Preview of US Stock Market | All three major stock index futures rise together; oil prices edge lower; Brazilian concept stocks plunge in premarket trading; AI trade faces a "critical judgment week."

Premarket Market Moves 1. On Monday, October 26, in the premarket session, all three major U.S. stock index futures rose together. As of press time, Dow futures were up 0.32%, S&P 500 futures were up 0.14%, and Nasdaq futures were up 0.18%. 2. As of press time, Germany's DAX index was up 0.77%, the UK's FTSE 100 was up 0.43%, France's CAC 40 was up 0.65%, and the Euro Stoxx 50 was up 0.36%. 3. As of press time, WTI crude oil was down 2.05% at $101.15 per barrel. Brent crude oil was down 1.49% at $110.04 per barrel. Market News The U.S. AI bull market faces a "critical judgment week": as the market no longer buys in unconditionally, how will the earnings reports of the three major cloud giants, the Federal Reserve decision, and PCE determine the market's direction? The U.S. stock market has entered a highly decisive week. On the surface, this is a dense earnings window. In substance, it is a synchronized stress test of the foundations of the artificial intelligence (AI) bull market narrative. The earnings reports of the three hyperscale cloud service providers set to appear this week Alphabet (GOOOGL.US), Microsoft Corporation (MST.US), and Amazon.com, Inc. (AMZN.US) as well as those of the two major memory chip giants, SK Hynix and Samsung Electronics, will test the quality of the recently much-worried-about AI trade. At the same time, the Federal Reserve will announce its interest rate decision this week, and the market widely expects the central bank to stand pat. What is more noteworthy than the rate decision itself is Chairman Warsh's communication stance at the post-meeting press conference. In addition, the U.S. September personal consumption expenditures price (PCE) index will be released on October 29 the day after the Fed decision in the same week as third-quarter GDP data. This timing is expected to amplify the data's impact on the market: less than 24 hours after digesting the Fed decision, investors will be forced to independently reprice the inflation trajectory. Wall Street hopes for a post-election rebound, but BTIG pours cold water: the midterm elections may be a "starting point for declines" rather than a "starting point for a rebound." Wall Street investors hoping for a stock market rally after the November midterm elections may be disappointed. BTIG strategist Jonathan Krinsky believes that as credit conditions deteriorate and multiple sectors show signs of fatigue, the risk of a stock market decline is rising. Krinsky said in a research report that the S&P 500 could pull back to around 7,300 points, near its 200-day moving average and summer low. That would represent a decline of about 4.3% from the index's recent level of 7,631 points. If it breaks below this technical support level, the benchmark index could fall further. This warning challenges the widespread expectation that "stocks will rise after the uncertainty of the November 3 election fades." Historically, midterm elections have often been turning points for the stock market, but Krinsky believes that this year's unusually strong market performance makes a repeat less likely. Krinsky wrote: "The reason stocks tend to perform well in November of midterm election years is that the S&P 500 usually has already weakened before the election. This year, the situation is exactly the opposite." Goldman Sachs Group, Inc.: Retail trading is down 45% from late 2025, while household buying remains a "ballast" for U.S. stocks. Maintains year-end S&P 500 target of 8,000. Goldman Sachs Group, Inc. said retail investors have significantly reduced stock trading in recent months, but overall demand for equities from U.S. households remains strong enough to help support the market amid rising selling pressure and increased equity supply. Goldman Sachs Group, Inc. strategist Ben Snider said in an October 23 research report that retail trading volume has fallen 20% since the summer and 45% since late 2025. Individual investors recently accounted for about 9% of total U.S. stock trading volume, down from 15% at the end of last year and close to the lowest level since 2020. Meanwhile, after a turbulent week for hedge fund favorites, hedge funds have reduced market exposure. This divergence "cooling speculative activity while household investment demand remains strong" is significant for the stock market. Households are the largest holders of U.S. equities, and their willingness to invest is an important source of support for stock prices. Goldman Sachs Group, Inc. expects net supply of U.S. public equities in 2027 to post the largest increase since 2000, making continued household buying potentially especially important. "Demand destruction" versus the risk of attacks on Saudi Arabia pull oil prices lower. On Monday, oil prices fell. Investors weighed the threat of further attacks on Saudi Arabia's energy infrastructure on the one hand, and concerns that elevated prices could eventually erode demand on the other. The pullback followed a sharp rise in oil prices on Friday attacks on Saudi Arabia by Yemen's Houthi militants rekindled market concerns about disruptions to global energy supply. In addition, according to reports, Iran confirmed that senior officials from three member states of the Mecca Joint Defense Agreement Saudi Arabia, Pakistan, and Turkey will meet with Iranian officials in Tehran today to discuss regional issues. This would be the first high-level contact between Iran and the Mecca alliance since the escalation of the Yemen situation and frequent mutual attacks between Saudi Arabia and the