November 4, 2025 • 32 mins
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Good afternoon and welcome to the Deep Dive.
Thank you for joining us. We're diving into, well, a
really consequential market day,Tuesday, November 4th, 2025.
This wasn't just, you know, a day where stocks went down.
It felt like more like A reckoning.
It was the moment, the whole consensus, the belief system
really supporting that huge AI fueled rally.
(00:22):
It just seemed to fracture and the market.
It violently rejected what on paper looked like genuinely good
news. That's exactly the frame, isn't
it? You have to understand this
November 4th wasn't just some technical dip.
It feels like it fundamentally shifted market psychology.
Everyone suddenly got defensive.So what we're analyzing today is
this complex collision of forces.
You've got a broad tech sell off, right?
(00:43):
Technology led the way down. Yeah.
And at the same time, a huge crash in speculative stuff like
crypto. And then there's this unique,
really unnerving uncertainty from the US government's
statistical blackout. OK, so our mission today for you
listening is to figure out just how quickly that tide turned and
what exactly broke the markets bullish spell because it felt
(01:03):
like it snapped. We need to unpack I think three
key things. First, this sell the news idea
that just took hold, like even perfection wasn't good enough
anymore. Second, those really explicit
warnings coming straight from the top, from C suites at the
big banks. And 3rd, this is critical.
Why suddenly private sector data, which, let's be honest,
usually plays second fiddle. Why it's suddenly the most
(01:26):
important gauge of the US economy?
Well, what's really striking is the sheer speed, the velocity of
the the bearish asymmetry that day.
Think about it like this. Getting a 1% gain lately?
You need something amazing. Totally unexpected news, but to
lose 1% all you needed yesterdaywas just a hint of
disappointment or maybe just someone validating that
valuation fear. Any positive news, like you
(01:47):
said, it was immediately contained, treated like, oh,
that's just company specific noise.
But the negative stuff, especially that fear about peak
AI valuation, instant contagion spread like wildfire.
The focus, it's decisively shifted away from just blind
hope about growth and landed hard on, well, the cold reality
evaluations. OK.
Let's start by just laying out the scale of it, the magnitude,
(02:10):
but maybe more importantly, where the selling was
concentrated. Because if you look at the
headline numbers, yeah, the painwas broad, but the difference
between the indexes, it tells a story.
It really does. Undeniably the epicenter, the
Ground Zero for this AI evaluation unwind, as we're
calling it, that was the NASDAQ Composite tech heavy.
It plunged a steep 2.0%. That's a big move, and it
(02:32):
reflects heavy, aggressive selling, institutional money,
getting out of software, semis, the names that carry the market
all year. And then you contrast that with
the other big indexes, the S&P 500, the SPX, it finished down
1.2%. If you look at the CFD, the US
500 that closed at 6806 points. Still a big drop obviously, but
not quite as bad as pure tech. Right, but the real story may be
(02:54):
of relative stability, or perhaps the lack of outright
systemic panic. Was the Dow Jones industrial
average, the DJI, the Dow? You know, it's often seen as the
old economy index, industrials, blue chips less tied to those
high growth stories. It showed relative strength.
Now that's significant, but it'sstill closed down .5%.
It was down about 326 points midafternoon.
(03:15):
Trim that a bit at the close. That divergent, that gap between
the NASDAQ and the Dow, that's areally crucial sign, isn't it?
Suggests the smart money wasn't panicking about, say, the whole
industrial economy collapsing orthe consumer suddenly
disappearing. It looked like they were
specifically almost surging DE risking the future growth priced
into those high multiple tech stocks.
(03:36):
Exactly when the Nasdaq's down 2% and the Dow's only down half
a percent, that screams bifurcated market.
It implies the selling pressure was just laser focused on those
mega cap growth names that dominate the NASDAQ.
Because look, if the selling wastruly systemic, right?
If investors genuinely feared animmediate deep recession was
hitting now, then. The Dow would have gotten
hammered, too. The Dow representing all that
(03:58):
cyclical industrial exposure, itwould have fallen much, much
harder. The fact that it held up
relatively well suggests this was more about unwinding
speculation, maybe froth, ratherthan panic about fundamental
economic collapse. And this sentiment, this fear,
it wasn't just a US thing, it spilled over pretty quickly into
international markets, suggests that this worry about AI
valuations, it's a global conversation now.
(04:20):
Oh. Absolutely.
Global equity markets, they traded with this decidedly
cautious negative bias, both leading into the US Open and
then reacting to the drop. Asia trading during our Monday
night fell sharply, kind of anticipating the trouble.
Japan's Nikki 225 down a significant 1.74%.
Hong Kong's Hang Seng also dropped .71%.
(04:42):
This wasn't some local issue in Tokyo.
It felt like fear transmitted directly from Wall Street.
And Europe? Same story.
Europe open lower as well. You had investors there, they'd
seen some decent gains recently.They were pretty eager to just
book profits, lock things in before the full force of the US
negativity hit their markets. It really highlights how
interconnected these high growthvaluations are when the biggest
(05:03):
US tech names get questioned. Everything else follows.
Yeah, every correlated global asset, London tech stocks,
emerging market funds, they all take a hit.
It felt like a synchronized global move to just dial down
risk. OK, let's dig into the core
trigger, the thing that really set off this whole bearish
cascade. It came from an earnings report,
weirdly enough, but it's a totalparadox.
(05:24):
We have to talk about Palantir Technologies, PLTR, and this was
a name that was basically the poster child for the 2025 AI
Rally. And look, Palantir delivered
what you'd call a textbook beat and raise.
I mean the kind of report that usually sends a growth stock
soaring 510% easily. They reported record quarterly
revenue $1.18 billion that crushed the one point O $9
(05:46):
billion estimate crushed it. That's a stunning 63% year over
year jump adjusted EPS well ahead of the dollars and 17
consensus. OK, wait, So massive revenue
beat $90,000,000, solid EPS beat$0.04, and they raised guidance
third time in a row? Yep.
And they explicitly cited massive accelerating demand for
(06:09):
their AI platform. AIP couldn't have been clearer.
So the market reaction to this, this financial perfection?
The stock plunged immediately, 8to 10% right after the release.
This wasn't like a mixed reaction.
It was an unequivocal, violent rejection of spectacular news.
And that right there establishedthe Palantir precedent, the idea
(06:29):
that even flawless performance isn't enough anymore to justify
these AI valuations. Why does that happen?
We hear price for perfection allthe time, but what does that
actually mean for someone listening?
Like in practical terms. OK.
So it means when a stock like Palantir has already rocketed up
over 174% year to date, which ithad, the market isn't just
expecting a great quarter, it's already baked in perfection for
like the next year or more, 3, five quarters out.
(06:52):
So when that perfect report finally lands, the big
institutions, the algorithms, they don't see it as a reason to
buy more. They see it as a reason to sell.
Exactly, they realize OK, where's the next catalyst for
another 100% game? There isn't 1 immediately
obvious. So it becomes the perfect exit
point. The ultimate liquidity event.
Time to lock in. Those massive profits may be
(07:12):
driven by tax reasons to that profit taking creates selling
pressure, and because the stock was so popular with momentum
funds, the selling just feeds onitself.
Downward momentum takes over. So the Palantir precedent wasn't
really about the Palantir's business being bad.
It was a signal about the market's mood towards all
expensive AI stocks. It validated the fear that
(07:33):
valuations were just too stretched.
Absolutely spot on. And that mood, that psychology,
it was actively encouraged by the second T driver we
mentioned, that authoritative, bearish narrative coming
straight from the top of Wall Street.
Right. This wasn't just nervous retail
traders. This was the big institution
saying be careful. Very publicly, we saw CEO's, top
execs from places like Morgan Stanley, Goldman Sachs, they
(07:56):
were out there warning investorstalking about a potential
material pull back, a significant correction, more
than 10% maybe in the next year or two.
