Chip Stocks Snap Their Losing Streak, Amazon Jumps, Tesla and SpaceX, Steel Dynamics Slides

Good evening. This is Trade and Ticker. Monday, October nineteenth, twenty twenty-six. Your evening company deep dive after the close.

Four stories tonight, and most of them come back to one question. After a brutal week for the A-I trade, are buyers ready to come back? First, the chip stocks. The Philadelphia semiconductor index finally snapped an eight-day losing streak, its longest since twenty oh-eight, with Intel, Micron, Western Digital, and Sandisk leading the bounce. Second, Amazon, which jumped about five percent after Morgan Stanley named it a top pick. Third, Tesla and SpaceX, two Musk companies that report earnings on back-to-back days this week, while talk of a merger gets louder. And fourth, a steel story with two very different endings. Cleveland-Cliffs soared about sixteen percent on its earnings this morning, and Steel Dynamics is sliding after the bell tonight. Let's get into it.

First, a quick look at the board. This was a tech day, and not much else. The Nasdaq rose about one-point-one percent. The S-and-P five hundred rose about four-tenths of a percent. And the Dow slipped less than a tenth of a percent, or thirty-six points, after swinging between gains and losses all day. The Russell two thousand, the small-company index, rose about a quarter of a percent. The Nasdaq led, and the Dow lagged.

Under the surface, the day was narrower than the headline. Most U.S. stocks outside of A-I and tech actually fell. Only three of the eleven sectors in the S-and-P finished higher. Consumer discretionary was the best, up almost one and eight-tenths percent, helped by Amazon and Tesla. Technology rose about one and a third percent. Materials barely finished in positive territory. Utilities were the worst group, down about two percent, and real estate fell more than one percent. Banks, healthcare, and industrials were all lower. The VIX, Wall Street's fear gauge, fell almost eight percent, to about eighteen and a half. So traders were calmer than on Friday, when they were paying up for protection heading into the weekend.

The bounce also faded as the day went on. Around lunchtime, the Nasdaq was up about one and a quarter percent, and the chip index was up about two and a half. By the close, both had given some of that back. Keep that in mind as we go through tonight's stories. Buyers came back today, but they didn't go all in.

Now rates and oil. The ten-year Treasury yield rose to about five-point-one-four percent, from about five-point-oh-nine on Friday. That's a reversal after last week's big drop in yields, and it leaves the ten-year not far from its highest levels since the early two-thousands. Yields matter a lot for the A-I story right now, because so much of the spending on chips and data centers is being paid for with borrowed money. A strategist at JPMorgan made that point this morning. If bond yields stabilize, he wrote, that helps stocks, in part by reducing the pressure on A-I funding. Today, they didn't stabilize. They went up. Oil was choppy. Brent crude, the global benchmark, swung between about one hundred seven and one hundred ten dollars a barrel, and settled near one hundred nine dollars and fifty-five cents, down about three-tenths of a percent.

Quickly overseas. Europe had a rough day. Major indexes there fell more than one percent after violent protests in France raised worries that the government will have to spend more money it doesn't have, and French bond yields jumped. In Asia, South Korea's market, home to Samsung and SK Hynix, bounced almost two percent after a terrible week.

Now the first deep dive: the chip stocks, and the end of a losing streak.

To understand today, you have to remember how bad the last two weeks were. The Philadelphia semiconductor index tracks thirty of the biggest chip companies. It fell eight days in a row through Friday, and over that stretch it lost about fifteen and three-quarters percent. Last week alone, it fell more than eleven percent. That was its longest losing streak since October twenty oh-eight, in the middle of the financial crisis.

So what drove it? A few worries piled up at once. Early last week, a Chinese memory chipmaker showed off new technology, and investors started to worry that a wave of Chinese memory chips could eventually push prices down. Then a hot inflation report raised bets that the Federal Reserve might have to raise interest rates. That fed the bigger fear. The companies building A-I data centers, many of them carrying heavy debt, could face higher borrowing costs and slow down their spending. And if the buyers slow down, the chipmakers feel it first.

