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Sunday, November 1, 2026
☀️ HAPPY SUNDAY
Big Tech spent last week explaining where hundreds of billions of dollars went. Wall Street did not love the answer.
The Nasdaq fell 2.9% Friday, its worst day since June, and closed out its worst month since March 2025.
Today: AI spending finally meets its bill, the Fed sets up a likely December hike, and an election and a jobs report land in the same week.
➤ Unlock gains: 5 stocks for Nov 3 →
(from TradeSmith)
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THE BIG STORY
Big Tech's AI Bill Comes Due
Amazon's cloud business grew 39% to $46 billion last quarter, its fastest pace in nearly five years. The stock still fell about 6% after hours.
The reason: Amazon spent $77.3 billion on capex in one quarter, versus a $58.7 billion estimate, pushing trailing free cash flow to negative $42.4 billion. CEO Andy Jassy said Amazon expects to spend "meaningfully more" in 2027.
Alphabet missed on earnings and reported negative free cash flow of more than $9 billion. Then Intel plunged 28.6% Friday after warning it would burn cash this year on PC weakness and supply bottlenecks.
Why it matters: For three years, the market rewarded AI spending. This week it started asking for receipts.
Microsoft was the tell. It grew Azure 48%, trimmed its capex forecast, and generated $19 billion in free cash flow. Cash generation is the new scoreboard, and if you own an S&P 500 index fund, you own this debate.
What we're watching: Apple reports Monday, with analysts expecting revenue up about 10% to roughly $113 billion. AMD follows Tuesday.
The Fed Held. December Probably Won't.
The Fed held rates at 3.75%–4% Wednesday in a 10–2 vote, with Governor Lisa Cook and Cleveland Fed President Beth Hammack both voting for a quarter-point hike. The Fed already raised rates in September, its first hike since 2023.
A day later, the economy made the hawks' case. GDP grew at a 3.4% annual rate, while September PCE inflation hit 3.6%, with core at 3.1%.
Why it matters: Traders now put the odds of a December hike above 80%. Higher for longer keeps CD and money-market yields attractive and keeps pressure on borrowers and rate-sensitive stocks.
What we're watching: Friday's jobs report. Payrolls rose just 29,000 in September and unemployment ticked up to 4.2%. The Fed's next meeting is Dec. 8–9.
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Midterms Meet a Market Already on Edge
Voters decide all 435 House seats, 35 Senate races and 36 governorships on Tuesday, according to Ballotpedia data compiled here. It lands in a week when 138 S&P 500 companies report.
Why it matters: Midterm years have historically been the market's weakest, averaging 7.5% versus 12.4% for all years. The usual culprit is uncertainty, not the result, and the period after Election Day has often been kinder.
What we're watching: Which party controls each chamber shapes 2027's fights over taxes, spending and the debt. Expect sector moves in energy, health care and defense once results settle.
The Ticker
The week: The S&P 500 and Nasdaq posted their third straight weekly loss. The S&P now sits about 3% below its Oct. 6 record.
Intel: Shares fell 28.6% Friday, the stock's worst day in decades.
Gold: Fell to its lowest close in a year as December hike bets lifted real rates.
Oil: Brent gained 13.6% in October, and WTI logged a fourth straight weekly gain.
Treasuries: The 10-year touched 5.05% Wednesday, then slid to 4.94% as money ran to safety.
MONEY & ECONOMY
Mortgage Rates Slip to 7.24%
The average 30-year mortgage fell to 7.24% this week, its lowest level of the month. A year ago it was 6.17%.
Investor takeaway: With a December hike likely, don't expect much more relief. Homebuilders and lenders remain hostage to the 10-year yield.
Spending is Outrunning Paychecks
Consumer spending rose 0.5% in September, while personal income grew just 0.2%. Real consumer spending still grew 3.8% for the quarter.
Investor takeaway: Households are dipping into savings to keep up with 3.6% inflation. That works until it doesn't, so watch retailers' holiday guidance closely.
CORPORATE RADAR
Microsoft — Azure revenue grew 48%, and the company cut its 2026 capex forecast to $170 billion from $175 billion. Investors cheered the rare combination of faster growth and slower spending.