Yemeni Houthis. Iran has previously said repeatedly that it is willing to mediate between Saudi Arabia and the Houthis. Individual Stock News Musk's warning of a "major shakeout" intensifies market concerns, and neocloud companies fall broadly in premarket trading. As of press time, CoreWeave (CRWV.US) was down nearly 5%, Nebius (NBIS.US) was down more than 3%, and IREN (IREN.US) was down more than 4%. On the news front, Musk predicted that the neocloud industry will undergo a shakeout, with companies in the sector facing large-scale consolidation or even bankruptcy. Musk said the debt market is unwilling to provide financing to companies whose revenue depends almost entirely on AI data centers, and added that SpaceX has already obtained $40 billion in debt financing to purchase NVIDIA Corporation GPUs, but unlike neocloud service providers, SpaceX also has revenue from Starlink and rocket launch operations. He concluded: "This means more than 200 neocloud service providers will face massive death and consolidation. Some companies will survive, but not many." Brazilian concept stocks plunge in premarket trading. The results of the second round of Brazil's presidential election landed on Sunday, with incumbent President Lula reversing the first-round lead of right-wing candidate Flavio Bolsonaro to win a fourth presidential term. The news triggered a selloff in Brazilian assets. As of press time, Brazil-based financial services platform XP (XP.US), listed in the U.S., was down more than 47%, Petrobras (PBR.US) was down nearly 23%, Itau Unity Bancorp, Inc. (ITUB.US) was down more than 26%, PagSeguro Digital (PAGS.US) was down more than 31%, Telefonica Brasil (VIV.US) was down nearly 18%, and Nacional Mineria (SID.US) was down more than 16%. The sharp plunge in Brazilian assets was related to investors' widespread prior bets that the right-wing candidate would win. In the first round of voting on October 4, Flavio led Lula with 47.03% to 45.16%, which briefly triggered a strong rebound in Brazilian risk assets. The market expected that a right-wing government would adopt stricter fiscal policy, cut public spending, control government debt, and push interest rates lower. However, Lula's eventual comeback victory completely shattered that expectation, meaning Brazil's existing economic policies may continue, and investors' concerns about the fiscal deficit, public debt, and the future path of interest rates have resurfaced. Meta (META.US) seeks up to $95 billion in equity financing for artificial intelligence spending. Meta is seeking to raise up to $95 billion by selling common and preferred stock in a bid to secure investor support to lead the development of artificial intelligence. The company said in a statement on Monday that it will issue about $35 billion of common and preferred stock. In addition, the company will raise up to about $60 billion through an "at-the-market" stock sale program, which allows the company to sell shares in the public market from time to time. The "at-the-market" program will issue its planned Class C non-voting shares. Verizon (VZ.US) Q3 results mixed, reaches over $2 billion AI infrastructure agreement with Amazon.com, Inc. AWS. The earnings report showed that Verizon's Q3 sales were $34.313 billion, below the market expectation of $34.744 billion; adjusted earnings per share were $1.31, better than the market expectation of $1.27. Thanks to improved operating efficiency, the company's net profit and adjusted EBITDA both hit record highs, and it raised its full-year guidance for the third consecutive quarter. The company now expects full-year adjusted earnings per share of $5.04-$5.06, up from its previous forecast of $4.99-$5.04. At the same time, Verizon announced an expanded strategic partnership with Amazon.com, Inc. AWS, reaching an artificial intelligence (AI) infrastructure agreement valued at more than $2 billion. Moderna (MRNA.US) extends premarket decline as fallout from melanoma vaccine data leak continues. As of press time, Moderna was down more than 8% in premarket trading, after falling about 26% over the last two trading days of last week. On the news front, Phase 3 data for its personalized melanoma vaccine intismeran autogene, developed jointly with Merck & Co., Inc. (MRK.US), leaked early last Thursday: combined with Keytruda, it reduced the risk of cancer recurrence or death by 42% and the risk of distant metastasis or death by 38%. The data itself was positive but below the 49%/59% reductions seen in earlier studies, landing at the low end of investors' expected range. RBC said the data was "clinically meaningful and highly likely approvable," and UBS Group AG said it strengthened confidence in subsequent kidney cancer and bladder cancer studies, but target prices from multiple institutions remain well below the current price. $6 billion takeover! Healthcare giant Bon Secours plans to control Surgery Partners (SGRY.US). According to people familiar with the matter, Bon Secours Mercy Health is in late-stage talks to acquire a majority stake in surgical services provider Surgery Partners, in a deal that would value the Bain Capital-backed company at about $6 billion, including $3.5 billion of debt. Bon Secours' partial acquisition of Surgery Partners would value the company at about $20 per share. Bain Capital will retain nearly 40% of its stake. As of press time, Surgery Partners surged more than 24% in Monday's U.S. premarket session. Earnings Preview Tuesday morning: Cadence Design Systems (CDNS.US) Tuesday premarket: Novartis AG Sponsored ADR (NVS.US), HSBC (HSBC.US), Coca-Cola Company (KO.US), Boeing Company (BA.US), United Parcel Service (UPS.US), PayPal (PYPL.US), Corning Inc (GLW.US), Freeport-McMoRan (FCX.US)