Today, the index rose about one and six-tenths percent. Twenty-six of its thirty stocks finished higher. And the biggest gains came from the names that had been hit the hardest.

Memory and storage led the way. Western Digital rose about six percent. Sandisk rose about five and a half percent. Seagate rose about three and a half, and Micron rose about three percent. Those memory names were at the center of last week's worries about Chinese competition, so they had the most room to bounce. And it helps to remember why investors care so much about them. A-I systems need enormous amounts of memory and storage, both to train models and to run them. That demand has been a huge driver of profits for memory makers, and their stocks had run up a lot before this pullback. So when investors start to worry that the boom could turn into a glut, these are the stocks that fall the fastest. And when the fear eases, even for a day, they bounce the hardest. Marvell rose about four percent. Broadcom, A-M-D, and Taiwan Semiconductor each gained a little less than two percent. And Nvidia, the biggest company on Wall Street by market value, rose about one and four-tenths percent. Because of its size, Nvidia was one of the strongest forces lifting the S-and-P today.

Intel had its own reason to rally. JPMorgan upgraded the stock this morning, to neutral from underweight. That ends a bearish call JPMorgan had held since November twenty twenty-two. But listen to the reasoning, because it isn't exactly a cheer. Analyst Harlan Sur said the risk and reward had become much more balanced after Intel fell about thirty-six percent from its June peak, and he kept his price target at eighty-five dollars. Intel closed today at about ninety-two dollars, which is above that target. So this was less a call to go buy Intel, and more a decision to stop betting against it. JPMorgan did say Intel's execution has improved under C-E-O Lip-Bu Tan, both in data center chips and in manufacturing. And it said growing demand from A-I agents, plus tight supplies of advanced chips, could support better earnings estimates through twenty twenty-seven. Intel was up more than four percent before the bell and finished up about two and four-tenths percent. That comes after a drop of about fourteen percent last week.

So how should you read the bounce? A trader at Rosenblatt Securities, Michael James, put it this way to Reuters. "Rubber bands can only stretch so far in one direction before they snap and start reversing." He said nothing really changed over the weekend, other than nothing bad happened, and sentiment had gotten so negative that a bounce was due. But he also warned that the market is "far from out of the woods," with a lot of tech earnings still to come.

That fits what we saw through the day. The chip index was up about two and a half percent at midday and finished up about one and six-tenths. A solid gain, but not a full recovery, and not much of a dent in a fifteen percent drop.

CoreWeave is the best example of how nervous investors still are. CoreWeave rents out A-I computing power, and it borrowed heavily to buy the Nvidia chips it rents out. Last week it lost about a quarter of its value as investors worried about its debt. This morning, Goldman Sachs upgraded it to buy, from neutral. Goldman said tight supply of computing power should keep the economics of CoreWeave's data centers strong over the next two years. But Goldman also cut its price target to one hundred six dollars, from one hundred thirty-nine. That tells you it still wants a discount for the risk. The stock jumped more than seven percent in the morning, then flipped to a loss of about three and a half percent, and finished down about four-tenths of a percent. Nebius, another A-I cloud company, held on to a gain of almost three percent.

Here's a simple way to think about it. The big chipmakers sell to customers like Microsoft, Amazon, Meta, and Alphabet, companies with very deep pockets. The newer A-I cloud companies, like CoreWeave, carry more debt and have less room for error. Today, investors were willing to buy the first group. They're still making up their minds about the second.

What comes next for chips? Lam Research, which makes the equipment used to manufacture chips, reports Wednesday after the close. Texas Instruments reports the same night. If those reports show that demand is holding up, this bounce has a better chance of lasting. But if bond yields keep climbing, good earnings may not be enough on their own.

Second deep dive: Amazon.

