December Nasdaq 100 E-Mini futures (NQZ26) are down -0.31% this morning as chipmakers and other AI-related stocks came under renewed selling pressure.
Sentiment toward the AI trade weakened again on Tuesday after the disastrous debut of a South Korean data center company reignited doubts about the sustainability of the AI spending boom. AI infrastructure provider Elice cratered 32% in Seoul, marking the worst trading debut for a sizable company in the country. The disappointing debut triggered a fresh wave of selling in AI-related stocks across the globe. Micron Technology (MU), Marvell Technology (MRVL), and Sandisk (SNDK) each fell more than -2% in U.S. pre-market trading.
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Further dampening risk appetite, the price of WTI crude climbed more than +3% on Tuesday as traders weighed lingering Middle East supply risks. Iran’s First Vice President Mohammad Reza Aref said on Monday that Tehran has “no choice” but to establish control over the Strait of Hormuz to protect its security. Traders took the remarks as a signal that Iran could intensify attacks on tankers passing through the waterway, prompting them to price in a higher geopolitical risk premium.
Investors are now awaiting U.S. housing market data and a slew of corporate earnings reports, with a particular focus on SpaceX’s results.
In yesterday’s trading session, Wall Street’s main stock indexes ended mostly higher, buoyed by a rebound in chipmakers. Chip and AI infrastructure stocks climbed, with Western Digital (WDC) rising over +6% to lead gainers in the S&P 500 and Nasdaq 100 and Sandisk (SNDK) gaining more than +5%. Also, Amazon.com (AMZN) advanced nearly +5% and was the top percentage gainer in the Dow after Morgan Stanley named the e-commerce and cloud-computing giant a top pick and raised its price target on the stock to $350 from $335. In addition, Datadog (DDOG) surged more than +5% after Bernstein upgraded the stock to Outperform from Market Perform with a price target of $350. On the bearish side, NRG Energy (NRG) slid over -4% after Jefferies and Seaport Research lowered their price targets on the stock.
“The final three months of the year have historically been favorable for stocks. Although there is no guarantee these historical patterns will continue in 2026, strong corporate profit growth and resilient economic activity could support further gains through year-end,” said Brock Weimer at Edward Jones.
Third-quarter corporate earnings season is gathering pace, with investors awaiting results from high-profile companies today, including SpaceX (SPCX), GE Aerospace (GE), Netflix (NFLX), RTX Corp. (RTX), Intuitive Surgical (ISRG), and 3M Company (MMM). SpaceX’s earnings report, due after the closing bell, will draw particular attention. Investors will be keen to hear updates from CEO Elon Musk on the ambitious goals he laid out during the previous earnings call in August, including plans to launch data centers in space in 2027 and achieve $1 trillion in revenue by 2030. According to Bloomberg Intelligence, S&P 500 companies are expected to post an average +25% jump in third-quarter earnings from a year earlier.
On the economic front, investors will focus on U.S. building permits (preliminary) and housing starts data, set to be released in a couple of hours. Economists expect September building permits to total 1.390 million and housing starts to total 1.300 million, compared with the prior month’s figures of 1.403 million and 1.275 million, respectively.
The National Association of Realtors’ pending home sales data will also be released today. Economists project pending home sales to fall -0.7% m/m in September following a +0.3% m/m rise in August.
U.S. rate futures are currently pricing in an 82.8% probability of no rate change and a 17.2% probability of a 25-basis-point rate hike at the conclusion of the Fed’s October meeting.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 5.13%, down -0.18%.
The Euro Stoxx 50 Index is down -0.97% this morning as a fresh wave of selling in AI-related stocks across the globe weighed on sentiment. Rising oil prices further dampened investors’ appetite for risk. Technology and bank stocks led the declines on Tuesday. Investors also digested a raft of regional economic data. The ZEW Economic Institute reported on Tuesday that German investor sentiment weakened in October for the first time in six months. Separately, data showed that U.K. wage growth picked up slightly in the three months through August, while the unemployment rate unexpectedly fell, strengthening expectations that the Bank of England will raise its key interest rate next month. In addition, data showed that the Eurozone’s current account surplus narrowed in August to its lowest level since January 2023. Meanwhile, Eurozone government bond yields fell on Tuesday as renewed concerns about the AI trade prompted investors to seek refuge in safe-haven assets. In corporate news, ABB (ABB.S.DX) slumped over -5% even as the Swiss engineering group boosted its full-year guidance.
U.K. Average Earnings ex Bonus, U.K. Unemployment Rate, Germany’s ZEW Economic Sentiment Index, Eurozone’s ZEW Economic Sentiment Index, and Eurozone’s Current Account data were released today.
U.K. Average Earnings ex Bonus rose +3.7% in the three months to August, stronger than expectations of +3.6%.
The U.K. Unemployment Rate was 4.7% in the three months to August, stronger than expectations of no change at 4.9%.
