The Morning Brief
Futures are leaning lower as traders digest a hot inflation print and a fresh leg down in AI infrastructure names, with the overnight tape adding geopolitical risk to the mix.
Asia and the Middle East set a cautious tone.
Memory and AI-adjacent names took the brunt of the overnight selling, with South Korea's SK Hynix posting its worst seven-day stretch since 2008 as traders debate whether the AI capex story is cracking or whether this is a buying opportunity. Japan's finance minister Katayama said the G20 reaffirmed its commitment on forex after the gathering, a reminder that currency stability remains a live topic. On the geopolitical side, the Saudi-led coalition reported 20 Houthi attacks on Riyadh airport in October with 17 fatalities, and Iran's navy said an oil tanker is on fire in the eastern Strait of Hormuz. Oil fund United States Oil Fund (USO) is barely moving on the day but sits up over 120% year to date, underscoring how jumpy this complex has been.
The US inflation data just made the Fed's job harder.
September PPI came in at 6.3% year over year against a 5.3% estimate, with core PPI at 5.0% versus 4.4% expected, both hotter than hoped. Retail sales also beat, up 0.8% month over month versus 0.3% estimated, with the core reading even stronger. Jobless claims held low at 199,000. Empire State manufacturing blew past estimates at 25.5, though Philly Fed cooled more than expected to 20.9. Billionaire John Arnold warned that further Fed hikes "may be counterproductive" and will do little to tame inflation, while the Treasury dismissed an IMF warning on US debt sustainability as "messy forecasting." Equity futures and the SPDR S&P 500 ETF Trust (SPY), down 1.1%, along with the Invesco QQQ Trust (QQQ) and iShares Russell 2000 ETF (IWM), are all pointing to a risk-off open.
AI infrastructure names are bearing the weight of the selloff.
CoreWeave (CRWV) is down over 15% as Wall Street questions its debt-fueled buildout, compounded by a Gartner warning that 80% of neoclouds could cease independent operations by 2030. IREN is sliding in sympathy. Micron Technology (MU) is off more than 4% even after Elon Musk praised its pricing discipline, while Sandisk is also under pressure in the memory space. Broadcom's CEO flagged financing costs as a potential brake on AI expansion, and Nvidia's Jensen Huang pushed back on Sam Altman's more relaxed stance on AI cybersecurity risk.
Single-stock movers:
Charles Schwab and First Horizon both slid after weaker than expected Q3 sales. Walmart (WMT) is up more than 3% as the retail sales beat validates the consumer story. Penske Automotive is higher on a $16.3 billion take-private deal with Penske Corp and Mitsui. Labcorp is buying OPKO Health's BioReference unit for $722 million, and Fastenal (FAST) gained after analysts raised forecasts on its results.
On the radar today:
Taiwan Semiconductor, PNC, US Bancorp, BNY and J.B. Hunt all report, with tomorrow's October options expiration adding positioning risk into the weekend.
Bottom line: hot inflation data and a cracking AI-infrastructure trade are pulling in the same direction this morning, and that leaves the tape with little room for comfort.