The largest companies fell and the rest of the market did not. The Nasdaq lost 2.0% to 25,437.00, its third straight weekly loss, and the S&P 500 fell 0.6% to 7,580.07, while the Russell 2000 rose 1.3% to 2,811.84 for a second straight weekly gain and the equal-weight S&P 500 rose 0.8%. The Dow fell 0.9% to 51,770.31. Alphabet fell 12.6% on Thursday, its worst day since its 2004 listing, after revenue rose 25% but free cash flow was negative for a second straight quarter on $51.4B of quarterly capital spending. Intel fell 28.6% on Friday after guiding fourth-quarter revenue to $15B to $16B, below forecasts. The Fed held its rate at 3.75% to 4.00% in a 10 to 2 vote, with both dissenters favoring a hike. Third-quarter growth came in at a 3.4% annual rate, September PCE inflation was 3.6%, and consumer confidence rose to 91.7 against an 81.0 forecast. The ten-year yield fell to 4.94% and the two-year to 4.56%. December Brent expired at $117.64, up 0.8% for the week and 13.6% for October. Tuesday brings the midterm elections and Friday the October jobs report.
The split between the largest companies and everyone else widened. The Russell 2000 rose 1.3% to 2,811.84, its second straight weekly gain, and now stands about 8.4% below the 3,068.42 record from #031. The equal-weight S&P 500 rose 0.8% while the cap-weighted index fell 0.6%, and nine of eleven sectors finished higher. The losses were concentrated: communication services fell 5.3% and technology 2.0%, while health care rose 3.1% and materials 2.8%. Rates helped. The two-year yield fell more than 10 basis points to 4.56%, and the ten-year fell to 4.94% after touching 5.05% on Wednesday. #041 called one week of small-cap strength a first sign, not a trend. A second week is still not a trend, and Friday showed the limits: the Russell fell 1.7% when the whole market sold off.
The largest companies are now being judged on cash, not revenue. Alphabet's revenue rose 25% to $127.58B and its cloud business more than doubled, but capital spending reached $51.36B in the quarter and free cash flow was negative $9.07B, its second negative quarter in a row. Its chief financial officer said spending will rise significantly again in 2027. The shares fell 12.6% on Thursday, the steepest one-day drop since the company listed in 2004, removing about $500B of market value. Amazon's cloud revenue rose 39%, but its trailing free cash flow was negative $42.4B, and the shares fell 1.4% on Friday. Intel fell 28.6% the same day after guiding fourth-quarter revenue to $15B to $16B against about $17.1B expected, and its chief financial officer said the slowdown in personal computers would last at least through the first half of next year. The semiconductor index fell 7.2% on Friday. The preference for current cash flow that #039 through #041 described now applies to the largest balance sheets in the market.
The Fed held, and the data gave it little reason to stop tightening. The committee kept the funds rate at 3.75% to 4.00% in a 10 to 2 vote. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented in favor of a quarter-point hike, and the statement said economic activity is expanding at a strong pace and inflation remains elevated. The economy grew at a 3.4% annual rate in the third quarter, up from 2.2% and ahead of forecasts. September PCE prices rose 3.6% from a year earlier, 3.1% excluding food and energy, and the employment cost index rose 0.8% in the quarter. Jobless claims were 194,000. Consumer confidence rose to 91.7 against an 81.0 forecast, and one-year inflation expectations in that survey fell to 4.7% from 5.1%. Futures still price a December hike as likely. Oil kept the pressure on. December Brent expired at $117.64 on Friday, up 0.8% for the week and 13.6% for October, after a mine attack on a tanker in the Strait of Hormuz and Houthi claims of strikes on Saudi facilities; January Brent settled at $113.43 and WTI at $104.12. Gold fell 3.1% to $3,885.70.
Coverage ledger: the desk initiates coverage this week on OIS, Oil States International, a Houston maker of offshore and subsea equipment, naval military products, and perforating systems. Its offshore backlog reached $482M at September 30, the highest since December 2014, and 46% of it is military work that converts over several years. Third-quarter revenue rose 3% to $169.8M and net income was $3.1M, and the company built $38M of inventory this year to support the backlog, which left nine-month operating cash flow negative. It reported on Friday, the day December Brent expired at $117.64; its customers are deciding on multiyear offshore projects, not reacting to one week's price. AEYE reported on Monday: revenue rose 7% to a record $11.0M, net income was $990,000 against a loss a year earlier, annual recurring revenue reached $43.3M, up 12%, and it noted a $15M repurchase program the board authorized on October 20. CXDO reports on Tuesday and LWAY on November 12. Full dossiers in the research library.
| Ticker | Company | Move | Why it moved |
|---|---|---|---|
| RUT | Russell 2000 | +1.3% | Closed at 2,811.84 for a second straight weekly gain, about 8.4% below its August record; the equal-weight S&P 500 rose 0.8% while the index fell 0.6%, and nine of eleven sectors rose |
| GOOGL | Alphabet | -12.6% | Its worst day since its 2004 listing, on Thursday, after free cash flow was negative $9.07B on $51.36B of quarterly capital spending, although revenue rose 25% to $127.58B |
| INTC | Intel | -28.6% | Fell on Friday after guiding fourth-quarter revenue to $15B to $16B against about $17.1B expected, citing a personal computer slowdown; the semiconductor index fell 7.2% that day |
| 10Y | Ten-Year Treasury | 4.94% | Fell for the week after touching 5.05% on Wednesday, and the two-year fell more than 10 basis points to 4.56%; the Fed held at 3.75% to 4.00% in a 10 to 2 vote, with both dissenters favoring a hike |
| BRENT | Brent Crude | $117.64 | The December contract expired up 0.8% for the week and 13.6% for October after a mine attack on a tanker in the Strait of Hormuz; January Brent settled at $113.43 and WTI at $104.12 |