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Weekly Newsletter
💳 AI Credit Repriced, Demand Held
📊 Key Takeaways From This Week’s Earnings
📈 Highest Import Inflation In 4+ Years
🚀 Tesla Unveils Flying Roadster
🍎 Extraordinary Apple Duo Demand
QUOTE OF THE WEEK:
“When you think about recursive loops of intelligence, they increase at an accelerating rate, and intelligence is the log of compute. These guys are adding the most compute next year. So you're ahead, you're entering a recursive loop, and you have the most compute. Now you're comparing Chinese models to their released models. Each of these labs has models complete inside the labs that they're doing safety testing on and lots of other things. So they may be generations ahead of the benchmarks that you're looking at and comparing to.” - Altimeter Founder & CEO, Brad Gerstner
KEY US ECONOMIC EVENTS NEXT WEEK:
MARKET CLOSE:
WEEKLY MARKET WRAP:
Good Afternoon. Worst week since June for major indices due to AI credit and inflation fears. VIX exploded +21.45% to 19.99 (intraday high 22.31), its first 20-handle in six weeks. The 10Y eased 14.6bp w/w to 5.098% as Treasuries caught a flight-to-safety bid off this year’s 5.364% high. Crude ripped +7.81% w/w to $99.02, flirting with $100 again; gold flat at $4,181; EUR/USD firmed to 1.1239 on dollar softness. Both S&P and Nasdaq pulled back from fresh all-time highs set earlier in the week (7,844.52 and 27,722.75).
Import inflation is hot—but 2022 offers perspectiveU.S. core import prices rose 6.2% year over year in September, well above core CPI’s 2.6%. The pressure is real, but uneven: capital-goods import prices increased 8.4%, versus 2.7% for consumer goods excluding autos. Import-price indexes also exclude tariffs, leaving potential additional pressure on landed costs.
A similar surge unwound in 2022: core import inflation fell from 7.1% in March to 1.7% by December, then turned negative in 2023. Yet domestic inflation remained sticky, and the Fed kept tightening. Today’s reading therefore signals a meaningful risk to margins and disinflation—not proof of a permanent inflation regime. This reading was also a key driver of this week's sell-off. The critical test is whether import-cost increases persist and spread into consumer prices, or things improve as they did in 2022 and this dip also proves to be a buying opportunity.
For the week:
CNN's Fear & Greed Index now stands at 18 (Extreme Fear) out of 100, down 27 points from last week. Details here
The top five trending stocks on Reddit are Micron, SPY, QQQ, NVIDIA, and VOO. Read More
Liquidity:
Banking Reserves + ON RRP: Banking reserves remain at approximately $3 trillion. ON RRP balance remains immaterial.
Standing Repo Operations: The New York Fed’s standing repo operation (primarily reflecting SRF take-up) is $0.
Here is a summary of this week’s key economic releases:
Target Rate Probabilities for October 28th FOMC Meeting:
CURATED INSIGHTS & ANALYSIS:
AI Credit Repriced. Demand Signals Held:
The selling spread across the AI trade. The semiconductor index fell 11.4% this week, and companies that fund their capex from cash flow fell with it: Meta by 3.7% and Alphabet by 2.5% on Friday.CoreWeave fell 25.2% through 16 October. It ended June with roughly $52bn of debt and lease liabilities. Nebius reported about $8.5bn of debt at the same date, before substantial further borrowing in the third quarter, and fell by a similar amount. Those figures use different definitions, but the contrast shows how far the financing concern spread.
Borrowing costs vary sharply by instrument. CoreWeave’s March secured facility was priced at SOFR plus 2.25% for floating draws, and the company has said it cut its weighted-average cost of debt by almost 300 basis points over the preceding year. That is how Jensen Huang could say on 15 October that its cost of capital is decreasing while investors demanded roughly 15% on some unsecured bonds. Both can be true. But the bond selloff is a genuine deterioration in market financing conditions, not a technicality.
Demand signals held. TSMC guided fourth-quarter revenue to $52.3bn–$54.3bn, implying 58% growth at the midpoint, and said assessed demand still exceeds supply.
Lenders were also turning more selective. JPMorgan told analysts on 13 October it was tightening credit, citing weak covenants as a general underwriting point rather than an AI-specific one. Goldman reported AI-related high-yield spreads widening 25 basis points over 13–14 October, against two basis points for non-AI high yield.
The evidence points to a repricing of financing risk rather than a collapse in AI demand. Coming earnings will test whether strong demand still translates into attractive returns at higher funding costs. Earnings are expected to be stellar, and banks kicked them off well this week.