And they explicitly said why frothy valuations, particularly
in tech. That kind of talk, it provides
the intellectual cover, if you will, for the profit taking we
saw in Palantir and right acrossthe NASDAQ.
(08:18):
You had a strategist from JP Morgan, for instance, on the
record saying it was healthy to see some of the steam coming out
of more speculative parts of themarket.
When the big banks basically give investors permission to
take risk off the table, the sell off just accelerates.
It shifts the whole mood from FOMO fear of missing out, to
maybe FOBS fear of being stuck. And what about the structure of
(08:39):
the market itself, this idea that only a few stocks were
doing all the heavy lifting? Yeah, that's where that Schwab
analysis comes in, talking aboutnarrow breath.
And that is a classic massive red flag.
Narrow breath means the whole index, like the S&P 500, it's
being dragged higher by just a handful of mega cap winners.
You know, the Magnificent 7 + a few other key AI infrastructure
(08:59):
players. Imagine like a tug of war.
One team has seven giants, the other team has like 493 regular
sized people. As long as those seven giants
pull, the rope moves forward. The second those giants stumble.
The whole thing collapses. Exactly.
The vast majority of stocks withthan the S&P 500 might have been
flat or even down for the year, hidden under the surface by the
(09:21):
performance of those few big names.
Historically, analysts always point out, when a rally is that
narrow, that concentrated, it usually hasn't led to the best
outcomes. Why is that?
Because when those few massive stocks finally face their own
valuation crisis, like the one maybe triggered by Palantir,
there's just nowhere else for that big money to rotate into
(09:41):
for support. The broad market doesn't have
the underlying strength, the breath to absorb that kind of
shock. So you put it all together, the
tangible earnings rejection of Palantir, the explicit C-Suite
warnings, it created this powerful self fulfilling
feedback loop that just speed upthe selling.
Now, to really get the gravity of Tuesday's action, we have to
layer in this extreme macro instability.
(10:02):
This tech wreck didn't happen ina vacuum.
It happened with the US government shutdown hitting
what, Day 35, tying the record. 35 days ties the record, and
this is way more than just political drama.
It creates A structural information vacuum.
We're calling it the statisticalblackout.
Key agencies, Bureau of Labor Statistics, Census Bureau,
they've suspended operations. They're not collecting data, not
(10:23):
releasing reports. And the direct impact for
investors, for you listening is that critical reports we rely
on, they're just delayed indefinitely, reports on
inflation, spending and crucially right now the labor
market. Precisely.
We specifically lost the Jolt Tess job openings report that
was actually due on November 4th, the day of the crash.
Jolt Tess gives us that key insight into labor demand, quit
(10:46):
rates, hiring, you know, the tightness of the market.
But even more critical, the big one, the official non farm
payrolls report, the NFP, originally due November 7th,
indefinitely delayed. The NFP is the gold standard,
right? It's the one everyone waits for.
What happens when the Fed the market suddenly don't have their
most trusted, most comprehensivedata point?
(11:07):
Well, the market is suddenly flying blind.
That's the phrase. NFP isn't just one number, it's
this incredibly detailed report.It has revisions to past months,
demographic breakdowns, wage data, labor force participation,
stuff that gives you confident context.
Without NFP, the whole structureof economic forecasting, it kind
of starts to wobble. Even Fed Chair Jerome Powell
admitted it's tough making policy decisions in this kind of
(11:28):
fog when your main indicators are just missing.
Uncertainty breeds in action or worse, policy mistakes.
OK, so when the official gold standard data just vanishes,
what does the market do? Where does all that intense
focus shift? It triggers this massive
immediate macro proxy shift. This is really the key concept
for you to grasp right now. All that institutional focus,
(11:50):
all those algorithms, they immediately pivot to the only
available private sector proxies, and their importance
just gets amplified exponentially.
Look, traders can't just stop trading algorithms, can't stop
running models. But those models are now being
fed dramatically less reliable, less comprehensive data.
What are these proxies specifically?
(12:11):
What is the market actually looking at now instead of Joltus
and NFP? Well, the main labor market
proxy becomes the ADP National Employment Report, which we'll
get into for Wednesday. That's the big one.
But beyond that, traders are digging into this patchwork of
frankly less common sources. They're looking at data from
private staffing agencies. You know, corporate surveys like
the ISM reports, credit card data tracking, spending
velocity, even things like payroll processing data from
(12:33):
companies like ADP itself or paychecks.
Information that's less regulated, much narrower in
scope, and it just doesn't have the rigor or the depth of the
official BLS data. So the stakes for Wednesday's
private reports are just astronomical now.
They're not just previews anymore.
That is the absolute key. Take away Wednesday's ADP
employment report and the ISM Services PMI.
(12:57):
They are no longer just helpful previews that analysts use to
tweak their NFP guesses. They are now the primary market
moving data points. They are the only real time
gauge we have for the US labor market and the huge services
economy. Any deviation from consensus in
these private reports, it's going to cause an outsize market
reaction simply because there's no official data coming later to
(13:18):
confirm, deny, or provide context.
This blackout has seriously cranked up the volatility and
the risk. The intensity of this sell off
it really confirms the fear wasn't just stuck in tech
valuations. Is a full blown flight to safety
a pervasive risk off signal thatjust swept across pretty much
every major asset class? Let's look at that cross asset
dashboard. You see the fear instantly in
(13:38):
fixed income, in bonds. Investors, they're panicking
about the equity volatility, maybe recession fears amplified
by that data blackout. They rush into safe haven U.S.
Treasury assets. Demand for bonds goes up.
Yields fall. The benchmark 10 year Treasury
yield eased quite a bit, fell to4.09%.
The sensitive 2 year yield softened to 3.58%.
(13:59):
That signals money actively moving out of risk into
perceived safety. And those concerns about global
demand, global growth, you can see that in commodities too.
Oh yeah, absolutely. WTI crude oil futures fell.
What was it? About 1.7% settled around $60.40
a barrel. That's a direct read through on
expected economic slowdown. Lower oil prices mean traders
expect less industrial activity,less travel, less future demand
(14:22):
for energy. Even gold futures, often seen as
a haven, actually declined 1.6% to $3950 an ounce.
That specific old move? It's often tied to what the
dollar is doing. Which brings us to currencies.
the US dollar index, the DXY. It rose .4% to 100.23.
Right the dollar. It's the world's ultimate
reserve currency. It acts as the universal safe
haven in moments of extreme volatility or uncertainty.
(14:45):
When global risk flares up like this, investors both here and
abroad, they flock to cash and the perceived safety of the
dollar. That drives its value up against
other currencies and sometimes against commodities like gold
too. So a stronger DXY just
reinforces that risk averse environment.
But look, if you want the clearest, maybe the most
visceral sign of risk appetite just evaporating, you look at
(15:08):
the speculative Canary in the coal mine, right?
The crypto crash. This wasn't just tech stocks
having a bad day. This was a mass liquidation
event in digital assets, and it happened before the equity fear
really took hold. It was severe.
Bitcoin BTC plunged over 6% in areally short period, broke below
that huge $100,000 psychologicallevel for the first time since
(15:28):
June, closed around 100,282 tellers.
Ethereum ETH fell even harder, down 9, maybe 10%.
This was the market's highest beta segment.
Just reacting violently to the sudden realization that maybe
liquidity was shrinking and those valuation fears were back
with a vengeance. You called it a mass
deleveraging event for listeners.
What does that actually mean? What's happening there?
(15:49):
OK, it's basically a domino effect driven by margin
borrowing. Lots of traders in crypto use
high leverage. They borrow money to make bigger
bets. When the price of Bitcoin or
whatever they're trading starts dropping fast, these leveraged
traders get margin calls. The broker demands more cash,
more collateral to cover potential losses.
If they can't meet that call, like instantly, the broker
(16:10):
doesn't wait. They automatically liquidate the
position for sell. And that, for selling pushes the
price down even more, triggeringthe next round of margin calls.