Amazon rose about five percent today, to close near two hundred sixty-two dollars and forty-five cents. That's a big move for one of the largest companies in the world. The spark was a note from Morgan Stanley.

Analyst Brian Nowak named Amazon one of the firm's top picks. He kept his overweight rating and raised his price target to three hundred fifty dollars, from three hundred thirty-five. From Friday's close of two hundred fifty dollars, that target implied about forty percent upside. He laid out five catalysts he thinks could push the stock higher. Let's walk through the ones that matter most.

The biggest is Amazon Web Services, the cloud business, often called A-W-S. This is where Amazon makes most of its profit, by renting computing power and storage to other companies. Nowak wrote, "We continue to think A-W-S's growth and profit runway is under-appreciated." Morgan Stanley now expects A-W-S revenue to grow forty-seven percent in twenty twenty-seven, and forty-two percent in twenty twenty-eight. Both forecasts are higher than before. Part of the reason is Nvidia. Morgan Stanley pointed to higher Nvidia chip shipments headed to Amazon's cloud. More chips running in Amazon's data centers means more computing power to rent out, and more revenue.

Second is Bedrock. That's Amazon's service that lets businesses use A-I models through its cloud. Morgan Stanley thinks investors will get a clearer view of how well Bedrock is doing as A-I moves into what's called the inference phase. Training is when a model learns. Inference is when people and companies actually use it, every day, at scale. And that's when the cloud bill really starts to add up.

Third is A-I shopping, and this one is interesting, because it has also been a worry. Meta just launched a personal A-I agent called Muse, and some investors have wondered whether A-I assistants could someday do your shopping for you and cut Amazon out of the loop. Morgan Stanley argues the opposite. Nowak wrote that Amazon is "a key agentic enabler and winner," and that this "remains unchanged" even with Meta's Muse. His point is that Amazon has the warehouses, the delivery network, and a loyal base of Prime customers. Whatever A-I agent you end up using, somebody still has to get the package to your door.

Fourth is robots. Amazon is putting more robotics into its fulfillment centers, and Morgan Stanley sees that as a real way to cut costs, with the payoff becoming more visible in twenty twenty-seven. Nowak said the ramp of those robot-run warehouses could show how Amazon is, in his words, a "physical A-I winner."

So why did this land so well today? Timing. Amazon got caught up in last week's A-I selloff. Investors were worried about how much it's spending on data centers, and whether Meta's new agent threatened its shopping business. Then a major bank stepped up with a detailed bullish case, on a day when buyers were already looking for beaten-down A-I names. And here's what stood out. Unlike the chip index, Amazon held on to nearly all of its gain into the close. It finished very close to its high of the day.

Two cautions. First, this isn't a lonely contrarian call. The vast majority of analysts who cover Amazon already rate it a buy, so a lot of optimism is already out there. Second, the spending is enormous, and it's still going up. Amazon is pouring enormous sums into data centers and chips. The bet is that the cloud revenue arrives fast enough to justify it. When Amazon reports its own quarterly results, the cloud growth number will be the first thing investors look for.

Third deep dive: Tesla and SpaceX, and a big week for Elon Musk.

Tesla rose about three and three-quarters percent today, to about three hundred sixty-eight dollars. SpaceX, which now trades publicly, rose about one and a third percent, to about one hundred forty-eight dollars. And this week, the two stories are tangled together in a way we don't usually see.

Start with the calendar. SpaceX reports its quarterly results tomorrow, after the close. Tesla reports on Wednesday after the close, with a call with management at five-thirty Eastern. So investors get a side-by-side look at Musk's two most valuable companies on back-to-back days.