Alphabet — Google Cloud revenue more than doubled, but an $8.7 billion loss on equity holdings dragged EPS to $2.12, below estimates. Shares lost roughly 12% in a day.
Meta — Raised the low end of its 2026 capex range to $135–145 billion and posted negative free cash flow of $2.12 billion. The stock held up better than peers.
Chevron — Earned $5.28 per share on an adjusted basis with record U.S. refinery throughput. Analysts had expected about $4.89.
Okta — Joins the S&P 500, replacing Kenvue, which Kimberly-Clark is acquiring. Index funds will have to buy in.
AROUND THE WORLD
Middle East: Attacks on ships in and around the Strait of Hormuz topped 30 in October, the highest monthly count of the war. Iran's foreign minister said reopening the strait on Tehran's terms could restart talks with Washington. Goldman estimates the threat alone adds about $27 a barrel to Brent.
Europe: The ECB held its deposit rate at 2.50% after hikes in June and September, with Lagarde sounding more hawkish than markets expected. Most economists see a December hike.
Japan: The Bank of Japan held at 1.25% in an 8–1 vote, with one member pushing for 1.5%. The yen sits near 158 per dollar, keeping a December move in play.
THE NUMBER
3.6%. That's the size of the Social Security raise coming in January. It's also exactly where September PCE inflation landed.
The 2027 cost-of-living adjustment adds about $75 a month to the average retirement check for nearly 72 million beneficiaries. It's the largest bump since 2023.
But a raise that matches inflation keeps you even, not ahead. And Medicare Part B premiums are projected to rise to $209.50 from $202.90, quietly taking back about $6.60 a month.
If you're within a few years of claiming, the math is simple: your portfolio, not the COLA, has to do the growing.
ON INVESTOR’S RADAR
Monday — ISM Manufacturing
Tuesday — Election Day; JOLTS job openings
Wednesday — ADP payrolls; ISM Services
Thursday — Jobless claims; Bank of England decision
Friday — October jobs report (8:30 a.m. ET)
Earnings: Apple, Palantir, Marriott, AMD, Pfizer, Amgen, Arista, Qualcomm, Uber, ConocoPhillips, Moderna, Vistra, Humana
The Main Event: Friday's jobs report. Yardeni expects roughly 55,000 new jobs, above consensus. A hot number on top of 3.6% inflation would all but lock in a December hike.
CHART OF THE DAY
The $730 Billion Question
The four biggest cloud spenders plan to pour roughly $730 billion into capex this year, most of it on AI data centers. Microsoft is the only one that trimmed its number this quarter.
Why it matters: That spending is revenue for chipmakers, power companies and builders. But for the spenders, it's now showing up as negative free cash flow, and the market is pricing that in.
THE WATCHLIST
AAPL — Reports Monday. The one megacap without a giant AI capex bill to defend; a clean quarter could make it the market's safe harbor.
AMD — Tuesday. The Street expects $1.94 EPS on $13.1 billion revenue; a read on whether AI chip demand survives tighter budgets.
CVX — Beat estimates with oil above $100. A Hormuz deal could deflate that premium fast.
IN OTHER NEWS
Fed: Chair Kevin Warsh announced changes to the FOMC's meeting structure starting in 2027.
Intel: The deadly October explosion at its Israel plant is expected to erase about $600 million in revenue over two quarters.
Amazon: AWS's order backlog grew to $578 billion from $496 billion in one quarter.
Crypto: Bitcoin fell more than 4% Friday as a record hack at Binance piled onto the tech sell-off.
ECB: Christine Lagarde could be named chair of the World Economic Forum as soon as November, a year before her ECB term ends.
THE BOTTOM LINE
Markets enter the week with strong earnings growth on one side and an AI spending bill, a hawkish Fed and a midterm election on the other. The S&P 500 is only about 3% off its record, so this is a reset, not a rout.
We'll be watching Apple's numbers, Friday's payrolls and the 10-year yield for signs that expectations are shifting.
See you before the bell Monday.
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