Exactly, you get this cascading liquidation loop.
We saw reports of over 1.3 billion billion with AB in
leveraged long positions liquidated across crypto
exchange changes in just that short time frame.
That kind of forced systemic selling pressure.
(16:32):
That's what turns a correction into a crash.
And what's really telling is we saw clear signs of institutional
retreat before the equity marketcracked on November 3rd.
The day before US bought BitcoinETF saw significant outflows,
$186.5 million out. Spot Etherium ETFs $135.76
million out. It felt like the institutional
fast money saw the writing on the wall in crypto 1st and
(16:55):
proactively started pulling backfrom all speculative bets.
So the regular session closes, broad pain everywhere.
Then the drama shifts to after hours trading and it delivered
this really complex, almost split report card.
We saw some genuinely strong results actually, but they were
completely overshadowed by 1 catastrophic myths.
A myth that seemed to confirm every single fear the market had
about AI valuations. Yeah, the Supermicro computer
(17:16):
report SMCI, that was the defining event after the close.
No question. SMCI, you have to understand
they're not software. They are a direct proxy for AI
infrastructure spending. They build the server racks, the
cooling, the hardware that physically powers this whole AI
revolution, often for huge customers like NVIDIA.
Their results? They provided concrete,
(17:38):
verifiable validation for the day's whole bearish story.
Let's dive into that blow up. OK, They managed A slight EPS
beat right set of ready one cents versus 01828 cent
consensus, that's fine. But the revenue, the top line
was the disaster. Catastrophic is the right word.
Revenue came in at $4.6 billion.The consensus estimate was an
aggressive $5.5 billion. They missed by nearly a billion
(18:01):
dollars. When you miss your revenue
target by almost 20% in the sector that's supposed to be
exploding, alarms just go off everywhere.
But the critical blow, the thingthat's going to stick with the
market for weeks, was the guidance cut.
OK. Talk us through that guidance
change. What do they say about the
future? They slash their full year 2025
revenue guidance significantly. They had previously expected
somewhere between 23.5 billion and 20. 25.0 billion.
(18:23):
The new range 21.8 billion or to$22.6 billion.
That is a massive down rate in what they expect to sell going
forward. It signals either substantial
project delays, maybe increase competition, or, and this is
what worries the market most, maybe a slowdown in how fast
customers are actually spending on AI infrastructure.
The stock immediately collapsed 5.56% after hours and it dragged
(18:43):
down other related names with. It Why does an SMCI miss matter
so much more than, say, some random software company missing
its numbers? Because it's it's physical.
Palantir gave us the psychological precedent.
OK, perfection isn't enough. SMCI gave us the physical
evidence, evidence that this massive accelerating AI
infrastructure investment thesis, maybe it's hitting a
(19:06):
snag. It's the first concrete sign
that the spending boom might be slowing.
Or maybe just that analyst expectations got completely
disconnected from the reality ofsupply chains, deployment
schedules, hyperscaler budgets. This report felt like a reality
check delivered in, you know, server racks and balance sheets.
It provided tangible proof for all those frothy valuation
(19:26):
concerns we talked about. And SMCI wasn't the only one
confirming that new sell the news paradigm after hours.
Arista Networks aynet. They focus on the high speed
networking for AI data centers. They had strong results and the
markets still punish them. Yeah, Innett delivered excellent
numbers, actually beat revenue expectations, $2.308 billion
versus $2.26 billion consensus. They even gave strong Q4
(19:49):
guidance, a range of $2.3 billion to $2.4 billion solid
and yet the stock still fell 2.41% after hours.
That's the Palantir precedent confirmed and replicated right
there in the hardware space. Even strong positive future
performance and core AI infrastructure plays met with
profit taking. Not buying the market is
rewarding defense, not strength.The nervousness got so intense
(20:12):
that traders didn't even seem towait for the results from the
next big semiconductor player, AMD.
Right Advanced Micro Devices AMDthey were scheduled to report
later after the bell and the stock was already down 2.59% in
after hours trading before its results were even public.
That tells you everything doesn't it?
About the negative read through from SMCI, investors were just
pricing in disappointing immediately.
(20:33):
They knew AM DS high expectations, especially around
data center revenue and their new MI 350 GPUs would be under
intense scrutiny and likely wouldn't be enough to justify
the stocks what, 115% year to date rally?
The bar was just too high. Now it is crucial to point out
amidst all this AI valuation carnage, there were a few
positive outliers, stories of genuine fundamental success, but
(20:55):
the market largely just contain them, ignored them, which kind
of highlights the overall risk off mood.
Yeah. The most significant success
story, maybe surprisingly came from the EV sector, A segment
that's really struggled with profitability.
Rivian, Rivian Q3 report after the close, unequivocally strong
for a growth company like them. They beat revenue expectations,
(21:15):
posted $1.558 billion versus the$1.51 billion consensus good
start. But the really crucial metric
for Rivian was profitability, right?
That's been the big question mark.
Absolutely. The milestone that truly
mattered for their long term viability.
The thing everyone was watching,they achieved $24 million in
consolidated gross profit. For an EV startup getting to
(21:35):
positive gross profit, that is amassive hurdle.
It signals they're not losing money on every single vehicle
they sell anymore. It suggests they've started to
successfully scale manufacturingefficiency.
That's a powerful, optimistic counter narrative, even if the
broader market basically shrugged it off that day.
We also saw a bit of a flight toquality into healthcare, which
is often seen as defensive when things get choppy.
(21:56):
Right Amgen, the biotech giant delivered a comprehensive beat
both top and bottom line, $9.6 billion in revenue that crushed
the $8.94 billion consensus EPS of $5.64 / 5 dollars expected.
Really strong and the strength was broad based driven by 14%
volume growth across 16 different products, both mature
(22:19):
and emerging. The stock traded higher up
almost a percent .94% after hours, kind of acting as a haven
amidst the tech storm. It confirms investors are
willing to pay up for proven reliable non cyclical strength
right now. But let's be clear, those were
isolated pockets of good news away from Rivian and Amgen, the
regular session saw some really significant carnage in specific
stocks. Reinforce that broad generalized
(22:41):
risk aversion. Oh yeah, we saw some brutal sell
offs tied to specific company news like a consumer
discretionary look at biotech failures.
Norwegian Cruise Line and CLH plunged 15% after disappointing
earnings, and that immediately dragged down rivals Carnival CCO
and Royal Caribbean RCO, down 9%and 7% respectively.
Signals real consumer caution maybe on big ticket travel.
(23:03):
Surrepta Therapeutics SRPTA biotech name totally dependent
on clinical success. Nose dived 33%.
Failed Clinical studies, devastating even a huge name
like Tesla sank 5%. That followed news that Norway's
massive sovereign wealth fund rejected the proposed $1
trillion CEO pay package. Puts a spotlight back on
governance accountability. And just for proof that weird,
(23:25):
idiosyncratic news can still move a stock against the tide,
what was the most bizarre gainerof the day?
That had to be done. He has DENN, the diner chain
skyrocketed 50%. News came out it was being
acquired for $620 million in cash.
That transaction had absolutely nothing to do with AI or
interest rates or the blackout. Just pure isolated M&A news
defying the overall negativity shows the market isn't
(23:46):
completely broken, I guess. OK, so the futures market
basically confirmed overnight that Wednesday, November 5th was
going to be a lower open. No surprise there.
The SMCI missed completely dominated the positive vibes
from Rivian or Amgen. U.S. stock futures pointed
sharply lower, even the S&P 500 futures down close to 1.1%.
(24:07):
NASDAQ 100 futures down maybe 1.3 percent, 1.4%.
Rough setup. Which means Wednesday is now
this critical inflection point. Not primarily because of the
next batch of earnings, actually, but because of those
two macro reports whose importance has just been
exponentially amplified by that statistical blackout we keep
talking about. Right, let's start with the ADP
National Employment Report that's due 8.15 AM Eastern Time.
