After Anthropic filed for an initial public offering (IPO), the artificial intelligence investment boom briefly reignited, but this optimism faded somewhat on Tuesday (October 27). European stocks declined, with bank shares serving as the main drag, while US stock index futures edged higher as traders refocused on a dense wave of corporate earnings, the upcoming Federal Reserve monetary policy meeting, and persistently tense Middle East situation. As of press time, Dow futures rose 0.28%, S&P 500 index futures gained 0.37%, and Nasdaq futures climbed 0.55%.
HSBC Share Plunge Drags Down European Stocks In European markets, as some major companies reported mixed earnings, the pan-European Stoxx 600 index fell 0.3%, with the banking sector index dropping 1.3%. London's FTSE 100 index declined 1%, mainly dragged down by HSBC's share price slump. Shares of HSBC Holdings (LSE: HSBA), Europe's largest bank, plunged 7% after slower growth in its wealth management business caused third-quarter revenue to miss market expectations. However, the bank's pre-tax profit met analyst forecasts. Reckitt Benckiser Group (LSE: RKT) also saw its shares fall 6% after lowering its full-year sales forecast. In contrast, Novartis AG (SWX: NOVN) shares rose after the company raised its growth outlook for its new drug business. Automaker Porsche AG (ETR: P911) also gained after its profit exceeded market expectations. Meanwhile, Dutch chip equipment manufacturer BE Semiconductor Industries NV (AMS: BESI) saw its shares surge as much as 10% after Applied Materials Inc (NASDAQ: AMAT) increased its stake in the company to approximately 20%. Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said: "In the previous quarter, bank stocks were market winners. Due to increased market volatility and growing AI financing demand, banks reported record results." She added: "But now bank stocks are coming under pressure because we are seeing rising interest rates, and short-term yields rising more than long-term yields, which is actually eroding banks' interest income." However, she still believes bank stocks have the potential to outperform other sectors, especially those more directly exposed to rising living costs.
Focus on Anthropic's IPO Following a strong rally on Monday, technology company financing activity became a major factor influencing market sentiment. Meta Platforms Inc (NASDAQ: META) is seeking to raise up to $97.5 billion through the sale of common and preferred shares. Broadcom Inc (NASDAQ: AVGO) arranged a $63 billion financing deal to support chip procurement, while SpaceX signed an equipment financing lease agreement worth approximately $40 billion. Previously, chip stocks suffered a massive sell-off amid concerns over excessive AI company valuations and overly large capital expenditures. Against this backdrop, Anthropic's IPO will serve as an important test of investor interest in AI companies. The market is now turning its attention to earnings reports from tech giants including Alphabet Inc (NASDAQ: GOOGL), Microsoft Corp (NASDAQ: MSFT) and Amazon.com Inc (NASDAQ: AMZN) later this week, as well as the Fed's interest rate decision on Wednesday. Anthropic, which owns the Claude artificial intelligence model, filed for a US initial public offering (IPO) on Monday. In its listing documents, the company disclosed substantial losses but also demonstrated extremely strong revenue growth. The market expects Anthropic to complete its listing before the end of November. Mohit Kumar, chief economist and strategist at Jefferies, wrote in a report: "Today's market focus will be on the AI trade and whether yesterday's upward momentum can continue. We expect the capital expenditure cycle to remain strong and corporate earnings to remain solid. However, as with any investment cycle, there will ultimately be winners and losers in the AI trade." Currently, quarterly earnings have become the core focus of global markets. Investors are assessing the impact of the Iran conflict on corporate operating performance, including pressures from rising costs and elevated interest rates. This week, more than one-third of S&P 500 constituents are expected to report earnings. AI hyperscalers such as Microsoft, Amazon and Alphabet will be closely watched, with investors hoping to confirm whether the billions of dollars these companies have invested are generating expected returns.
Fed Decision Approaching Later this week, the Federal Reserve, European Central Bank and Bank of Japan will successively announce their monetary policy decisions. Economists widely expect all three central banks to keep interest rates unchanged, so market focus will shift to policymakers' remarks to gauge future rate trends. The market currently considers the probability of a 25 basis point rate hike by the Fed this week to be low, but the probability of a December hike remains high. Inflation concerns remain at the core of policy discussions, and investors believe a pause in rate hikes may not last long. If the Fed keeps rates unchanged on Wednesday, Chairman Kevin Warsh will need to reassure investors that the Fed remains committed to curbing inflation while energy prices remain elevated. Geoff Yu, senior macro strategist at Bank of New York Mellon, said: "The market will pay more attention to the Fed because it determines global financial conditions, which are crucial for credit markets. Although we do not expect a rate adjustment this week, we would not object even if the Fed chooses to hike, though we are not entirely convinced a hike is urgent. However, we believe that maintaining policy credibility is crucial for the Fed."
