Oil crashed, but AI stocks stayed weak

Easy version of the November 3 morning note. It covers the prior U.S. session. This is not investment advice.

In one line, oil prices crashed, but worry about AI spending and financing left the U.S. market split. Airlines, consumer stocks, and solar were strong. Chips and optical names were weak.

An index is a score made by putting many stock prices into one basket. DK's close was S&P 500 down ▼ 0.51%, Nasdaq down ▼ 1.07%, Russell 2000 down ▼ 0.06%, and the Dow up ▲ 0.41%. Stocks opened higher on Middle East talk and cheaper oil, then turned down as chips and AI names fell. An equal-weight S&P 500 rose, so the drop was concentrated in a few large technology stocks.

I did not copy the sector percentage list. It matched the next day's note word for word, so I could not tell which day it belonged to.

Micron fell ▼ 5.82%, SanDisk 6.59%, and Seagate 7.88%. Intel fell another 8.85% on a weak outlook, soft PC demand, and cash-flow worry. AMD fell 7.58% ahead of earnings. Nvidia fell ▼ 1.23% and Broadcom 1.16%.

Marvell fell ▼ 12.78% after saying it would buy Lumentum for about $115 billion in stock. Lumentum holders would get 4.5 Marvell shares per share, which can dilute existing owners. Dilution means their share of the company shrinks. Lumentum fell 18.66% because the falling Marvell price cut the deal value. Coherent fell 4.95%, Ciena 11.38%, and Applied Optoelectronics 9.57%.

Oracle fell ▼ 8.83% on a plan to issue $10 billion of stock and $10 billion of bonds. Checkpoint fell 6.98%, Okta 11.27%, and CrowdStrike 3.45%. Amazon bounced 2.23% after an earnings shock. Tesla rose 1.01%. Microsoft fell 2.83%, Alphabet 0.30%, Meta 1.34%, Apple 1.74%, and Palantir 3.10%. Alphabet also moved to issue 6 billion euros of corporate bonds, debt notes issued by a company.

Cheaper fuel sent United Airlines up ▲ 4.78%, American Airlines 3.73%, and Delta 4.10%. The same oil drop hurt energy stocks. Exxon Mobil fell 3.99% and Chevron 3.27%. Visa rose 2.88% and Mastercard 3.19% to intraday records. American Express rose 2.78%. Solar rose on hope a strong Democratic showing could keep clean-energy support. First Solar rose 4.44%, Enphase 8.97%, SolarEdge 0.60%, and Sunrun 10.16%.

Apple's fiscal fourth-quarter revenue was $114.48 billion, up ▲ 11.7%, and earnings per share were $2.10, up ▲ 13.5%, a September-quarter record. iPhone revenue rose 17.5% and services 9.8%. A tariff refund added about 1 percentage point to gross margin and $0.05 to earnings per share. A report said a first robot priced around $1,000 might slip from next year to 2028. Palantir's third-quarter revenue was $2.31 billion, up ▲ 96%. U.S. commercial revenue rose 148%. Fourth-quarter revenue guidance of $2.65 billion beat the $2.46 billion forecast, and the yearly outlook rose from $8.15 billion to $8.53 billion.

Oil crashed on hopes of a diplomatic path with Iran. WTI fell ▼ 7.38% to $96.44, and Brent fell 7.63% to $104.77. A final deal was not confirmed.

Treasury yields split. The 2-year rose to ▲ 4.598%, while the 10-year fell to 4.912% and the 30-year to 5.286%. The dollar fell 0.11%. Gold futures rose 1.49% from about a one-year low. The Treasury cut its fourth-quarter borrowing estimate from $628 billion to $618 billion. Excluding the starting cash balance, borrowing need was $24 billion higher than the old estimate. The first-quarter estimate was $800 billion, assuming $1 trillion of cash at the end of March.

The October manufacturing score was 55.5, above the 54.5 forecast, a tenth straight month of expansion. A score above 50 means expansion. The production score of 59.0 was the highest since November 2021. The price score was 75.2, below the 77.5 forecast but still high. Private construction spending fell ▼ 2.4%. A total construction number was not given, so I did not invent one.

Three lines to keep. Cheaper oil helped airlines and solar, and hurt energy stocks. AI names were weak on deals, new debt, and spending worry. Long Treasury yields fell, but the 2-year rose a little.