(24:29):
We know the context here is pretty desperate after a really
concerning reading last month. Yeah, we really can't overstate
how fragile the labor market context feels right now.
This report follows that dismal September reading, which showed
a net loss of 32,000 jobs in theprivate sector.
That was the first time, outsideof the initial 2020 COVID shock,
that the private sector cut jobsfor two months running That data
(24:51):
point really heightened recession fears dramatically.
So what's the consensus actuallyexpecting for this October
report? Any kind of rebound.
Well, the consensus forecast is extremely muted.
They're expecting only a very tentative rebound.
Estimates are ranging only between like plus 22,000 and
plus 31,000. New private sector jobs, tiny
numbers. The market is already braced for
(25:11):
a significant slowdown. OK, so what's the implication if
ADP misses even that incredibly low forecast?
What if we get a second negativeprint?
Look amiss to the downside. Say private job growth comes in
below 20,000 or worse. A second consecutive negative
print. That would be devastating.
It would signal not just a stalled labor market, but
(25:33):
potentially one that's actively collapsing that scenario.
It dramatically escalates recession fears.
It likely triggers powerful selling inequities, and it might
even force the Federal Reserve to immediately pivot its
language towards potential emergency easing measures.
Conversely, a strong beat, say over 50,000 jobs, that might be
the only thing capable of takingsome pressure off after the tech
wreck. OK.
Then later 1000AM Eastern we getthe ISM services PMI you
(25:58):
stressed earlier. This is arguably the single most
critical macro report of the week, even more than ADP right
now. Why does the services sector
hold so much weight? Because the vast services
sector, it represents roughly 70% of the entire U.S. economy.
It's the last pillar holding thewhole structure up.
It just is. We know manufacturing is already
contracting the ISM. Manufacturing PMI already works
(26:21):
them at 48.7. Remember, anything below 50
signals contraction. The services report for
September was exactly 50.0. Right on that razor thin
dividing line between expansion and contraction.
We are literally standing on theedge.
And the consensus forecast for the October services PMI number,
are they expecting it to hold? Just barely.
They're forecasting A tentative little uptick to a reading
(26:42):
somewhere between 50.5 and 51 point O.
The market is basically just hoping the services sector
maintain some slight positive momentum.
The stakes for this number are immense.
Let's talk about the downside scenario here, because the
market is clearly pricing in risk.
What happens if ISM services slips below 50?
If that ISM services number comes in below 50.0, that is the
defining data point of the day, possibly the defining data point
(27:04):
of the month. It signals that the huge engine
of the US services economy has officially joined manufacturing
and contraction. At that point, a broad based
recession isn't just probable anymore, it becomes the base
case assumption for most analysts.
That scenario would almost certainly accelerate the equity
sell off, and it would likely ramp up bets on aggressive Fed
(27:25):
rate cuts later this year. Cuts driven by systemic economic
failure, not just because tech stocks got too expensive.
The ISM services PMI. That is the line in the sand
this week. So given this intense skepticism
after the Palantir reaction and that devastating SMCI
confirmation, the burden of proof for Wednesday's earnings
slate is just extraordinarily high.
(27:45):
Companies basically have to deliver flawless results and
stellar forward guidance or they're going to get punished.
Yeah, the aftermarket focus on Wednesday will be squarely on
the next major test for that AI and semiconductor narrative.
Specifically, how does the SMCI revenue shock ripple through the
rest of the supply chain? We're looking at two major
reports after the close Qualcomm, QCOM and ARM Holdings.
(28:09):
ARM. OK.
What specifically are investors demanding from these reports to
avoid that Palantir fate that sell the news reaction?
Well, for Qualcomm, the markets intensely focus on their
transition, moving away from just relying on 5G mobile phone
chips and more into AI on deviceprocessing, automotive chips.
Those growth areas. Analysts need to see concrete
(28:30):
data points on design wins. They need clear visibility into
next year's high revenue streams, a strong beat on their
IO2 segment Internet of Things, which includes a lot of smart
device AI applications. That's essential.
Any perceived softness and theirforward guidance will be read
directly through that SMCI lens.If the hardware guys are
struggling, is the demand already peaking?
And for ARM Holdings license chip designs right different
(28:51):
model. Different model, even more
speculative arguably given its high valuations since the IPO.
For ARM, the focus is entirely on licensing agreements and
royalty revenue connected to those next generation AI
processing units. Since Arms performance is kind
of a leading indicator for the whole mobile and edge computing
ecosystem, the market will scrutinize any commentary on the
(29:12):
royalty rates and crucially, guidance that demonstrates
accelerating momentum in their most advanced, highest margin
ship designs. Anything less than a monumental
positive surprise probably triggers profit taking just
based on that Palantir model high bar.
We also have some key reports before the market opens
Wednesday that touch on the health of the consumer, which
(29:32):
seems essential context given all these recession fears
swirling around. Definitely we'll be watching
McDonald's MCD very closely before the bell.
McDonald's often acts as a decent proxy for the lower
income, maybe middle income consumer.
Any commentary from them on foottraffic, same store sales
growth, maybe any shifts towardstheir value menu items that
gives us real time insight into household budget stress.
(29:54):
Also, Novo Nordisk NVO crucial for insight into sales growth
for those huge weight loss drugsOzempic Wigovi and whether the
US market is maybe starting to see any pricing pressure there.
These reports, they'll give us valuable early insight into
consumer resilience, or lack thereof, ahead of those delayed
official numbers. So if we had to synthesize this
brutal Tuesday, the market posture has just definitively
(30:16):
shifted from buy the dip to sellthe rally, validating those
valuation fears. Precisely the dominant narrative
now is valuation fear, coupled with that concrete evidence of a
potential AI infrastructure slowdown via super micro Smiths, and
this whole bearish turn is happening in a total data
vacuum. That's statistical blackout
which displaces immense outsize pressure on tomorrow's ADP and
(30:39):
ISM services reports. A highly defensive posture seems
warranted right now. The environment is violently
punishing sector specific negatives and basically choosing
to ignore company specific positives.
Hashtag #outro. So Tuesday, November 4th, it was
defined really by two powerful forces clashing. 1st, that's
self correction within the AI sector itself driven by Palantir
(31:00):
psychological precedent and thendevastatingly confirmed by
Supermicro's financial miss. And 2nd, the vacuum of official
economic data that has just magnified tomorrow's private
reports into truly make or breakmarket moving events.
Yeah, the environment is just acutely risk averse right now,
demonstrating that classic bearish asymmetry.
We talked about positive outliers, ignored, sector
(31:22):
negatives extrapolated instantlyinto contagion, which leads us
to really question the very structure of market reliance,
doesn't it, especially in the face of this unprecedented data
blackout. And that leads perfectly into
our final provocative thought for you, the listener to maybe a
Mull over since the non farm payrolls report, the most
comprehensive trusted data source we have since that's
(31:42):
delayed indefinitely and the market, the Fed, everyone is
flying blind into these less reliable private ADP and ISM
reports. What does it truly mean when the
world's most powerful decision maker, the Federal Reserve, and
all those institutional algorithms, when they are all
forced to rely entirely on proxydata to gauge the health of the
world's largest economy? Right.
If the Fed is using narrower, potentially misleading data to
(32:05):
set monetary policy, doesn't that significantly increase the
risk of a policy error, a disastrous move that maybe
accelerates A recession, or completely misinterprets the
severity of the situation simplybecause the official picture,
the full picture, remains entirely dark?
What unseen systemic risks mightbe accumulating just out of
sight while we all fixate only on what these limited proxy data
(32:28):
points permit us to see? That's the question looming over
the markets this week. We will absolutely be here
tomorrow to impact those critical ADP and ISM results and
the market's reaction. Thank you for joining us for
this deep dive.
