The Ugliest Chart in the World
We closed out another fun week in the markets so it's time to look ahead with the 10 things you need to know, starting with…
1. Oracle Has the Ugliest Chart in the World
Oracle (ORCL) did all the right stuff.
They had big earnings. Raised guidance. Announced a massive deal with OpenAI.
But after all that positivity, the stock put in a slow-motion “sell the news” decline that erased that massive September earnings gap:
The stock is now 32% off the highs, make this the ugliest chart in the world right now.
Meanwhile, CDS just hit 2-year highs.
Why?
The market is starting to wonder how OpenAI can spend hundreds of billions of dollars on infrastructure.
Speaking of ugly
2. SPX Breaks the 50 Day
Today, the S&P 500 Index fell below the 50 day moving average for the first time since April.
Why?
Well, aside from normal profit-taking after a monster rally, we've got a shut down government, falling odds of a December rate cut (more on this below), weak consumer sentiment, and real questions about the sustainability of the AI boom.
The party can't go on forever.
3. No 100% Rate Cut Guarantee for You
Fed Chair Powell said a December rate cut is not guaranteed.
And now the CME's FedWatch Tool is pricing in a 72.2% probability of another easing:
This is down from 82% a month ago.
The result: pressure on rate sensitive sectors like speculative small caps and homebuilders.
4. Earnings Season Has Been Pretty Good
This earnings season has had its fair share of messes (we'll get to this in a minute), but the numbers look good overall.
According to FactSet, 83% of S&P 500 companies have beaten earnings estimates, and 79% have beaten revenue estimates.
And overall earnings growth is tracking at 10.7%, beating the 7.9% expected back on September 30.
Sector-wise, the financials have been the biggest contributor to increase in growth, with big boys like Morgan Stanley (MS) and Capital One (COF) dropping huge beats.
5. The Collapse in Basic Luxury
DoorDash (DASH) was a monster stock until it tanked on Wednesday after an earnings miss.
And this fits a notable trend in weak earnings for consumer stocks offering “basic luxuries” like:
- Starbucks (SBUX) – expensive fancy coffee
- Lululemon (LULU) – expensive yoga pants
- Chipotle (CMG) & Cava (CAVA) & SweetGreen (SG) – expensive slop bowls
This ain't pretty:
6. Sentiment Is Mixed Up
The AAII Sentiment Survey shows that 38.0% of investors are bullish.
And it's basically in-line with the long-term average of 38.5%. On balance, this is positive. Because with the market feeling like it's on right on the edge of falling, it's good to see doubt.
And on a related note, the CNN Fear & Greed Index is at 14, reading Extreme Fear.
That's more a product of how F&G is calculated, and doesn't necessarily mean the market is freaked out. We can all agree people are cautious at best.
7. Sydney Sweeney Is Still Winning
American Eagle Outfitters (AEO) got a monster boost from its “Great Jeans” ad campaign in August.
The obvious question to ask was “will this last?”
And so far, the answer is YES.
AEO popped when the campaign was released, then had a monster short squeeze after earnings.
It looked like it was filling the gap, but it's since rebounded.
AEO stock is now up 57% from when it announced the campaign.
Hopefully, Ms. Sweeney was paid in stock!
8. Cracker Barrel Is Still Losing
Since we're on the topic of culture wars, let's take a fresh look at restaurant chain Cracker Barrel (CBRL), which enraged its customers by unveiling a new menu and logo in August.
The company reversed course and brought back the old stuff, but that hasn't helped:
This might be uglier than Oracle!
9. Apple Is the King Safety Play
Remember when Apple (AAPL) was viewed as a tech laggard because it was behind in AI?
Well, as I might remind you, you can download any number of AI apps like ChatGPT, Grok, Perplexity, etc. to your Apple devices.
BOOM! You have AI on your iPhone.
And again, I suggest telling your kids “Apple is behind in AI, so we're taking away your iPhone and giving you an Android phone.”
See how fast you get slapped in the face.
And if you look at the past 3 months, Apple has been crushing the QQQ's:
And yes, it's good that Apple is working with Google to bring AI features to Siri.
But what matters for Apple is that the average person has no reason to leave the ecosystem.
And no matter how many negative news stories get planted, iPhones just keep on selling.
That makes Apple the King Safety Play.
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