Oil Just Hit $116 🛢️

Welcome back to the Day Trading newsletter 📈

It was the week that was: oil climbed to its highest level in six months, an AI-led selloff rattled Wall Street on Thursday, and the S&P 500 notched a second straight weekly loss.

Let’s get into it 👇️ 

📆 Wednesday 10/28 — Fed Decision (2:00 p.m. ET) and Chair Warsh Press Conference (2:30 p.m. ET): A hold at 3.75% to 4% is the consensus. Any signal that a December hike is coming could move stocks and bonds.

📆 Wednesday 10/28 — Microsoft and Alphabet Q3 Earnings (after close ET): Two more tests of whether AI spending is paying off after Meta's selloff. Watch capital spending guidance and cloud growth.

📆 Thursday 10/29 — PCE Inflation and Q3 GDP (8:30 a.m. ET): PCE is the Fed's preferred inflation gauge, expected to show prices up 3.7% from a year earlier. A hot reading would strengthen the case for a December hike.

📆 Thursday 10/29 — Amazon and Intel Q3 Earnings (after close ET): Amazon's cloud and AI spending and Intel's chip outlook round out a heavy week for tech earnings.

🔻 Wall Street's AI trade cracked Thursday, with the Nasdaq falling 2.6% and the S&P 500 dropping 1.2%. The S&P closed at 7,663.43, its worst day since July, while the Dow finished flat. AI stocks led the losses on worries that high interest rates could threaten the boom, and Treasury yields fell sharply.

🔽 Meta shares fell nearly 7% Thursday even though the company beat revenue estimates. Revenue hit $64.6 billion, but a $9.89 billion legal charge cut into earnings, and Meta raised the low end of its 2026 capital spending forecast to $135 billion to $145 billion. Investors are wary that returns on AI spending will take longer to arrive.

🚀 SpaceX shares fell about 9% Thursday, giving back most of Wednesday's 7.8% post-earnings gain. The broader tech selloff weighed on the stock. SpaceX also guided fourth-quarter capital spending to $35 billion to $40 billion, up from $19.6 billion in the third quarter, a reminder of how much cash its AI buildout burns.

📞 AT&T and T-Mobile each fell nearly 8% Friday after Bloomberg reported SpaceX is in talks to lease space on about 80,000 U.S. cell sites. Investors read the report as a step toward SpaceX building a fourth nationwide wireless network. AT&T closed at $20.93, T-Mobile at $146.54, and Verizon slipped 1.2%.

💉 Moderna shares plunged as much as 25% Thursday after detailed results from its melanoma vaccine trial leaked ahead of a medical conference. The data showed the vaccine, paired with Merck's Keytruda, cut the risk of recurrence or death by 42%. But after a rally of more than 500% this year, analysts called the drop a "sell-the-news" reaction.

💳️ American Express shares fell 3.7% Friday even though profit rose 28% to $3.71 billion and the company raised its full-year outlook. Amex also said it will cut about 3,500 jobs, or 5% of its workforce, its first major round of layoffs in roughly a decade.

🛍️ U.S. consumer sentiment slipped to a five-month low in October as inflation worries grew. The University of Michigan's final reading was 48.0, and consumers now expect prices to rise 4.7% over the next year, the highest since May. Nearly 70% expect interest rates to climb, the highest share in more than three years.

💼 Weekly jobless claims fell to 194,000, a three-month low, showing the job market is still holding up. Economists polled by Bloomberg expected 200,000, and the four-week average is the lowest since 2022. A resilient labor market gives the Fed more room to keep raising rates to fight inflation.

Brent crude settled at $116.72 a barrel Friday, up 3.1% and its highest settlement since April 29, as Houthi attacks across Saudi Arabia stoked fears of lost supply.

Brent, the global oil benchmark, rose about 6% this week and is up from under $97 at the start of October, while U.S. crude finished just above $103.

The U.S. war with Iran has already sharply cut global supply, and Saudi Arabia is the world's largest crude exporter, so any threat to its energy infrastructure moves prices fast. Stocks buckled: the S&P 500 fell 0.5% to 7,623.68, and the Dow dropped 1.2%, or about 650 points, with nearly three in four S&P 500 stocks declining.

Energy shares were the exception, with Chevron up 2.9% and ConocoPhillips up 3.6%.

Oil is an input for almost everything: gasoline, shipping, airfares, plastics. When it jumps, inflation tends to follow, and inflation is already running hot.

Economists expect September's PCE index, the Fed's preferred inflation gauge, to show prices up 3.7% from a year earlier, and a University of Michigan survey found consumers expect prices to rise 4.7% over the next year, the highest since May.

That puts the Fed in a bind. It raised rates in September to a range of 3.75% to 4% and is widely expected to hike again in December, even as pricier energy squeezes shoppers and company profits. Banks and industrials felt it Friday: JPMorgan and Citigroup each fell 1.5%, and Caterpillar dropped 2.4%.

What to watch:

• The Fed's decision comes Wednesday at 2 p.m. ET. A hold is the consensus (94 of 100 economists in a Reuters poll), so the real signal will be in Chair Kevin Warsh's 2:30 p.m. press conference, where any hint that a December hike is locked in could move stocks and bonds.

• Thursday brings the PCE report and the first estimate of third-quarter GDP. Also keep an eye on Iran and Saudi headlines, which could gap oil, and stocks, at Monday's open.
  

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