Good afternoon and welcome to the Deep Dive.
Thank you for joining us. We're diving into, well, a
really consequential market day,Tuesday, November 4th, 2025.
This wasn't just, you know, a day where stocks went down.
It felt like more like A reckoning.
It was the moment, the whole consensus, the belief system
really supporting that huge AI fueled rally.
(00:22):
It just seemed to fracture and the market.
It violently rejected what on paper looked like genuinely good
news. That's exactly the frame, isn't
it? You have to understand this
November 4th wasn't just some technical dip.
It feels like it fundamentally shifted market psychology.
Everyone suddenly got defensive.So what we're analyzing today is
this complex collision of forces.
You've got a broad tech sell off, right?
(00:43):
Technology led the way down. Yeah.
And at the same time, a huge crash in speculative stuff like
crypto. And then there's this unique,
really unnerving uncertainty from the US government's
statistical blackout. OK, so our mission today for you
listening is to figure out just how quickly that tide turned and
what exactly broke the markets bullish spell because it felt
(01:03):
like it snapped. We need to unpack I think three
key things. First, this sell the news idea
that just took hold, like even perfection wasn't good enough
anymore. Second, those really explicit
warnings coming straight from the top, from C suites at the
big banks. And 3rd, this is critical.
Why suddenly private sector data, which, let's be honest,
usually plays second fiddle. Why it's suddenly the most
(01:26):
important gauge of the US economy?
Well, what's really striking is the sheer speed, the velocity of
the the bearish asymmetry that day.
Think about it like this. Getting a 1% gain lately?
You need something amazing. Totally unexpected news, but to
lose 1% all you needed yesterdaywas just a hint of
disappointment or maybe just someone validating that
valuation fear. Any positive news, like you
(01:47):
said, it was immediately contained, treated like, oh,
that's just company specific noise.
But the negative stuff, especially that fear about peak
AI valuation, instant contagion spread like wildfire.
The focus, it's decisively shifted away from just blind
hope about growth and landed hard on, well, the cold reality
evaluations. OK.
Let's start by just laying out the scale of it, the magnitude,
(02:10):
but maybe more importantly, where the selling was
concentrated. Because if you look at the
headline numbers, yeah, the painwas broad, but the difference
between the indexes, it tells a story.
It really does. Undeniably the epicenter, the
Ground Zero for this AI evaluation unwind, as we're
calling it, that was the NASDAQ Composite tech heavy.
It plunged a steep 2.0%. That's a big move, and it
(02:32):
reflects heavy, aggressive selling, institutional money,
getting out of software, semis, the names that carry the market
all year. And then you contrast that with
the other big indexes, the S&P 500, the SPX, it finished down
1.2%. If you look at the CFD, the US
500 that closed at 6806 points. Still a big drop obviously, but
not quite as bad as pure tech. Right, but the real story may be
(02:54):
of relative stability, or perhaps the lack of outright
systemic panic. Was the Dow Jones industrial
average, the DJI, the Dow? You know, it's often seen as the
old economy index, industrials, blue chips less tied to those
high growth stories. It showed relative strength.
Now that's significant, but it'sstill closed down .5%.
It was down about 326 points midafternoon.
(03:15):
Trim that a bit at the close. That divergent, that gap between
the NASDAQ and the Dow, that's areally crucial sign, isn't it?
Suggests the smart money wasn't panicking about, say, the whole
industrial economy collapsing orthe consumer suddenly
disappearing. It looked like they were
specifically almost surging DE risking the future growth priced
into those high multiple tech stocks.
(03:36):
Exactly when the Nasdaq's down 2% and the Dow's only down half
a percent, that screams bifurcated market.
It implies the selling pressure was just laser focused on those
mega cap growth names that dominate the NASDAQ.
Because look, if the selling wastruly systemic, right?
If investors genuinely feared animmediate deep recession was
hitting now, then. The Dow would have gotten
hammered, too. The Dow representing all that
(03:58):
cyclical industrial exposure, itwould have fallen much, much
harder. The fact that it held up
relatively well suggests this was more about unwinding
speculation, maybe froth, ratherthan panic about fundamental
economic collapse. And this sentiment, this fear,
it wasn't just a US thing, it spilled over pretty quickly into
international markets, suggests that this worry about AI
valuations, it's a global conversation now.
(04:20):
Oh. Absolutely.
Global equity markets, they traded with this decidedly
cautious negative bias, both leading into the US Open and
then reacting to the drop. Asia trading during our Monday
night fell sharply, kind of anticipating the trouble.
Japan's Nikki 225 down a significant 1.74%.
Hong Kong's Hang Seng also dropped .71%.
(04:42):
This wasn't some local issue in Tokyo.
It felt like fear transmitted directly from Wall Street.
And Europe? Same story.
Europe open lower as well. You had investors there, they'd
seen some decent gains recently.They were pretty eager to just
book profits, lock things in before the full force of the US
negativity hit their markets. It really highlights how
interconnected these high growthvaluations are when the biggest
(05:03):
US tech names get questioned. Everything else follows.
Yeah, every correlated global asset, London tech stocks,
emerging market funds, they all take a hit.
It felt like a synchronized global move to just dial down
risk. OK, let's dig into the core
trigger, the thing that really set off this whole bearish
cascade. It came from an earnings report,
weirdly enough, but it's a totalparadox.
(05:24):
We have to talk about Palantir Technologies, PLTR, and this was
a name that was basically the poster child for the 2025 AI
Rally. And look, Palantir delivered
what you'd call a textbook beat and raise.
I mean the kind of report that usually sends a growth stock
soaring 510% easily. They reported record quarterly
revenue $1.18 billion that crushed the one point O $9
(05:46):
billion estimate crushed it. That's a stunning 63% year over
year jump adjusted EPS well ahead of the dollars and 17
consensus. OK, wait, So massive revenue
beat $90,000,000, solid EPS beat$0.04, and they raised guidance
third time in a row? Yep.
And they explicitly cited massive accelerating demand for
(06:09):
their AI platform. AIP couldn't have been clearer.
So the market reaction to this, this financial perfection?
The stock plunged immediately, 8to 10% right after the release.
This wasn't like a mixed reaction.
It was an unequivocal, violent rejection of spectacular news.
And that right there establishedthe Palantir precedent, the idea
(06:29):
that even flawless performance isn't enough anymore to justify
these AI valuations. Why does that happen?
We hear price for perfection allthe time, but what does that
actually mean for someone listening?
Like in practical terms. OK.
So it means when a stock like Palantir has already rocketed up
over 174% year to date, which ithad, the market isn't just
expecting a great quarter, it's already baked in perfection for
like the next year or more, 3, five quarters out.
(06:52):
So when that perfect report finally lands, the big
institutions, the algorithms, they don't see it as a reason to
buy more. They see it as a reason to sell.
Exactly, they realize OK, where's the next catalyst for
another 100% game? There isn't 1 immediately
obvious. So it becomes the perfect exit
point. The ultimate liquidity event.
Time to lock in. Those massive profits may be
(07:12):
driven by tax reasons to that profit taking creates selling
pressure, and because the stock was so popular with momentum
funds, the selling just feeds onitself.
Downward momentum takes over. So the Palantir precedent wasn't
really about the Palantir's business being bad.
It was a signal about the market's mood towards all
expensive AI stocks. It validated the fear that
(07:33):
valuations were just too stretched.
Absolutely spot on. And that mood, that psychology,
it was actively encouraged by the second T driver we
mentioned, that authoritative, bearish narrative coming
straight from the top of Wall Street.
Right. This wasn't just nervous retail
traders. This was the big institution
saying be careful. Very publicly, we saw CEO's, top
execs from places like Morgan Stanley, Goldman Sachs, they
(07:56):
were out there warning investorstalking about a potential
material pull back, a significant correction, more
than 10% maybe in the next year or two.
