Good morning,
 
Yesterday the S&P 500 rose 0.6% while the equal-weight gained 0.4% and Russell 2000 0.3%. The AI complex was strong across sectors: Tech and Industrial led the sectors. SPCX and SMCI provided an early push with extremely bullish AI commentary and a pre-announcement, respectively. Comm Services was a laggard with GOOG lower and telecom hit on SPCX competitive concerns despite solid numbers from AT&T. Equities were at their highs and Treasury yields were around flat until news that the State Dept. was going to order personnel to leave US embassies across the Gulf. That came after reports suggested there was progress toward a resolution in That Other War (Russia-Ukraine).
 
S&P futures have bled lower since yesterday, with global markets following, and are currently down ~1%. Tech is under pressure again as markets react to a deluge of earnings, triggering a flight to treasuries, while oil is up on resurgent geopolitical risk. There were signs of progress on the Russia-Ukraine front, but attacks between the two continued and the US-Iran situation appears to be deteriorating. The State Department recalled personnel from Saudia Arabia there was an attack on the country’s refineries. President Trump said the US isn’t negotiating with Iran and that “something” will happen soon. The risk-off sentiment is apparent with Staples, Healthcare and Utilities leading in the pre-market.
 

 

• META (-3%) shares initially jumped on the earnings print, gaining as much as 7% but faded throughout the after-hours. The company didn’t provide 2027 outlooks for revenue or capex, but qualitatively said AI investments would be aggressive, and if this year’s capex is any indication, it’s gonna be a big number. The bottom-end of FY 2026 capex guidance raised from $130B, to $135B. FCF this quarter was better than expected (-$2B versus -$8B) Much of the conference call focused on Muse and the associated roadmap. Meta expects to 10x the cost efficiency of Muse next year. Ad revenue beat, with the company noting AI driving growth- a leading example of a company showing tangible impact from AI adoption. The company also announced it will be creating a new class of non-voting common stock which will be allocated to shareholders, effectively creating a 2:1 stock split. There was a lot of talk leading into the call of META announcing an equity raise soon. That didn’t happen, but these new shares would act as a new funding method for further investments. Speaking of, the 10-Q disclosed $825B in future spending agreements, mostly related to AI.  
• TSLA (-4%). The company had a big beat on the FCF line ($1.5B vs -$4.6B estimate) due to lower than expected capex, and the company also cut full year capex guide from $25B to $20B. That is driving concern around demand and new product (Optimus, Cybertaxi) development, while a merger with SPCX is under consideration.
• LRCX (-10%) as the quarterly guide was only inline, though management noted demand remains unprecedented while supply is constrained across the ecosystem.
• NBIS (-4%) announced a $3.5B credit facility from Citi.
• SAP (+3%) is trading higher as cloud backlog grew 26% and cloud revenue guidance was moved to the top-end of the prior range.
• IBM (-7%) raised FCF guidance but maintained the revenue guide. The company will celebrate my birthday by discussing its Quantum computer business on December 10.  
• KMI (+1%) committed to build a $4.2B natural gas pipeline across Texas to supply a data center
• PG (+3) with a beat and raise, and revenue growth driven by volume and mix, with price only a minor positive.

Treasuries are bid this morning as investors look for safety, taking yields sharply lower while the Dollar is holding steady despite those moves.  
 

• US 2yr -9bps to 4.72%, 5yr -10bps to 4.86%, 10yr -9bps to 5.03%, 30yr -7bps to 5.35%
• USD index: +$0.01 to $101.61

Oil prices are up >2% retesting the recent highs as more tankers have been attacked in the Strait and Russia/Ukraine continue to exchange fire. The US State Department has ordered non-emergency personnel to leave Saudi Arabia and other areas in the Middle East which is adding to speculation that the US and Israel will unleash another round of airstrikes soon. Nat gas is around unchanged in the US while prices in Europe are up ~3% pushing to fresh highs. This backdrop is adding to a risk off environment and weighing on the metals complex which is down between 1% - 3.5%, testing recent lows.  Ag is hovering around unchanged trying to stabilize after recent weakness.  Crypto which has been bouncing over the last couple of days, reversed sharply during Asian trading hours overnight. Bitcoin and Ethereum are down >3%.
 

 
Global equities are under pressure with Asia hit the hardest. The Nikkei fell >2.5%. Metals/Mining and tech were among the hardest hit sectors. Europe was giving back most of yesterday’s gains but has rallied off the lows. Tech, financials and cyclical are among the worst sectors this morning while defensives lead (Food & Beverage, Healthcare) along with Telecom. The UK is outperforming as its big biopharma, energy and consumer staples stocks are higher.
 

 
Earnings:
After-Market: BANR, BBT, CACI, CCI, CSX, EGP, FAF, FULT, GGG, GL, GTY, HXL, IBM, KALU, KNX, LBRT, LUV, LVS, LRCX, MEDP, META, MOH, OII, PKG, PNFP, ROL, RS, SAP, SLG, SON, TCBI, TSLA, TXN, URI, WDFC, WH
Pre-Market: AAL, ALLE, BCS, BFH, BMI, BX, CBRE, CMCSA, CRS, DGX, DOV, DOW, FBP, FCFS, HBAN, HON, LAZ, LMT, LNN, MSM, NDAQ, NOK, NSC, ORI, PCG, PHM, POOL, R, ROP, SNA, SPOT, THRM, TSCO, TTMI, UNP, VC, VLO, VLY
After-Market: ABCB, APPF, ASB, BE, BYD, COLB, DECK, KN, KNSL, KRC, MXL, NEM, REXR, RNG, SAM, SLM, VRSN, WDC
 
Economic Data:
 
US:

• Weekly claims: 194K vs 200k cons, prior 199k
  • Continuing Claims: 1728K vs 1720K cons, prior 1710K
• 10:00am CB leading index
• 10:30am Nat gas inventories
• 11:00am KC Fed Manuf index
• 1:00pm 5y TIPS auction
• 4:30pm Fed Balance Sheet

 
Global:

• South Korea rate decision: Unchanged at 3% as expected
• France Business Confidence: 105 vs 101 cons, prior 101
• UK Industrial Trend Orders: -32 vs -20 cons, prior -9
• Canada PPI m.m: 2.0% vs 0.9% cons, prior 1.3%