Good morning,

Last week ended on a sour note with broad based losses on Friday. Throughout the week the main topic of conversation was the Tech Wreck as financing concerns hit the AI complex. Chip and memory stocks were down >10% while neoclouds were off >20%, closing back around the late July Situational Awareness lows. After hitting a new all-time high in the previous week, the S&P 500 fell nearly 2%, breaking below its 50d ma. For a second consecutive week the equal-weight version of the index outperformed managing to end the week up 0.5%, led by Energy, Consumer Staples and Healthcare. Despite some hot economic data Treasury yields fell driven by a flight to safety and as investors recalibrated growth assumptions should there be a slowdown in AI investment. Oil prices were on the move higher again as tensions increased in the Middle East and between Russia/Ukraine, despite Trump claiming an “energy ceasefire”. The downside momentum in equity markets picked up on Friday which was options expiration and as the VIX jumped from ~16 to >20.

Today is the 39th anniversary of Black Monday so after the ugly session on Friday it’s nice to see markets stabilize. S&P futures are trading up ~0.5% as there’s been a reprieve in the tech selling ahead of a big week of earnings which includes Meta, SpaceX, IBM and SAP. There is a bullish Semi Analysis data center report and a couple of sell side upgrades (CRWV - GS, INTC - JPM) helping to fuel the bounce (SMH +3%, DRAM +4.5%). Cleveland Cliffs is trading up >10% after earnings. Not all the news is positive though. Microsoft has pulled out of a UK data center deal with Nscale. The project had faced delays but is raising questions about the firm’s IPO. Staying on the other side of the pond civil unrest in France is adding to the fiscal concerns and pushing local yields higher. Oil prices are pulling back modestly after last week’s move higher despite tensions remaining elevated in both theaters. On Friday, President Trump waived additional Russian sanctions while there are reports that Putin is weighing a November summit with President’s Trump/Xi at APEC.