And they explicitly said why frothy valuations, particularly
in tech. That kind of talk, it provides
the intellectual cover, if you will, for the profit taking we
saw in Palantir and right acrossthe NASDAQ.
(08:18):
You had a strategist from JP Morgan, for instance, on the
record saying it was healthy to see some of the steam coming out
of more speculative parts of themarket.
When the big banks basically give investors permission to
take risk off the table, the sell off just accelerates.
It shifts the whole mood from FOMO fear of missing out, to
maybe FOBS fear of being stuck. And what about the structure of
(08:39):
the market itself, this idea that only a few stocks were
doing all the heavy lifting? Yeah, that's where that Schwab
analysis comes in, talking aboutnarrow breath.
And that is a classic massive red flag.
Narrow breath means the whole index, like the S&P 500, it's
being dragged higher by just a handful of mega cap winners.
You know, the Magnificent 7 + a few other key AI infrastructure
(08:59):
players. Imagine like a tug of war.
One team has seven giants, the other team has like 493 regular
sized people. As long as those seven giants
pull, the rope moves forward. The second those giants stumble.
The whole thing collapses. Exactly.
The vast majority of stocks withthan the S&P 500 might have been
flat or even down for the year, hidden under the surface by the
(09:21):
performance of those few big names.
Historically, analysts always point out, when a rally is that
narrow, that concentrated, it usually hasn't led to the best
outcomes. Why is that?
Because when those few massive stocks finally face their own
valuation crisis, like the one maybe triggered by Palantir,
there's just nowhere else for that big money to rotate into
(09:41):
for support. The broad market doesn't have
the underlying strength, the breath to absorb that kind of
shock. So you put it all together, the
tangible earnings rejection of Palantir, the explicit C-Suite
warnings, it created this powerful self fulfilling
feedback loop that just speed upthe selling.
Now, to really get the gravity of Tuesday's action, we have to
layer in this extreme macro instability.
(10:02):
This tech wreck didn't happen ina vacuum.
It happened with the US government shutdown hitting
what, Day 35, tying the record. 35 days ties the record, and
this is way more than just political drama.
It creates A structural information vacuum.
We're calling it the statisticalblackout.
Key agencies, Bureau of Labor Statistics, Census Bureau,
they've suspended operations. They're not collecting data, not
(10:23):
releasing reports. And the direct impact for
investors, for you listening is that critical reports we rely
on, they're just delayed indefinitely, reports on
inflation, spending and crucially right now the labor
market. Precisely.
We specifically lost the Jolt Tess job openings report that
was actually due on November 4th, the day of the crash.
Jolt Tess gives us that key insight into labor demand, quit
(10:46):
rates, hiring, you know, the tightness of the market.
But even more critical, the big one, the official non farm
payrolls report, the NFP, originally due November 7th,
indefinitely delayed. The NFP is the gold standard,
right? It's the one everyone waits for.
What happens when the Fed the market suddenly don't have their
most trusted, most comprehensivedata point?
(11:07):
Well, the market is suddenly flying blind.
That's the phrase. NFP isn't just one number, it's
this incredibly detailed report.It has revisions to past months,
demographic breakdowns, wage data, labor force participation,
stuff that gives you confident context.
Without NFP, the whole structureof economic forecasting, it kind
of starts to wobble. Even Fed Chair Jerome Powell
admitted it's tough making policy decisions in this kind of
(11:28):
fog when your main indicators are just missing.
Uncertainty breeds in action or worse, policy mistakes.
OK, so when the official gold standard data just vanishes,
what does the market do? Where does all that intense
focus shift? It triggers this massive
immediate macro proxy shift. This is really the key concept
for you to grasp right now. All that institutional focus,
(11:50):
all those algorithms, they immediately pivot to the only
available private sector proxies, and their importance
just gets amplified exponentially.
Look, traders can't just stop trading algorithms, can't stop
running models. But those models are now being
fed dramatically less reliable, less comprehensive data.
What are these proxies specifically?
(12:11):
What is the market actually looking at now instead of Joltus
and NFP? Well, the main labor market
proxy becomes the ADP National Employment Report, which we'll
get into for Wednesday. That's the big one.
But beyond that, traders are digging into this patchwork of
frankly less common sources. They're looking at data from
private staffing agencies. You know, corporate surveys like
the ISM reports, credit card data tracking, spending
velocity, even things like payroll processing data from
(12:33):
companies like ADP itself or paychecks.
Information that's less regulated, much narrower in
scope, and it just doesn't have the rigor or the depth of the
official BLS data. So the stakes for Wednesday's
private reports are just astronomical now.
They're not just previews anymore.
That is the absolute key. Take away Wednesday's ADP
employment report and the ISM Services PMI.
(12:57):
They are no longer just helpful previews that analysts use to
tweak their NFP guesses. They are now the primary market
moving data points. They are the only real time
gauge we have for the US labor market and the huge services
economy. Any deviation from consensus in
these private reports, it's going to cause an outsize market
reaction simply because there's no official data coming later to
(13:18):
confirm, deny, or provide context.
This blackout has seriously cranked up the volatility and
the risk. The intensity of this sell off
it really confirms the fear wasn't just stuck in tech
valuations. Is a full blown flight to safety
a pervasive risk off signal thatjust swept across pretty much
every major asset class? Let's look at that cross asset
dashboard. You see the fear instantly in
(13:38):
fixed income, in bonds. Investors, they're panicking
about the equity volatility, maybe recession fears amplified
by that data blackout. They rush into safe haven U.S.
Treasury assets. Demand for bonds goes up.
Yields fall. The benchmark 10 year Treasury
yield eased quite a bit, fell to4.09%.
The sensitive 2 year yield softened to 3.58%.
(13:59):
That signals money actively moving out of risk into
perceived safety. And those concerns about global
demand, global growth, you can see that in commodities too.
Oh yeah, absolutely. WTI crude oil futures fell.
What was it? About 1.7% settled around $60.40
a barrel. That's a direct read through on
expected economic slowdown. Lower oil prices mean traders
expect less industrial activity,less travel, less future demand
(14:22):
for energy. Even gold futures, often seen as
a haven, actually declined 1.6% to $3950 an ounce.
That specific old move? It's often tied to what the
dollar is doing. Which brings us to currencies.
the US dollar index, the DXY. It rose .4% to 100.23.
Right the dollar. It's the world's ultimate
reserve currency. It acts as the universal safe
haven in moments of extreme volatility or uncertainty.
(14:45):
When global risk flares up like this, investors both here and
abroad, they flock to cash and the perceived safety of the
dollar. That drives its value up against
other currencies and sometimes against commodities like gold
too. So a stronger DXY just
reinforces that risk averse environment.
But look, if you want the clearest, maybe the most
visceral sign of risk appetite just evaporating, you look at
(15:08):
the speculative Canary in the coal mine, right?
The crypto crash. This wasn't just tech stocks
having a bad day. This was a mass liquidation
event in digital assets, and it happened before the equity fear
really took hold. It was severe.
Bitcoin BTC plunged over 6% in areally short period, broke below
that huge $100,000 psychologicallevel for the first time since
(15:28):
June, closed around 100,282 tellers.
Ethereum ETH fell even harder, down 9, maybe 10%.
This was the market's highest beta segment.
Just reacting violently to the sudden realization that maybe
liquidity was shrinking and those valuation fears were back
with a vengeance. You called it a mass
deleveraging event for listeners.
What does that actually mean? What's happening there?
(15:49):
OK, it's basically a domino effect driven by margin
borrowing. Lots of traders in crypto use
high leverage. They borrow money to make bigger
bets. When the price of Bitcoin or
whatever they're trading starts dropping fast, these leveraged
traders get margin calls. The broker demands more cash,
more collateral to cover potential losses.
If they can't meet that call, like instantly, the broker
(16:10):
doesn't wait. They automatically liquidate the
position for sell. And that, for selling pushes the
price down even more, triggeringthe next round of margin calls.