Now the merger talk. Last Thursday, Tesla unveiled its new Roadster at a SpaceX test site in Texas. It's a sports car planned for production in twenty twenty-eight, and it uses rocket-style thrusters built with SpaceX technology. In the demo, it actually jumped off the ground. A lot of investors saw that as a hint. If Tesla and SpaceX are already sharing technology this closely, maybe one day they become one company. Barclays suggested last week that a deal could be announced before Tesla's annual meeting, with SpaceX the more likely buyer. And Gary Black, a well-known Tesla investor, has publicly laid out a scenario where SpaceX announces an all-stock deal within weeks. To be clear, neither company, and not Musk himself, has committed to a deal. This is speculation. But it is moving the stocks.

Today added a little more fuel. Tesla said its annual shareholder meeting will be held on December third. Bill Birmingham, head of research at REX Financial, told Reuters the Roadster reveal was, at the very least, "a subtle plant in investors' minds" for a merger, making the case that the two companies could share engineering. He also said the timing, right ahead of the shareholder meeting, was no coincidence.

There's a reason the two companies fit together in people's minds. SpaceX took over Musk's artificial intelligence startup in February, a few months before SpaceX went public in June. And now both companies are pouring money into the same place, which is A-I. SpaceX through its A-I computing business. Tesla through self-driving cars, its robotaxi service, and its Optimus humanoid robot.

So what matters in the actual numbers? Start with SpaceX. This is only its second report as a public company. Analysts expect revenue of nearly thirteen billion dollars. SpaceX lost money in the second quarter. This time, analysts expect a small profit, around fourteen cents a share. That would be its first profitable quarter as a public company. The two things to watch are Starlink, the satellite internet business, which has been growing fast, and whether all that A-I spending is starting to turn into real revenue. SpaceX also agreed earlier this month to buy wireless airwaves from Grain Management for about eight billion dollars, to help its Starlink mobile service. That deal still needs approval from the Federal Communications Commission. The stock went public at one hundred thirty-five dollars a share. It's above that today, but well below the peak it hit after its debut. Separately, Musk pledged today to give one share of SpaceX to every kid in America next year.

Now Tesla. The car business still brings in most of Tesla's revenue, and that's where the pressure is. Tesla delivered about four hundred eighty-six thousand five hundred vehicles in the third quarter, which beat estimates. Analysts expect revenue close to twenty-eight billion dollars. But profit per share is expected to come in below where it was a year ago. Shawn Campbell, an adviser at Camelthorn Investments who owns shares in both companies, told Reuters the key numbers are Starlink revenue growth for SpaceX, and improvement in car margins for Tesla. Margins are simply how much Tesla keeps from each car after its costs. Investors are also watching cash flow closely, because Tesla is spending heavily on A-I, new factories, and robotaxis all at once.

Here's the tension with Tesla. The stock price is mostly about the future, things like robotaxis, robots, and A-I. The quarterly report is mostly about the present, which is still selling cars. If the car numbers hold up and Musk gives investors more on the future, the stock could keep running. If margins disappoint, the merger talk alone may not be enough to hold it up.

Fourth deep dive: steel, and a tale of two steelmakers.

Cleveland-Cliffs reported before the bell this morning, and the stock jumped about sixteen percent, to about fourteen dollars and ten cents. It's a smaller company than most of the names we cover, but the story is a strong one. Adjusted profit came in at twenty-eight cents a share, above what analysts expected. Adjusted earnings before interest, taxes, depreciation, and amortization, a common way to measure the cash a business generates, came in at six hundred twelve million dollars. That beat the five hundred seventy-five million the company itself had forecast three months ago. C-E-O Lourenco Goncalves called it the strongest quarter in three years. He said selling prices, sales volumes, and costs per ton all moved in the right direction.

But the real reason the stock soared was the outlook. Cliffs expects that same profit measure to rise to about seven hundred fifteen million dollars in the fourth quarter. And for twenty twenty-seven, based on new contracts already signed with customers, it expects more than four billion dollars. Goncalves said the outlook for next year "has improved materially" since the last earnings call. For a company that lost money in the second quarter, that's a big turn.

