As markets brace for Tuesday’s trading, Apple’s post-earnings dip and broader declines in the Nasdaq-100 and S&P tech sectors are signaling potential headwinds. Investor anxieties are further heightened by the growing likelihood of a Democratic sweep in the midterms, impacting the AI trade, particularly stocks like Vistra. Key earnings from Pfizer, DuPont, Amgen, AMD, and Block will also significantly shape the day’s market dynamics.
As the trading week progresses, investors are grappling with a mixed bag of corporate earnings, sector-wide declines, and political shifts. The Nasdaq Composite stumbled into November, setting the stage for what promises to be an eventful Tuesday.
Apple Navigates Post-Earnings Headwinds
The consumer technology behemoth, Apple, exceeded fiscal fourth-quarter estimates. Furthermore, it projects a robust revenue increase of 7% to 10% on an annual basis for the crucial December quarter. Despite these positive figures, Apple shares experienced a decline after hours. CNBC's Jim Cramer cautioned that "in the short term the stock is likely to go down," citing investor concerns about the pace of the company's growth. Interestingly, CNBC's Kif Leswing noted Apple's Greater China business saw a significant 21% growth during the earnings call. The stock is currently down 4% from its previous month's high, with further analysis expected on "Morning Call" with Morgan Brennan.
Tech Sector Experiences Broad Correction
The broader technology market is facing a significant pullback. The Nasdaq-100 index is now down almost 11% from its peak on October 6, having shed 4.4% in the past five sessions alone. The S&P Communications Services sector, home to giants like Alphabet, Netflix, and Disney, has plunged 22% from its May high and is down 7.4% in just a week. Similarly, the S&P Tech sector is off 12% from its October 6 high and has fallen nearly 6% over the last seven days.
Midterm Elections and the AI Trade: Vistra Under Pressure
CNBC's senior executive producer, Max Meyers, highlighted a notable connection between Vistra's stock drop and the increasing favorability for Democrats in the upcoming midterm elections. Meyers suggests that as the probability of a Democratic party win rises, investors are growing apprehensive about certain segments of the artificial intelligence trade. This includes Vistra, a key provider of power to data centers. Kalshi's data, as of Monday afternoon, showed the chances of Democrats winning the U.S. Senate at an all-time high of 74%. Consequently, Vistra is now down 31% from its November high last year and nearly 4% in the past month. Related ETFs are also feeling the pinch: The Global X Data Center & Digital Infrastructure ETF (DTCR) is down 24% from its June high (8.6% in a month), and the iShares U.S. Digital Infrastructure and Real Estate ETF (IDGT) is off 21% from its high (9.4% in a month).
Key Earnings Reports to Watch
Tuesday brings a flurry of important earnings releases that will likely sway market sentiment:
- Before the Bell (on 'Squawk Box'):
- Pfizer: Up 22% in three months, hitting a new high on Monday.
- DuPont: Up 3% in three months, currently 10% below its February high.
- After the Bell (on 'Closing Bell: Overtime'):
- Amgen: Up 21% in three months, reaching a high last week.
- AMD: Down about 2% in three months, off 29% from last month's high.
- Block: Down 5% in three months, 11% below its August high. Notably, the stock is up 50% since late February following founder and CEO Jack Dorsey's announcement of a massive layoff initiative.