Key takeaways from this week's earnings:
Higher interest rates are helping bank income but hurting bond trading
The Fed raised rates in September for the first time in three years. Bank of America’s net interest income rose 8%, and it now assumes three more quarter-point hikes by June 2027. The same rate move hurt Bank of America's bond trading and cut JPMorgan’s bond trading revenue by 4%. Higher rates appear to help lending profits while making markets harder to trade.
Wall Street had a strong summer, then activity slowed
Morgan Stanley said July and August were unusually busy, then trading slowed near Labor Day as Middle East tensions and higher rates weighed on markets. Wells Fargo saw the same slowdown late in the quarter, and JPMorgan said deal activity had slowed “a bit.” Citigroup, Morgan Stanley and Wells Fargo shares fell on results day despite earnings beats. Investors appear more focused on the fourth quarter than the third.
Investors keep moving money to the largest firms
Morgan Stanley, BlackRock, Schwab and Goldman together brought in more than $700 billion of new client money in the quarter. BlackRock alone added $205 billion, and Morgan Stanley added a record $232 billion. BlackRock said higher yields are drawing investors back to income funds. Even as trading slows, the largest firms are still gaining assets.
AI chip demand is still greater than supply
TSMC expects fourth-quarter revenue to rise about 58% from a year ago and said demand remains well above what it can produce. ASML said its planned output for 2027 and 2028 will not fully meet demand, and customers are asking about orders as far out as 2030. Goldman cited estimates that U.S. data centers could need over $10 trillion of investment through 2032. The limit on AI growth may be how fast chips can be made.
Banks say AI agents are not yet a threat to their deposits
Analysts asked JPMorgan, Bank of America and Wells Fargo about AI agents that could move customers’ idle cash to higher-paying accounts. JPMorgan called the competition “nothing new.” Bank of America said it is “not worried.” Schwab, whose clients move nearly $4 trillion in cash each month, said it is blocking agents that try to log in for clients. Banks are treating AI agents as a new form of an old risk.
Drugmakers' growth is part of insurers' rising costs
UnitedHealth said medical cost trends for employer health plans are running above the 11% it expected, partly due to costly specialty drugs. Johnson & Johnson’s drug sales grew about 8%, led by its immune disease drug Tremfya, up 68%. UnitedHealth still improved its margins through better pricing. One company’s sales growth may be another’s cost problem.
FRONT PAGES:
Anthropic Reports $16.8B Q3 Revenue: Anthropic disclosed Q3 revenue of approximately $16.8 billion at a closed investor meeting in San Francisco, per FT and Bloomberg reporting. The figure represents 45% sequential growth from $11.5 billion in Q2 and marks Anthropic’s first voluntary financial disclosure. The company reportedly pitched investors a $110 billion forward run-rate ahead of a planned IPO. Kalshi prediction market odds shifted meaningfully toward Anthropic listing before OpenAI.
Bank of America Fined $1.2 Billion: The Treasury Department’s FinCEN assessed a $1.2 billion penalty against Bank of America on Tuesday for anti-money-laundering compliance failures and alleged sanctions violations. The fine is the largest in the agency’s history and resolves a multi-year investigation into gaps in BoA’s transaction monitoring systems. The settlement adds to roughly $4 billion in regulatory penalties the bank has paid over the past decade.
Big Banks Block Third-Party AI Agents: JPMorgan Chase and Citigroup moved this week to restrict third-party AI agents from directly accessing customer accounts, with FT reporting Citi’s step on Thursday. The banks cited security, fraud, and deposit-flight risk as the primary drivers. The move marks an early inflection in the AI agent rollout, as incumbents block the API-level account access general-purpose consumer agents are built to assume.
Tesla Unveils Flying Roadster: Tesla showcased its next-generation Roadster on Thursday, which Elon Musk described as a flying car using cold-gas thrusters adapted from SpaceX technology. The prototype hovered briefly during the demonstration. Reservations opened at a reported base price of $200,000. Production timing remains unspecified. The reveal comes seven years after the Roadster was first promised and follows a strong Q3 vehicle delivery print earlier this month.
Apple Calls iPhone Duo Demand “Extraordinary”: Apple described pre-order demand for the new iPhone Duo as “nothing short of extraordinary” after shipping dates slipped into January 2027 within days of launch. The $1,999 foldable sold out within minutes of pre-orders opening, with Apple reportedly raising supplier orders by 30%. Early analyst estimates suggest roughly 6 million units moved. The product is Apple’s first foldable and anchors the lineup against Samsung’s Galaxy Z Fold.