Exactly, you get this cascading liquidation loop.
We saw reports of over 1.3 billion billion with AB in
leveraged long positions liquidated across crypto
exchange changes in just that short time frame.
That kind of forced systemic selling pressure.
(16:32):
That's what turns a correction into a crash.
And what's really telling is we saw clear signs of institutional
retreat before the equity marketcracked on November 3rd.
The day before US bought BitcoinETF saw significant outflows,
$186.5 million out. Spot Etherium ETFs $135.76
million out. It felt like the institutional
fast money saw the writing on the wall in crypto 1st and
(16:55):
proactively started pulling backfrom all speculative bets.
So the regular session closes, broad pain everywhere.
Then the drama shifts to after hours trading and it delivered
this really complex, almost split report card.
We saw some genuinely strong results actually, but they were
completely overshadowed by 1 catastrophic myths.
A myth that seemed to confirm every single fear the market had
about AI valuations. Yeah, the Supermicro computer
(17:16):
report SMCI, that was the defining event after the close.
No question. SMCI, you have to understand
they're not software. They are a direct proxy for AI
infrastructure spending. They build the server racks, the
cooling, the hardware that physically powers this whole AI
revolution, often for huge customers like NVIDIA.
Their results? They provided concrete,
(17:38):
verifiable validation for the day's whole bearish story.
Let's dive into that blow up. OK, They managed A slight EPS
beat right set of ready one cents versus 01828 cent
consensus, that's fine. But the revenue, the top line
was the disaster. Catastrophic is the right word.
Revenue came in at $4.6 billion.The consensus estimate was an
aggressive $5.5 billion. They missed by nearly a billion
(18:01):
dollars. When you miss your revenue
target by almost 20% in the sector that's supposed to be
exploding, alarms just go off everywhere.
But the critical blow, the thingthat's going to stick with the
market for weeks, was the guidance cut.
OK. Talk us through that guidance
change. What do they say about the
future? They slash their full year 2025
revenue guidance significantly. They had previously expected
somewhere between 23.5 billion and 20. 25.0 billion.
(18:23):
The new range 21.8 billion or to$22.6 billion.
That is a massive down rate in what they expect to sell going
forward. It signals either substantial
project delays, maybe increase competition, or, and this is
what worries the market most, maybe a slowdown in how fast
customers are actually spending on AI infrastructure.
The stock immediately collapsed 5.56% after hours and it dragged
(18:43):
down other related names with. It Why does an SMCI miss matter
so much more than, say, some random software company missing
its numbers? Because it's it's physical.
Palantir gave us the psychological precedent.
OK, perfection isn't enough. SMCI gave us the physical
evidence, evidence that this massive accelerating AI
infrastructure investment thesis, maybe it's hitting a
(19:06):
snag. It's the first concrete sign
that the spending boom might be slowing.
Or maybe just that analyst expectations got completely
disconnected from the reality ofsupply chains, deployment
schedules, hyperscaler budgets. This report felt like a reality
check delivered in, you know, server racks and balance sheets.
It provided tangible proof for all those frothy valuation
(19:26):
concerns we talked about. And SMCI wasn't the only one
confirming that new sell the news paradigm after hours.
Arista Networks aynet. They focus on the high speed
networking for AI data centers. They had strong results and the
markets still punish them. Yeah, Innett delivered excellent
numbers, actually beat revenue expectations, $2.308 billion
versus $2.26 billion consensus. They even gave strong Q4
(19:49):
guidance, a range of $2.3 billion to $2.4 billion solid
and yet the stock still fell 2.41% after hours.
That's the Palantir precedent confirmed and replicated right
there in the hardware space. Even strong positive future
performance and core AI infrastructure plays met with
profit taking. Not buying the market is
rewarding defense, not strength.The nervousness got so intense
(20:12):
that traders didn't even seem towait for the results from the
next big semiconductor player, AMD.
Right Advanced Micro Devices AMDthey were scheduled to report
later after the bell and the stock was already down 2.59% in
after hours trading before its results were even public.
That tells you everything doesn't it?
About the negative read through from SMCI, investors were just
pricing in disappointing immediately.
(20:33):
They knew AM DS high expectations, especially around
data center revenue and their new MI 350 GPUs would be under
intense scrutiny and likely wouldn't be enough to justify
the stocks what, 115% year to date rally?
The bar was just too high. Now it is crucial to point out
amidst all this AI valuation carnage, there were a few
positive outliers, stories of genuine fundamental success, but
(20:55):
the market largely just contain them, ignored them, which kind
of highlights the overall risk off mood.
Yeah. The most significant success
story, maybe surprisingly came from the EV sector, A segment
that's really struggled with profitability.
Rivian, Rivian Q3 report after the close, unequivocally strong
for a growth company like them. They beat revenue expectations,
(21:15):
posted $1.558 billion versus the$1.51 billion consensus good
start. But the really crucial metric
for Rivian was profitability, right?
That's been the big question mark.
Absolutely. The milestone that truly
mattered for their long term viability.
The thing everyone was watching,they achieved $24 million in
consolidated gross profit. For an EV startup getting to
(21:35):
positive gross profit, that is amassive hurdle.
It signals they're not losing money on every single vehicle
they sell anymore. It suggests they've started to
successfully scale manufacturingefficiency.
That's a powerful, optimistic counter narrative, even if the
broader market basically shrugged it off that day.
We also saw a bit of a flight toquality into healthcare, which
is often seen as defensive when things get choppy.
(21:56):
Right Amgen, the biotech giant delivered a comprehensive beat
both top and bottom line, $9.6 billion in revenue that crushed
the $8.94 billion consensus EPS of $5.64 / 5 dollars expected.
Really strong and the strength was broad based driven by 14%
volume growth across 16 different products, both mature
(22:19):
and emerging. The stock traded higher up
almost a percent .94% after hours, kind of acting as a haven
amidst the tech storm. It confirms investors are
willing to pay up for proven reliable non cyclical strength
right now. But let's be clear, those were
isolated pockets of good news away from Rivian and Amgen, the
regular session saw some really significant carnage in specific
stocks. Reinforce that broad generalized
(22:41):
risk aversion. Oh yeah, we saw some brutal sell
offs tied to specific company news like a consumer
discretionary look at biotech failures.
Norwegian Cruise Line and CLH plunged 15% after disappointing
earnings, and that immediately dragged down rivals Carnival CCO
and Royal Caribbean RCO, down 9%and 7% respectively.
Signals real consumer caution maybe on big ticket travel.
(23:03):
Surrepta Therapeutics SRPTA biotech name totally dependent
on clinical success. Nose dived 33%.
Failed Clinical studies, devastating even a huge name
like Tesla sank 5%. That followed news that Norway's
massive sovereign wealth fund rejected the proposed $1
trillion CEO pay package. Puts a spotlight back on
governance accountability. And just for proof that weird,
(23:25):
idiosyncratic news can still move a stock against the tide,
what was the most bizarre gainerof the day?
That had to be done. He has DENN, the diner chain
skyrocketed 50%. News came out it was being
acquired for $620 million in cash.
That transaction had absolutely nothing to do with AI or
interest rates or the blackout. Just pure isolated M&A news
defying the overall negativity shows the market isn't
(23:46):
completely broken, I guess. OK, so the futures market
basically confirmed overnight that Wednesday, November 5th was
going to be a lower open. No surprise there.
The SMCI missed completely dominated the positive vibes
from Rivian or Amgen. U.S. stock futures pointed
sharply lower, even the S&P 500 futures down close to 1.1%.
(24:07):
NASDAQ 100 futures down maybe 1.3 percent, 1.4%.
Rough setup. Which means Wednesday is now
this critical inflection point. Not primarily because of the
next batch of earnings, actually, but because of those
two macro reports whose importance has just been
exponentially amplified by that statistical blackout we keep
talking about. Right, let's start with the ADP
National Employment Report that's due 8.15 AM Eastern Time.