Oil Prices Recover Losses In other markets, global crude benchmark Brent crude recovered all its earlier losses, rising back above $116 per barrel. Previously, oil prices had fallen as senior officials from multiple countries traveled to Tehran to try to restart negotiations aimed at preventing further escalation of the Middle East conflict. Meanwhile, Israel will hold elections on Wednesday, the first national election since Hamas launched its attack in 2023. That attack caused severe trauma to Israeli society and triggered subsequent wars in Gaza, Lebanon and Iran. The election is further heightening regional tensions. In the foreign exchange market, the US dollar rose slightly for a third consecutive trading day. The euro fell 0.1% to $1.115, close to its lowest level since May touched two weeks ago. US Treasury prices were roughly flat, with the benchmark 10-year US Treasury yield holding slightly below 5%. Previously, as concerns over AI investment prospects triggered stock market turbulence, investors flocked to US Treasuries for safe haven, pushing yields back from the level above 5% breached in September. Bob Michele, chief investment officer at JPMorgan Asset Management, previously expected US bond returns to reach 7% to 8% over the next 12 months. Gold prices fell, losing the $4,000 mark, mainly dragged down by a stronger dollar. Ricardo Evangelista, director and chief executive of ActivTrades, said: "A stronger dollar and elevated US Treasury yields continue to put pressure on gold. At the same time, high oil prices keep inflation concerns alive, further reinforcing expectations that the Fed will maintain a restrictive monetary policy stance."
Don't Forget the Midterm Elections Andrea Gabellone, head of global equities at KBC Securities, said investors are also positioning ahead of next week's US midterm elections. Gabellone said: "Anthropic's IPO announcement is clearly a positive for the entire AI industry, but the ultimate impact will depend on how much investor demand it can attract, especially against the backdrop of the upcoming US midterm elections. Depending on the election results, market optimism about AI could be affected, particularly if Democrats win across the board. Today's market moves mainly reflect investors' cautious attitude ahead of next week's vote."
Morgan Stanley Says US Stock Correction Entering Final Stage! Sticks to Year-End S&P 8000 Target, Identifies Three Counterattack Catalysts. Morgan Stanley's chief US equity strategist Michael Wilson judged in his latest research report that the internal correction in US stocks that began in June has entered its final tail phase, but the index may still experience one last dip. Wilson said that the digestion of three key uncertainties — AI-related capital issues, midterm election uncertainty, and changes in Fed liquidity — is expected to drive the market to form a bottom, laying a significant foundation for the S&P 500 to rally to a record level near 8,000 by year-end. Morgan Stanley's composite sentiment indicator is currently at a neutral level, and third-quarter earnings are expected to grow 27% year-over-year. Wilson accordingly maintains his view: as these key uncertainties gradually become clearer in the coming weeks, attractive buying opportunities should emerge in the market.
Is the Window to Add to Stocks Finally Opening? Goldman Sachs Sticks with "Overweight" Equities. Goldman Sachs' latest "GOAL Kickstart" research report, focused on financial market risk appetite and stock-bond allocation stances, shows that the tech-driven risk repricing has significantly reduced market crowding, but credit pressures have not yet been resolved; earnings support, lower valuations and reduced positioning are still sufficient to support the Goldman Sachs financial market strategist team's "mildly pro-risk" asset allocation stance, which leans toward optimistic forecasts for stocks and government bonds. The report places Goldman Sachs' proprietary risk appetite indicator falling to -0.5, falling credit excess returns, a rebound in major government bonds, pressure on European assets, and quality and defensive styles leading — all within the same cross-asset framework, cross-validated by valuation, earnings revisions, fund flows, volatility, liquidity and recession models. Therefore, Goldman Sachs maintains its previously issued "overweight" bullish rating on equities over 3-month and 12-month horizons.