Goncalves also pointed to trade. Steel imports into the U.S. remain well below historical levels, lead times are long, and customers increasingly want a reliable domestic supplier. Cliffs expects a major debt reduction in the fourth quarter, which matters for a company that carries a lot of debt. And there was one piece of bad news. Cliffs is indefinitely idling its galvanizing lines at Stelco, its Canadian business, because it says Canada has far too much galvanized steel on the market.

Other steelmakers rose with Cliffs during the day. Nucor rose about one and seven-tenths percent, and Steel Dynamics rose almost two percent ahead of its own report.

Then Steel Dynamics reported after the close, and the mood changed. On the surface, the numbers look great. Record steel shipments of three-point-eight million tons. Net sales of six-point-five billion dollars. Net income of seven hundred fifty-six million dollars, or five dollars and twenty-six cents a share. That's up from three dollars and sixty-nine cents in the second quarter, and two dollars and seventy-four cents a year ago. The average price it got for its steel rose to one thousand four hundred dollars a ton.

But profit came in below what analysts expected. The stock fell more than six percent in after-hours trading. Part of the problem looks like its newer aluminum business. Steel Dynamics is ramping up a big aluminum rolling mill, and it said volumes there were lower than expected for a number of weeks, because quality suffered when the mill ran at higher speeds. It traced the problem to the coolant used in the rolling process, changed it, and said the mill has performed very well in October. Expectations were also tricky going in. Back in September, Steel Dynamics had already given third-quarter guidance below what analysts were looking for, and the stock fell on that news. So investors wanted reassurance tonight, and they didn't quite get it on profit.

The bigger picture from Steel Dynamics was actually upbeat. C-E-O Mark Millett said the domestic steel market remained strong, with steady demand, low customer inventories, and historically low import levels. Its steel fabrication business, which makes things like steel joists and decking for buildings, has an order backlog fifty percent higher than a year ago, stretching into the second quarter of twenty twenty-seven. The company said that demand is coming from commercial construction, manufacturing, warehouses, data centers, and healthcare. That's the A-I build-out showing up in a very physical way. Before anyone can fill a data center with chips, somebody has to build the building.

So, two steelmakers, the same strong market, and opposite reactions. Cliffs beat lower expectations and raised its outlook. Steel Dynamics delivered a record quarter but missed higher expectations. Steel Dynamics holds its call with analysts tomorrow at eleven o'clock Eastern, and that's where we should hear more about aluminum and pricing into next year.

A few other reports came out after the bell. Western Alliance posted results that beat estimates, and Zions reported too. Both bank stocks were little changed in late trading. Insurer W-R Berkley fell more than two percent after the bell.

Here's what to watch into tomorrow. The biggest test is SpaceX, after the close. Netflix also reports tomorrow after the close, and it heads in with the stock down about one percent today. United Airlines and Capital One report tomorrow after the close as well. United will give us a read on how airlines are handling oil above one hundred dollars a barrel, and Capital One will tell us how the consumer is holding up with borrowing costs this high. Then Wednesday brings Tesla, Meta, I-B-M, Texas Instruments, and Lam Research. Meta is the key one for the A-I trade. Investors want proof that its huge data center spending is turning into revenue and profit, not just a bigger spending plan. And keep an eye on the ten-year Treasury yield. It moved back up today, and if it keeps climbing, it could make it hard for this bounce in tech to last. Looking a little further out, the Federal Reserve meets next week, on October twenty-seventh and twenty-eighth. After last week's hot inflation reports, every move in the bond market between now and then will get extra attention.

So here's where we are tonight. The chip stocks finally broke their losing streak, and Amazon had a standout day on a bullish call from Morgan Stanley. But the bounce faded into the close, most stocks outside of tech fell, and yields went back up. Tesla and SpaceX head into a huge week with merger talk swirling, and steel showed us that even a record quarter can disappoint when expectations run high.

We'll be back in the morning with the futures and everything you need before the opening bell. Thanks for listening. I'm Trade and Ticker.