EARNINGS UPDATE:
JPMorgan Chase. Adjusted EPS $5.75 versus $5.93, excluding $658M of losses on securities sales; revenue $50.9B, slightly below estimates. Stock trading revenue rose 49% while bond trading fell 4%. Expenses rose 12%. Shares fell about 1%. A rare miss for the largest U.S. bank.
Goldman Sachs. EPS $17.01 versus $12.86; revenue $18.7B versus $16.8B, its second-best quarter ever. EPS would have been about $18 without an early charitable donation. Advisory revenue was a record, and its deal backlog remains high. Shares were flat.
Wells Fargo. EPS $1.87 versus $1.85; revenue $21.9B versus $22.3B, a miss. Loans and deposits both grew 11%. Trading slowed in the quarter's final weeks. Shares fell about 3%.
Citigroup. EPS was $2.85 versus $2.66; revenue was $23.8B, in line, and it was its best third quarter in a decade. Its services business grew 15%. It pulled some planned spending and severance costs into this quarter. Shares fell about 6%.
Bank of America. Adjusted EPS $1.08 versus $1.10, excluding a $1.2B anti-money-laundering settlement (reported $0.91); revenue $30.0B versus $30.6B. Net interest income rose 8%. Bond trading suffered from a sharp move in interest rates. Shares fell about 5%.
Morgan Stanley. EPS $3.03 versus $2.93; revenue $20.3B versus $19.9B. Wealth management had record revenue above $9B and brought in $232B of new client assets. Markets slowed after Labor Day. Shares fell about 3%.
BlackRock. Adjusted EPS $15.93 versus $14.32; revenue $7.8B versus $7.4B. Clients added $205B of new money, and its fee base grew 11% from new business alone. Shares rose about 1%, then another 4%.
Charles Schwab. Adjusted EPS $1.69 versus $1.65; revenue $7.2B, in line. Clients opened 1.2 million new accounts and added $190B of new assets. Shares fell about 3%.
UnitedHealth Group. Adjusted EPS $4.69 versus $4.14; revenue $112.7B versus $111.3B. It paid out 88.4% of premiums in medical costs, down from 89.9% a year ago. It raised its 2026 outlook to at least $20.50. Shares were flat, then rose 5%. The turnaround is showing up in the numbers.
Johnson & Johnson. Adjusted EPS $2.59 versus $2.52; revenue $25.4B, in line. Drug sales grew about 8%, but medical device sales grew only 2.5%, below its own plan. It took a $5.5B charge for a proposed talc settlement. Shares fell about 6%.
Taiwan Semiconductor. EPS $4.60 per ADR versus $4.45; revenue $46.7B, above the top of its own forecast. It expects fourth-quarter revenue of $52.3–54.3B, up about 58% from a year ago. Shares fell about 2%.
ASML. EPS was €12.95, and sales were €11.7B, both a record and above estimates. Part of the profit came from a €510M gain on its stake in Mistral AI. It said its planned output for 2027 and 2028 will not fully meet customer demand. Shares fell about 4%.
EARNINGS PREVIEW:
Date | Symbol | Name | Time |
20-Oct | NFLX | Netflix Inc | After Close |
20-Oct | GE | GE Aerospace | Before Open |
20-Oct | RTX | RTX Corp | Before Open |
21-Oct | META | Meta Platforms | After Close |
21-Oct | TSLA | Tesla Inc | After Close |
21-Oct | LRCX | Lam Research | After Close |
21-Oct | PM | Philip Morris International | Before Open |
21-Oct | SAP | SAP SE | After Close |
21-Oct | TMO | Thermo Fisher Scientific | Before Open |
21-Oct | TXN | Texas Instruments | After Close |
21-Oct | IBM | IBM Corp | After Close |
22-Oct | PG | Procter & Gamble | Before Open |
VIDEO’s OF THE WEEK:
The ice cream shop that makes money when it's cold
28 Wishes sells ice cream in Los Angeles. Below 70°F, sales fall about 20%. The weather is out of their hands. Rent isn't.
So the owners started putting about $20 a day into Kalshi weather markets, taking the cold side. The days that keep customers away now pay something back.
This is hedging. Big companies have done it for decades, buying protection against bad weather, fuel spikes and rising rates. It used to take a broker, a trading desk, and an order size no corner shop could meet.
Kalshi opens it up. Contracts on weather, fuel prices, inflation, tariffs and regulation, starting at a few dollars. Take a position on the outcome that would hurt you. If it hits, the payout softens it. If it doesn't, the contract expires and the good month was the point.
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This newsletter's content is for informational and educational purposes only and should not be considered trading or investment recommendations. All the opinions in this newsletter are personal and do not belong to any organization.
