Wall Street finished a volatile five days with a noticeable split among the major averages. The S&P 500 declined almost 2% for the week, while the technology-heavy Nasdaq Composite dropped more than 4%, its worst week since June. The Dow Jones Industrial Average, however, managed to gain approximately 0.7%. [cnbc.com]
That divergence tells much of the week’s story.
Investors didn’t necessarily abandon stocks. Instead, they became considerably more selective about where they wanted to be.
Monday: AI Gets a Second Look
We began the week with Salesforce, after Bank of America made a dramatic reversal in its view of the software company.
The firm double-upgraded Salesforce from Underperform to Buy and increased its price target to $285 from $160, reflecting a revised view that artificial intelligence could strengthen established enterprise-software platforms rather than simply disrupt them. [financefeeds.com]
Our Dog, meanwhile, came from the grocery aisle.
Albertsons and Kroger remained locked in litigation following their failed $24.6 billion proposed merger, with Albertsons seeking billions of dollars in damages and other compensation. Kroger has disputed the allegations. [finance.yahoo.com]
Monday’s lesson: Even within AI, Wall Street’s narrative continues to evolve.
Tuesday: Earnings Season Arrives, Plus a Little History
Tuesday marked a milestone worth remembering.
Exactly 55 years earlier, on October 13, 1971, Intel went public at $23.50 per share. After 13 subsequent stock splits, Intel says that IPO price equates to approximately two cents on a split-adjusted basis. [intc.com]
How appropriate that we marked that anniversary while semiconductors and AI were becoming central characters in the week’s market story.
Our Diamond was UnitedHealth Group, which reported adjusted third-quarter earnings of $4.69 per share versus an LSEG consensus estimate of $4.14 and raised its full-year adjusted earnings outlook to at least $20.50 per share. [cnbc.com], [unitedheal…hgroup.com]
Our Dog was Johnson & Johnson, whose shares fell approximately 6% as investors focused on softer MedTech performance and developments surrounding its hips-and-knees business. [gurufocus.com], [finance.yahoo.com]
And yes, we couldn’t resist noting that Johnson & Johnson might be trying to reposition those hips and knees.
Elvis would understand. 🎸
Wednesday: Inflation Heats Up as Apple Makes History
Wednesday brought the week’s major macroeconomic development.
September consumer prices rose 3.7% from a year earlier, slightly above the cited 3.6% consensus expectation. Core CPI increased 2.6% year over year, also slightly exceeding expectations. [cnbc.com]
Stocks responded accordingly.
The S&P 500 dropped 1.11%, while the Nasdaq Composite fell 1.88%. [cnbc.com]
But one technology company bucked the trend.
Apple closed at $342.96, placing its market value at approximately $5.005 trillion. While Apple had previously touched $5 trillion intraday in July, Wednesday marked a close above that threshold. [appleinsider.com], [cnbc.com]
Our Dog was Netflix. Although the stock actually edged higher Wednesday, it was down roughly 26% year to date through October 14, and the company announced plans to eliminate approximately 1,000 positions, or 6% of its workforce, its biggest round of layoffs since 2022. [barchart.com], [reuters.com]
Thursday: The Market Changes Lanes
Thursday gave us a classic example of market rotation.
The Dow Jones Industrial Average soared 556 points, or 1.08%, while the S&P 500 added 0.33%. The Nasdaq Composite, however, finished just 0.08% higher after falling as much as 1.4% earlier in the session. [cnbc.com]
Wholesale inflation also provided another surprise. September producer prices increased 1.3% month over month and 6.3% year over year, both above cited economist expectations. [finance.yahoo.com]
Our Diamond was Nike, which gained more than 5% as investors found opportunities outside the week’s struggling technology names. [cnbc.com]
Our Dog was Hewlett Packard Enterprise, one of Thursday’s weakest S&P 500 performers. [quant500.com]
Thursday’s lesson: Sometimes the market doesn’t stop running. It simply changes lanes.
Friday: Old Energy Meets New Technology
Friday brought the week’s defining contrast.
Technology and AI-related stocks came under heavy selling pressure again. The Nasdaq Composite fell 2.14%, the S&P 500 lost 1.09%, and the Dow Jones Industrial Average declined 0.34%. [cnbc.com]
The AI financing story was difficult to ignore.
CoreWeave fell almost 12% Friday, taking its weekly decline to approximately 25%. Investors focused increasingly on the company’s debt, which CNBC reported had risen above $51 billion. [cnbc.com]
That made CoreWeave our Dog and raised a larger question for investors:
How much does it cost to finance the AI revolution?
Meanwhile, traditional energy came roaring back into the conversation.
West Texas Intermediate crude jumped 3.51% to $101.41 per barrel, while Brent crude gained 3.72% to $109.86, amid geopolitical tensions. [cnbc.com]
Energy shares held up better than most of the market. ExxonMobil rose more than 2%, while Chevron also gained about 2.4%. [apnews.com]
That earned ExxonMobil our final Diamond of the week.
The Week in Three Words
Inflation. Financing. Rotation.
Inflation, because both consumer and wholesale inflation reports came in hotter than expected, keeping monetary policy firmly in the market conversation. [cnbc.com], [finance.yahoo.com]
Financing, because investors began scrutinizing the enormous amounts of capital and debt associated with portions of the AI infrastructure buildout. CoreWeave became the clearest example, but concerns affected other AI-related companies as well. [reuters.com], [cnbc.com]
Rotation, because while the Nasdaq Composite lost more than 4% for the week, the Dow Jones Industrial Average actually finished approximately 0.7% higher. [cnbc.com]
That is quite a disconnect for five trading days.
Important Disclosure
This commentary is provided solely for informational and educational purposes and should not be considered a recommendation or solicitation to buy, sell or hold any security, sector, index or investment strategy. References to individual securities, sectors, analyst opinions, market capitalization, commodity prices, debt levels and historical performance are included to illustrate publicly reported market developments and do not constitute investment recommendations. Analyst ratings and price targets represent the opinions of the issuing firms and are subject to change. Past performance does not guarantee future results. Investing involves risk, including possible loss of principal.