Morning Reads

 

• China’s Extraordinary Path to Power
• The Negotiators Who Brought China Into the World Economic Order
• Why China Uses a ‘National Team’ to Influence Trading
• Eurozone Retail Sales Slump as Energy Shock Hits Confidence
• Oil’s Plunge Below $100 Doesn’t Mean Markets Are Out of Jeopardy
• US Allies Need a Plan for a Lame-Duck Trump
• Stable Labor Market to Keep Fed on Track to Raise Rates Gradually
• US Treasury Traders Make Bullish Bets Ahead of Jobs Report
• Bitcoin Selloff Eases as Investors Explore Cautious Recovery
• Stocks Bounce Back in Another Day of Dizzying Volatility
• The Hot New Place to Bet on Stocks Is a Health Savings Account
• Fast-Money Systematic Funds Stoked $2.3 Trillion Tech-Stock Rout
• Wall Street Peers into Abyss of AI Trade as Midterms Expose Risk
• Washington’s Stock Portfolio Needs a Board and a Ledger
• Trump Media’s Investors Lost $2.2 Billion While Trump Holds $460 Million Stake
• Hackers Paid $15 to Drain $2.5 Billion From Binance in One Hit
• Why Investors Are Searching for Hope in Home Builders
• Data-Center Pullback in US May Shield Real Economy From AI Bubble
• Buffett and Munger Would Know How to Invest in AI
• ‘What Everybody Is Concerned About Is Cyber’
• Google’s $500 Billion Lesson for Antitrust Officials
• Apple’s iPhones Are About the U.S. as Much as the World
• Tesla’s Polarizing Cybertruck to Wind Down Production Amid Slow Sales
• Zipline Valuation Soars as Drone Startup Raises Funds, Expands Walmart Deal
• Lilly, Hims Join Forces to Reach More Obesity Drug Patients
• Moderna Boosts Revenue Guidance on Covid Vaccine Sales
• Humana Lifts Outlook as Quarterly Revenue Jumps
• Moscow Seizes Japan Tobacco’s Russia Factories
• Under Armour Sinks After Cut to Margin Forecast Hits Turnaround
• Outback Steakhouse Owner Raises Profit Outlook as Chain’s Turnaround Continues

 

Data on tap: The Oct. nonfarm payrolls report is due today, here's what to expect.

AI trade fears: Investors are skeptical of Anthropic's (ANT) $1.5T IPO valuation.

Financing risk: Is Nvidia (NVDA) repeating Cisco's (CSCO) fatal dot-com playbook?

The reckoning

The AI trade faced a major reckoning on Thursday as a huge selloff wiped out $2.5T from the tech-heavy Nasdaq index. Notably, the index saw its worst intraday drop since the height of the COVID-19 pandemic in March 2020. While Nasdaq futures are up this morning, yesterday's selloff had far-reaching implications for the AI trade.

Zoom in: The stock rout was fueled by the Democrats' sweeping midterm victory, which prompted investor fears that data center construction could slow down. "The fundamentals surrounding the AI infrastructure buildout — or its potential pace — have been under fire due to questions around future funding, and the blue sweep just exacerbated that concern," said Nathan Peterson, director of derivatives research and strategy, Schwab Center for Financial Research. As a result, the Nasdaq Composite (COMP:IND) entered correction territory and closed down 5.5% on Thursday. "Investors are pricing in power and funding bottlenecks, and the midterms added a political layer, as a new Congress will likely scrutinize data center permitting and power bills,” said Seeking Alpha analyst Leo Nelissen. “But Big Tech is a major Democratic donor, and falling tech stocks hit millions of retirement accounts. The more pressure builds, the more I expect Democrats to soften their stance."

No dip-buying: Thursday also saw a notable change in trader behavior. Retail investors abandoned their signature dip-buying playbook to dump individual stocks at the fastest pace since March 2020. Shortly before market close, retail net outflows from single stocks reached $338M, Vanda Research noted. The selloff marked the third-largest day of retail single-stock liquidation on record, trailing only March 12 and March 17 of 2020. Vanda analyst Viraj Patel said institutional call buying slumped to a one-year low earlier in the week, while leveraged ETFs faced an estimated $42B-$48B in forced rebalancing into the close alongside de-risking from volatility-target funds. With institutional buyers stepping aside just as retail and systematic strategies aggressively unload equities, Patel warned that the collision represents flow dynamics rarely witnessed outside periods of acute market stress.

Global rout: Asia was not immune to the selloff on Friday, with Japan's Nikkei 225 index (NKY:IND) entering bear market territory and ending below 60,000 for the first time since May. Tokyo-listed shares of investment giant SoftBank (SFTBY) sank nearly 11%, while those of memory chipmaker Kioxia (KXIAY) declined 8.7%. South Korea's Kospi Index fell below the 5,000 level for the first time in nine months, before paring losses to end 6% lower. Seoul-listed shares of SK Hynix (SKHY) and Samsung (SSNLF) slumped due to concerns over tighter U.S. regulation slowing AI investment and weakening memory chip demand, Saxo analysts said. Taiwan's TAIEX index (TWSE) ended 4.5% lower, also entering bear market territory. TSMC (TSM), which accounts for over 40% of TAIEX's weighting, dropped 5% in Taiwan. European markets also fell, tracking the tech selloff.

Here's the latest Seeking Alpha analysis

AI Stocks Are Having The Sale Of The Year, But Avoid These

Micron's Selloff Is A Once-In-A-Decade Opportunity

Intel: I Warned Before The 40% Crash, Now I'm Bullish

Selling AI Because Of Democrats Is Insane

Don't Mistakenly Equate An AI Slowdown To An AI Crash

What else is happening...

Tesla (TSLA) factory to pivot to Cybercab production over Cybertruck.

Nvidia, Apollo (APO) in talks to repurpose Brightspeed buildings for AI.

Bloom Energy (BE) sinks despite landing its biggest international deal.

Midterm fallout: Trump-backed critical mineral deals under pressure.

Block (XYZ) set to reduce workforce for the second time this year.

Delta (DAL) faces class-action lawsuit over windowless window seats.

Half of RFK Jr. health panel appointees get waivers to keep stocks.

Democrats weigh measure to roll back Trump's tariffs on Canada.

Israel's arms backlog complicates Trump's plan to end military aid.

Judge blocks construction of Trump's triumphal arch for 14 days.

Today's Markets

In Asia, Japan -6%. Hong Kong -1.3%. China -1.1%. India +2.2%.
In Europe, at midday, London -2.2%. Paris -1.8%. Frankfurt -2.4%.
Futures at 6:30, Dow -0.9%. S&P +0.3%. Nasdaq +1.5%. Crude +0.5% to $90.95. Gold -0.8% to $4,080.10. Bitcoin -5.3% to $76,031.
Ten-year Treasury Yield +2 bps to 4.86%.

On The Calendar

Companies reporting today include Moderna (MRNA) and Oklo (OKLO).