensive chips.
They're seen as a key bellwetherfor data center demand, so if
either of them signals any weakness, maybe a cautious
(26:33):
outlook hints that the big cloudcompanies are tapping the brakes
on spending. Like the meta narrative again?
Exactly. If they hint at that meta style
caution, it could stop this whole tech rally dead in its
tracks because the market would immediately fear that this
massive AI spending boom might already be peaking or cooling
off. The stakes are incredibly high
for those two reports Tuesday night.
Wow. And the volatility keeps rolling
(26:55):
into Wednesday. Oh yeah, Wednesday gives us
McDonald's during the day. That's a huge read on the
consumer across different incomelevels.
Then after the bell Wednesday, more Critical Semiconductor
reports, Qualcomm, QCOM and RM Holdings.
ARM Qualcomm is important. For mobile phones primarily,
their outlook is vital for gauging demand for smartphones
(27:15):
and other connected devices, andARM is unique because of its
licensing model. It's results give you a broad
insight across the entire chip design ecosystem.
And then we wrap up the really high impact earnings Thursday
night with Airbnb. Yep.
Airbnb gives us that final look at discretionary consumer spend,
especially in the travel sector,which has been pretty good.
So yeah, it's just a relentless week.
(27:37):
Micro level earnings tests are perfectly colliding with these
huge macro pressures. It's set up for maximum market
tension. Which brings us perfectly to our
outro the conclusion of this deep dive?
The bold, dangerous bet. We definitely ended the week
with some upward momentum, didn't we?
But that central conflict is just crystal clear now.
The market seems to have placed this very narrow, very bold bet
(28:00):
that profits, especially from a few tech giants, will keep
accelerating. And it seems to be largely
trying to ignore these flashing policy warning lights from a Fed
that doesn't even agree with itself.
It really is a profound bet and it's a bet on a very specific,
very optimistic and maybe narrowpath to success.
That positive momentum we saw infutures Friday night, it's real.
(28:24):
But we just have to stress the immediate dangers here.
This rally, as we've said, it's built on maybe the narrowest
foundation we've seen in a whileand the economic landscape for
this first week of November, it really does feel like a
tinderbox. You've got these make or break
AI earnings test crashing right into this critical data star
jobs report. The slightest thing goes wrong,
(28:44):
corporate results disappoint, orthat economic data surprises
badly. The risk of a broader stumble
feels really high. Yeah, that confluence of events,
it just means the market is carrying this fragile momentum
into November. So for you, the listener, you
really have to weigh these competing forces.
Look, the market closed October on a high note, no doubt, but it
could be just one hot jobs number away from facing that
(29:06):
hawkish cut reckoning we talked about that single data point on
Friday morning. It really holds the power to
validate those Fed dissenters, potentially send bond yields
soaring again, and knock risk assets right back down as those
discount rates adjust higher. So as you get ready for this
crucial first week of November, the big, big question you have
to ask yourself is which story do you believe holds more weight
(29:28):
right now? Is it the fundamental, maybe
accelerating power of these concentrated corporate profits?
Or is it the looming external threat of this restrictive,
uncertain and fractured Fed policy?
That really is the question, isn't it?
The answer will likely determinewhether it's the bulls or the
bears who truly control the market narrative as we head
(29:49):
towards the end of the year. Thank you for diving deep with
us today. We'll catch you next time.
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