The German October ZEW Economic Sentiment Index came in at 28.1, weaker than expectations of 30.2.
The Eurozone October ZEW Economic Sentiment Index arrived at 18.5, weaker than expectations of 23.6.
Eurozone’s August Current Account came in at 8.7 billion euros, weaker than expectations of 29.2 billion euros.
Asian stock markets today closed mixed. China’s Shanghai Composite Index ($CHSC) closed up +0.12%, and Japan’s Nikkei 225 Stock Index ($NKY) closed down -1.30%.
China’s Shanghai Composite Index closed slightly higher today, supported by gains in the technology sector. Tech stocks advanced on Tuesday, bucking a slump among their regional peers. However, declines in financial and gold-related stocks capped the benchmark’s gains. Meanwhile, China left its benchmark lending rates unchanged for a 17th consecutive month on Tuesday, in line with expectations, as authorities increasingly rely on fiscal expansion to support economic growth. The one-year loan prime rate was held steady at 3.00%, while the five-year LPR remained at 3.50%, according to the People’s Bank of China. The decision came after China’s central bank signaled plans to continue overhauling the country’s monetary policy framework, placing greater emphasis on shorter-term interest rates to better steer markets. PBOC Governor Pan Gongsheng said on Monday that companies with stronger financial positions could eventually be permitted to choose between the interbank overnight repo rate and LPRs as the reference rate for floating-rate loans. “The potential shift to an overnight policy rate could effectively amount to a policy rate cut, depending on the level at which the new rate is set,” according to Goldman Sachs’ Xinquan Chen. Elsewhere, two Chinese technology companies launched share offerings in Hong Kong aimed at raising a combined $1.5 billion, testing investor demand amid ongoing concerns about the AI trade.
Japan’s Nikkei 225 Stock Index closed lower today, failing to follow Wall Street’s overnight rally. Technology stocks were among the biggest losers on Tuesday as sentiment toward the AI trade remained jittery. Tech investor SoftBank Group sank over -6%, making it the biggest drag on the Nikkei. The drop came after the company’s credit risk, as measured by its credit-default swaps, climbed to the highest level in almost four years amid mounting concerns over AI-related financing and a possible large acquisition. Losses in financial and industrial stocks also weighed on the benchmark. Meanwhile, Japanese government bond yields fell on Tuesday after an auction of 20-year bonds attracted record demand, signaling that elevated yields are beginning to draw domestic investors back into the market. Elsewhere, Reuters reported on Tuesday that the Bank of Japan is likely to leave interest rates unchanged this month but could raise its inflation forecast for the next fiscal year, as rising oil prices keep price pressures elevated for longer than previously expected. Investor focus this week is on Japan’s national core CPI for September. Market participants will also closely watch Japan’s preliminary October PMIs and September trade figures. In addition, the BOJ will publish its semiannual Financial System Report at the end of the week. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +3.04% at 32.18.
Pre-Market U.S. Stock Movers
Chip and AI infrastructure stocks slid in pre-market trading. Micron Technology (MU), Marvell Technology (MRVL), and Sandisk (SNDK) each fell more than -2%.
Apple (AAPL) slipped nearly -1% in pre-market trading after Loop Capital downgraded the stock to Hold from Buy with a price target of $330.
Solstice Advanced Materials (SOLS) rose over +3% in pre-market trading after the Financial Times reported that activist investor Starboard Value had built a stake in the company.
You can see more pre-market stock movers here
Today’s U.S. Earnings Spotlight: Tuesday - October 20th
Space Exploration Technologies (SPCX), GE Aerospace (GE), Netflix (NFLX), RTX Corporation (RTX), Intuitive Surgical (ISRG), Chubb (CB), Capital One Financial (COF), 3M Company (MMM), Northrop Grumman (NOC), General Motors Company (GM), MSCI Inc. (MSCI), United Airlines Holdings (UAL), Halliburton Company (HAL), Synchrony Financial (SYF), Synchrony Financial (SYF.PRB), KeyCorp (KEY), Equifax (EFX), Genuine Parts Company (GPC), East West Bancorp (EWBC), Hasbro (HAS), Annaly Capital Management (NLY), Equity LifeStyle Properties (ELS), Ally Financial (ALLY), Vicor (VICR), Valmont Industries (VMI), Agree Realty (ADC), Commerce Bancshares (CBSH), Hancock Whitney (HWC), Pegasystems (PEGA), Atlantic Union Bankshares (AUB), Bank OZK (OZK), United Community Banks (UCB), Neptune Insurance Holdings (NP), Alaska Air Group (ALK), Nicolet Bankshares (NIC), Stride (LRN), Dime Commercial Bancshares (DCOM), QCR Holdings (QCRH), Peoples Bancorp (PEBO), Metropolitan Bank Holding (MCB), Mercantile Bank (MBWM), Capital City Bank Group (CCBG), Orrstown Financial Services (ORRF), Bridgewater Bancshares (BWB), Northpointe Bancshares (NPB).
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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