AI Is Swallowing the Stock Market 🤖

Welcome back to the Day Trading newsletter 📈

It was the week that was: the S&P 500 finished essentially flat, a weak jobs report sent Fed rate-hike odds tumbling, and Nvidia still managed to hit a record high.

Let’s get into it 👇️ 

📆 Monday 10/5 — ISM Services PMI, September (10am ET): The first big data point of the week, covering the largest part of the U.S. economy. Watch the prices-paid component for signs inflation is still running hot.

📆 Wednesday 10/7 — Fed Minutes, September Meeting (2pm ET): Notes from the meeting where the Fed raised rates to 3.75%-4.00%. Look for how much support there is for another hike after Friday's weak jobs report.

📆 Thursday 10/8 — PepsiCo Q3 Earnings (before the open, around 6am ET): Wall Street expects roughly $2.30 a share on about $25 billion in revenue. A read on whether consumers are still spending on everyday staples.

📆 Thursday 10/8 — Weekly Jobless Claims (8:30am ET): A fresh check on layoffs after claims recently fell below expectations. A jump would reinforce the cooling-labor-market story.

📆 Friday 10/9 — University of Michigan Consumer Sentiment, Preliminary October (10am ET): September's final reading was 48.1, a four-month low. Watch whether high gas prices and tariff worries keep weighing on households.

💼 The U.S. economy added just 29,000 jobs in September, far below the roughly 84,000 economists expected. The unemployment rate rose to 4.2% from 4.1%, and July and August payrolls were revised lower. The sharp miss raised fresh worries about a cooling labor market.

📊 Traders slashed bets on another Fed rate hike after the jobs miss. Odds of an October increase fell to roughly one in five, down from nearly two-thirds a week earlier. Stocks rallied, with the Nasdaq up about 1.2%, but the 10-year Treasury yield stayed above 5.1%, near its highest level since 2002.

⛽️ The G7 agreed to release 100 million barrels of diesel and other emergency fuel stocks over several months. The move targets tight refined-fuel supplies rather than crude itself. Brent settled near $102 a barrel Friday, roughly flat on the week, while WTI ended the week down about 1.4% near $91.

🔼 Nvidia hit a record high Friday, topping $237 a share and a market value near $5.7 trillion. Continued spending on AI infrastructure keeps feeding the rally, following a strong August earnings report with $96.2 billion in revenue. Rivals like AMD and customer-built chips from Amazon and Google remain the main competitive threats.

🚘️ Tesla delivered 486,532 vehicles in the third quarter, about 25,000 more than Wall Street expected. Consensus was roughly 462,000. Shares jumped about 5% Friday, a welcome sign of demand for the company's cheaper Model 3 and Model Y, which made up nearly all deliveries.

🔻 Nike shares fell nearly 9% in premarket trading Friday after the company guided to another revenue decline. Nike posted $11.21 billion in first-quarter revenue, short of the roughly $11.35 billion expected, and forecast a high-single-digit revenue drop for fiscal 2027. A restructuring plan will mean fewer roles across the company.

🖥️ Seagate and Western Digital each fell more than 10% Friday after Toshiba said it plans to double its hard disk drive output. Toshiba, the smallest of the three major makers, is targeting 30% of the market by capacity. The news hit two stocks that had surged this year on AI data center demand.

💰️ Bitcoin is trading around $84,600, about 5% below where it started 2026. Spot Bitcoin ETFs took in $6.3 billion in the third quarter, but are up only about $1 billion for the year after heavy first-half outflows. Citigroup's new $113,000 target implies roughly 34% upside from here.

Nvidia hit an all-time high Friday, topping $237 a share and a market value of roughly $5.7 trillion, even as the broader market ended the week about flat.

The Wall Street Journal reports that AI-linked stocks are increasingly dominating market returns and attention, leaving the rest of the market behind.

The gap shows up in the index itself: the S&P 500 is up about 12.8% this year, while the equal-weighted version, which gives every company the same influence, is up about 9.5%.

Most index funds are weighted by company size, so the biggest names move the fund the most.

Nvidia alone is nearly 8% of the S&P 500, and RBC Wealth Management research estimates that about $40 of every $100 in an S&P 500 index fund sits in just 10 companies.

One analysis earlier this year estimated that stripping out AI-related stocks would have cut the index's two-year return from roughly 42% to roughly 16%.

The takeaway for anyone holding a plain index fund: a big share of your return now rides on a single theme, even if you own 500 stocks.

Watch whether the rest of the market starts to catch up, or whether the AI trade keeps pulling away.

Two things could decide it: the 10-year Treasury yield, which sits near its highest level since 2002 and makes borrowing for AI buildouts more expensive, and third-quarter earnings season, which ramps up in mid-October and will show whether big tech's AI spending is paying off.

If the leaders stumble, an index fund is where you would feel it first.

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⚠️ Disclaimer: Not financial advice. Do your research before making any trades.