(24:29):
We know the context here is pretty desperate after a really
concerning reading last month. Yeah, we really can't overstate
how fragile the labor market context feels right now.
This report follows that dismal September reading, which showed
a net loss of 32,000 jobs in theprivate sector.
That was the first time, outsideof the initial 2020 COVID shock,
that the private sector cut jobsfor two months running That data
(24:51):
point really heightened recession fears dramatically.
So what's the consensus actuallyexpecting for this October
report? Any kind of rebound.
Well, the consensus forecast is extremely muted.
They're expecting only a very tentative rebound.
Estimates are ranging only between like plus 22,000 and
plus 31,000. New private sector jobs, tiny
numbers. The market is already braced for
(25:11):
a significant slowdown. OK, so what's the implication if
ADP misses even that incredibly low forecast?
What if we get a second negativeprint?
Look amiss to the downside. Say private job growth comes in
below 20,000 or worse. A second consecutive negative
print. That would be devastating.
It would signal not just a stalled labor market, but
(25:33):
potentially one that's actively collapsing that scenario.
It dramatically escalates recession fears.
It likely triggers powerful selling inequities, and it might
even force the Federal Reserve to immediately pivot its
language towards potential emergency easing measures.
Conversely, a strong beat, say over 50,000 jobs, that might be
the only thing capable of takingsome pressure off after the tech
wreck. OK.
Then later 1000AM Eastern we getthe ISM services PMI you
(25:58):
stressed earlier. This is arguably the single most
critical macro report of the week, even more than ADP right
now. Why does the services sector
hold so much weight? Because the vast services
sector, it represents roughly 70% of the entire U.S. economy.
It's the last pillar holding thewhole structure up.
It just is. We know manufacturing is already
contracting the ISM. Manufacturing PMI already works
(26:21):
them at 48.7. Remember, anything below 50
signals contraction. The services report for
September was exactly 50.0. Right on that razor thin
dividing line between expansion and contraction.
We are literally standing on theedge.
And the consensus forecast for the October services PMI number,
are they expecting it to hold? Just barely.
They're forecasting A tentative little uptick to a reading
(26:42):
somewhere between 50.5 and 51 point O.
The market is basically just hoping the services sector
maintain some slight positive momentum.
The stakes for this number are immense.
Let's talk about the downside scenario here, because the
market is clearly pricing in risk.
What happens if ISM services slips below 50?
If that ISM services number comes in below 50.0, that is the
defining data point of the day, possibly the defining data point
(27:04):
of the month. It signals that the huge engine
of the US services economy has officially joined manufacturing
and contraction. At that point, a broad based
recession isn't just probable anymore, it becomes the base
case assumption for most analysts.
That scenario would almost certainly accelerate the equity
sell off, and it would likely ramp up bets on aggressive Fed
(27:25):
rate cuts later this year. Cuts driven by systemic economic
failure, not just because tech stocks got too expensive.
The ISM services PMI. That is the line in the sand
this week. So given this intense skepticism
after the Palantir reaction and that devastating SMCI
confirmation, the burden of proof for Wednesday's earnings
slate is just extraordinarily high.
(27:45):
Companies basically have to deliver flawless results and
stellar forward guidance or they're going to get punished.
Yeah, the aftermarket focus on Wednesday will be squarely on
the next major test for that AI and semiconductor narrative.
Specifically, how does the SMCI revenue shock ripple through the
rest of the supply chain? We're looking at two major
reports after the close Qualcomm, QCOM and ARM Holdings.
(28:09):
ARM. OK.
What specifically are investors demanding from these reports to
avoid that Palantir fate that sell the news reaction?
Well, for Qualcomm, the markets intensely focus on their
transition, moving away from just relying on 5G mobile phone
chips and more into AI on deviceprocessing, automotive chips.
Those growth areas. Analysts need to see concrete
(28:30):
data points on design wins. They need clear visibility into
next year's high revenue streams, a strong beat on their
IO2 segment Internet of Things, which includes a lot of smart
device AI applications. That's essential.
Any perceived softness and theirforward guidance will be read
directly through that SMCI lens.If the hardware guys are
struggling, is the demand already peaking?
And for ARM Holdings license chip designs right different
(28:51):
model. Different model, even more
speculative arguably given its high valuations since the IPO.
For ARM, the focus is entirely on licensing agreements and
royalty revenue connected to those next generation AI
processing units. Since Arms performance is kind
of a leading indicator for the whole mobile and edge computing
ecosystem, the market will scrutinize any commentary on the
(29:12):
royalty rates and crucially, guidance that demonstrates
accelerating momentum in their most advanced, highest margin
ship designs. Anything less than a monumental
positive surprise probably triggers profit taking just
based on that Palantir model high bar.
We also have some key reports before the market opens
Wednesday that touch on the health of the consumer, which
(29:32):
seems essential context given all these recession fears
swirling around. Definitely we'll be watching
McDonald's MCD very closely before the bell.
McDonald's often acts as a decent proxy for the lower
income, maybe middle income consumer.
Any commentary from them on foottraffic, same store sales
growth, maybe any shifts towardstheir value menu items that
gives us real time insight into household budget stress.
(29:54):
Also, Novo Nordisk NVO crucial for insight into sales growth
for those huge weight loss drugsOzempic Wigovi and whether the
US market is maybe starting to see any pricing pressure there.
These reports, they'll give us valuable early insight into
consumer resilience, or lack thereof, ahead of those delayed
official numbers. So if we had to synthesize this
brutal Tuesday, the market posture has just definitively
(30:16):
shifted from buy the dip to sellthe rally, validating those
valuation fears. Precisely the dominant narrative
now is valuation fear, coupled with that concrete evidence of a
potential AI infrastructure slowdown via super micro Smiths, and
this whole bearish turn is happening in a total data
vacuum. That's statistical blackout
which displaces immense outsize pressure on tomorrow's ADP and
(30:39):
ISM services reports. A highly defensive posture seems
warranted right now. The environment is violently
punishing sector specific negatives and basically choosing
to ignore company specific positives.
Hashtag #outro. So Tuesday, November 4th, it was
defined really by two powerful forces clashing. 1st, that's
self correction within the AI sector itself driven by Palantir
(31:00):
psychological precedent and thendevastatingly confirmed by
Supermicro's financial miss. And 2nd, the vacuum of official
economic data that has just magnified tomorrow's private
reports into truly make or breakmarket moving events.
Yeah, the environment is just acutely risk averse right now,
demonstrating that classic bearish asymmetry.
We talked about positive outliers, ignored, sector
(31:22):
negatives extrapolated instantlyinto contagion, which leads us
to really question the very structure of market reliance,
doesn't it, especially in the face of this unprecedented data
blackout. And that leads perfectly into
our final provocative thought for you, the listener to maybe a
Mull over since the non farm payrolls report, the most
comprehensive trusted data source we have since that's
(31:42):
delayed indefinitely and the market, the Fed, everyone is
flying blind into these less reliable private ADP and ISM
reports. What does it truly mean when the
world's most powerful decision maker, the Federal Reserve, and
all those institutional algorithms, when they are all
forced to rely entirely on proxydata to gauge the health of the
world's largest economy? Right.
If the Fed is using narrower, potentially misleading data to
(32:05):
set monetary policy, doesn't that significantly increase the
risk of a policy error, a disastrous move that maybe
accelerates A recession, or completely misinterprets the
severity of the situation simplybecause the official picture,
the full picture, remains entirely dark?
What unseen systemic risks mightbe accumulating just out of
sight while we all fixate only on what these limited proxy data
(32:28):
points permit us to see? That's the question looming over
the markets this week. We will absolutely be here
tomorrow to impact those critical ADP and ISM results and
the market's reaction. Thank you for joining us for
this deep dive.
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