Citadel Warns: Tech Stock Selloff Is Just the First Alarm Bell, AI Trade Has "Almost No Margin for Error." Nohshad Shah, head of EMEA fixed income sales at Citadel, said the tech stock selloff shows that investors are demanding more and more that massive AI spending ultimately generate sufficient profits. "Given how much of the current economy and stock market is betting on the AI trade, once other risks begin to emerge, there is almost no margin for error," Shah said. Shah said trade policy, fiscal stimulus and elevated energy prices have made both the financing and operating costs of AI investment more expensive, while public opposition to data center construction could slow project timelines and push up costs. He added that the US has so far been able to absorb these pressures because earnings and confidence remain strong. But a continued retreat in AI investment and financing could threaten the growth and household wealth that previously helped the economy buffer higher costs.
Key Individual Stocks Digital payment platform PayPal Holdings Inc (NASDAQ: PYPL) released third-quarter earnings, with revenue missing expectations, and its shares fell 1%. The company reported revenue of $8.58 billion, while LSEG analysts expected $8.71 billion. However, earnings beat market expectations, and PayPal raised its full-year profit guidance. Corning Inc (NYSE: GLW) reported third-quarter results exceeding expectations, and its shares jumped nearly 3%. Corning reported earnings per share excluding special items of $0.91 and revenue of $5.08 billion; LSEG-surveyed analysts expected $0.88 per share and $5.02 billion in revenue. United Parcel Service Inc (NYSE: UPS) reported better-than-Wall Street-expected results and also raised its full-year guidance, sending shares up 1.6%. UPS expects full-year consolidated revenue of about $92.6 billion, above its previous expectation of $91.2 billion; fourth-quarter revenue is expected at $25.7 billion. Despite weak domestic demand, Coca-Cola Co (NYSE: KO) raised its performance outlook for a third consecutive quarter, and its shares rose 0.3%. Coca-Cola expects comparable earnings per share to grow at least 11%, up from its previous forecast range of 9%-10%; it also expects organic revenue to grow at least 5%, a slight upward revision from the previous expectation of about 5%. Meta Platforms Inc (NASDAQ: META) and NVIDIA Corp (NASDAQ: NVDA) announced plans to raise up to $95 billion for AI infrastructure investment, with NVIDIA participating in the investment. NVIDIA shares rose 0.7%, while Meta shares fell 0.3%. Chip packaging and testing company Amkor Technology Inc (NASDAQ: AMKR) reported third-quarter earnings and revenue that both missed analyst expectations, but its shares still rose more than 3.5%. Amkor reported earnings per share of $0.76 and revenue of $1.99 billion; FactSet analysts expected $0.78 per share and $2.04 billion in revenue. The company also lowered its capital expenditure forecast for the fiscal year to about $2.5 billion, from a previous guidance range of $2.5-$3 billion. Royal Caribbean Cruises Ltd (NYSE: RCL) reported third-quarter results beating analyst expectations, and its shares rose 4.4%. The cruise operator reported earnings per share excluding certain items of $6.57, above FactSet's expectation of $6.38; the company raised its full-year 2026 earnings guidance. Boeing Co (NYSE: BA) shares rose slightly by 0.5% after its earnings report. Although the reported loss was larger than expected, revenue exceeded LSEG's market consensus. Whirlpool Corp (NYSE: WHR) reported earnings and guidance that both missed expectations, and its shares plunged 7%. Whirlpool reported an adjusted loss per share of $0.21 and revenue of $3.68 billion; LSEG analysts expected adjusted earnings per share of $0.80 and revenue of $3.92 billion. The company lowered its full-year revenue guidance from $15 billion to $14.5 billion; it expects a full-year loss per share of $1.30, while the market consensus was earnings per share of $1.55. JetBlue Airways Corp (NASDAQ: JBLU) said it expects further margin improvement in the fourth quarter despite an expected 85% year-over-year increase in fuel prices, and its shares surged more than 11%. The company reported an adjusted loss per share of $0.60 in the third quarter, while LSEG analysts expected a loss of $0.55; revenue also slightly missed expectations. Supply chain management company Celestica Inc (NYSE: CLS) raised its full-year guidance, and its shares soared nearly 15%. The company expects adjusted earnings per share of $11.55, above its previous guidance of $11.30 and also above the FactSet consensus estimate of $11.16. Cadence Design Systems Inc (NASDAQ: CDNS) reported third-quarter results exceeding expectations and raised its full-year revenue growth outlook, sending shares up 1.8%. Cadence reported adjusted earnings per share of $2.11 and revenue of $1.63 billion; LSEG analysts expected earnings per share of $2.05 and revenue of $1.61 billion.
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