October Had Some Spooks, but the Semis Shined

Macbeth, Act IV, Scene 1

Round about the cauldron go;

In the poison'd entrails throw.

Toad, that under cold stone

Days and nights hast thirty one

Swelter'd venom sleeping got,

Boil thou first i' the charmed pot.

Double, double toil and trouble;

Fire burn and cauldron bubble.

- William Shakespeare (1623)

Casting a Spell?

Happy Halloween, gang. No, we're not casting any spells this morning. No sorcery here. We are marveling though at the resilience of the tech sector. Just when you think you may have them down, "they" being tech stocks, they do seem to come storming back. Meta Platforms  (META)  stumbles as Microsoft  (MSFT)  sputters. OK. Alphabet  (GOOGL)  went the right way even on a down day. Then came Amazon  (AMZN) and Apple  (AAPL) . If Apple hit a double, Amazon hit a five-run homer.

That said, October, as it has been so often in the past for those of us of a certain age, was indeed scary. There was the 3.6% selloff that hit the Nasdaq Composite on Oct. 10 that was paired with a 2.7% beat-down put on the S&P 500. They (They being the powers that be) certainly did try to shake us out in October as we had said that "they" would. There were at least two other trading days during the month that contained either high-volume selloffs or nasty reversals to the downside.

Still, it is the AI trade that leads the way. Just look at the continued capital spending that the above mentioned five names and others keep pouring into what they see as their future. The real winners for the month of October, while we see heightened reaction at earnings time for these hyperscalers, are still the stocks that are building out the infrastructure of generative and agentic artificial intelligence and behind that, quantum computing. I am speaking of semiconductors, as if you didn't know.

The Beat Goes On

At zero dark-thirty on Friday morning, the South Korean government announced a broad collaboration with U.S. chip designer Nvidia  (NVDA)  to acquire more than 260,000 of that company's most advanced GPUs for deployment across the public and private sectors. Roughly 50,000 of these GPUs designed on the Blackwell architecture will be earmarked for the public sector, primarily South Korea's National AI Computing Center while the other 200,000 or so will be spread across the likes of Samsung Electronics  (SSNLF) , Hyundai Motor Group and Naver.

For those about to ask, with the S&P 500 up 2% for October and the Nasdaq Composite up 4.1%, the Dow Jones U.S. Semiconductor Index over the past month is up a jaw-dropping 11.6%. Within that index, Advanced Micro Devices  (AMD)  leads the way, up 57.5%. Yes, AMD is up 57.5% in a month. All hail Lisa Su. The mighty Nvidia is only up 8.7%. True story. Micron Technologies  (MU) has gained 34%, while Intel  (INTC) is up 19.7% over a month. Rah.

Those two were followed by Arm Holdings  (ARM) , and Broadcom  (AVGO) . These two names have posted gains of 16.9% and 14.1% over a month's time. Incredible. Yeah, I had the semis in inventory. Go team, go! Yes, I expected demand for the semis to remain strong. No, I did not see anything like this coming. Guess what? That demand going forward, as expressed this week by the hyperscalers and now by governments as well, who are playing catch up, is going nowhere.

Marketplace

Thursday was another tough day for equities as the market, near the top of the chart, continues to absorb the Fed's "hawkish" rate cut this week. Treasury debt securities sold off sort of sharply in response to that meeting and more or less, stabilized at new levels on Thursday. It took positive results from Amazon, Apple and Western Digital (WDC), which is another semiconductor name to stabilize equities after the closing bell.

On Thursday, the S&P 500 gave back 0.99%. That made for a two-day losing streak. The Nasdaq Composite surrendered 1.57% as the ugly stock paid a rare visit to some of our friends. The small to mid-cap indices all took one on the chin as well. At the index level, only the KBW Banks and the Dow Transports posted wins for the session. Breadth was rather gnarly again on Thursday.

Breadth

Just three of the 11 S&P sector SPDR ETFs closed out the Thursday session in the green. This was the third straight day that a majority of sector SPDRs closed in the red, despite what the headline indexes may or may not have done. The defensives were the funds of choice for the day as Tech fell briefly out of favor.

Three of the top four performing funds out of the 1 could be considered defensive in nature as the REIT's  (XLRE) led the way. The bottom feeders could all be described as either growth of cyclical sectors as the Discretionaries  (XLY) and Communication Services  (XLC)  all kept appointments with the woodshed.

Losers beat winners by almost 2 to 1 at the NYSE and by just about 2 to 1 at the Nasdaq. Advancing volume took a 44.3% share of composite Nasdaq-listed trade and just a 30.4% share of composite NYSE-listed activity. So, was Thursday a brand new "Day One" reversal of trend to the downside? No!

Why is that? For a third consecutive day, even on weak breadth, trading volume was not elevated across the board. On Thursday, while aggregate trade across Nasdaq-listing was up 4.4% on a day over day basis, aggregate trade was 3.6% lower across NYSE-listings and also lower across the membership of the S&P 500. Simply put, this market has not put in a bearish Day One and is nowhere close to confirming anything technically that might be taken as a bearish signal. That's my story (for now) and I'm sticking to it.

Budapest Meeting a No-Go

The Financial Times is reporting that a planned meeting in Budapest between U.S. Pres. Donald Trump and Russian Pres. Vladimir Putin has been cancelled by the White House. The cancellation came after the Kremlin sent a memo to the White House as Moscow stuck to previously made demands that Ukraine cede more territory and dramatically reduce the size of its armed forces. The memo also demands that Ukraine never join the NATO alliance.

Apparently, Moscow is feeling its "beer muscles" after the recent tests of two nuclear powered weapons, the Burevestnik cruise missile and the Poseidon super torpedo in late October. Russian forces have also been conducting nuclear launch drills. Oh, joy. This is likely why President Trump had directed the Pentagon to resume the testing of nuclear weapons on his way to his Thursday morning meeting with Chinese leader Xi Jinping. The order most probably had nothing to do with any kind of flex concerning China at all.

Split 'Em Up

After the closing bell, Netflix  (NFLX) announced a ten for one stock split. The stock is expected to trade on a split adjusted basis as of the market open on Monday, Nov. 17. The stock is trading 2.5% overnight. On Wednesday evening, ServiceNow  (NOW)  announced its intention to implement a five for one stock split. That split is still subject to shareholder approval. NOW was up 2.5% on Thursday despite a weak tape and is up another 1.3% overnight.

Still Not Sure

I still can't decide what I'll be for Halloween this year. It's down to either Chewbacca or an old, but devastatingly handsome Irish guy from Queens, NY. Gametime decision.

Economics (All Times Eastern)

09:45 - Chicago PMI (March): Expecting 42.0, Last 40.6.

1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 550.

1:00 p.m. - Baker Hughes Oil Rig Count (Weekly): Last 420.

The Fed 

(All Times Eastern)

09:30 - Speaker: Dallas Fed Pres. Lorie Logan. 

12:00 p.m. - Speaker: Atlanta Fed Pres. Raphael Bostic.

12:00 - Speaker: Cleveland Fed Pres. Beth Hammack.

Today's Earnings Highlights 

(Consensus EPS Expectations)

Before the Open:  (ABBV)  (1.80),  (CVX)  (1.70),  (XOM)  (1.82), GWW (9.95)

At the time of publication, Guilfoyle was long GOOGL, MSFT, NVDA, AMD, MU, INTC equity.