Market review from UTEX — week 43

Major U.S. indices fell sharply last week — the SPY lost 2%, while the Nasdaq dropped 5.5%. Meanwhile, the Dow Jones rose 0.7%.

Top gainers among the largest companies: Walmart (+6%), Coca-Cola (+6%), Eli Lilly (+6%), Home Depot (+6%). Top decliners: Dell Technologies (-22%), Applied Materials (-19%), SK Hynix (-19%), Arista Networks (-18%), Palo Alto Networks (-18%).

The market was roiled by three factors: fears that AI investments are becoming too expensive, a spike in oil prices due to geopolitics, and new data showing accelerating inflation.

Investors are beginning to doubt whether the AI sector can service its massive debts. The focus was on neocloud infrastructure provider CoreWeave, whose total debt exceeded $51 billion. The company's stocks plummeted 25% over the week.

Semiconductor ETFs declined for 9 consecutive days — the longest losing streak in 20 years. Micron and Intel led the tech sell-off. The market cap of chipmaking giant Nvidia shrank by more than $350 billion.

Consumer inflation (CPI) came in worse than expected — accelerating from 3.4% to 3.7% year-over-year versus a forecast of 3.6%. Producer inflation (PPI) rose 1.3% month-over-month in September after +0.5% in August. That is the fastest pace since March 2022. The annual figure accelerated to 6.3%. Fears that the Fed will continue raising rates have intensified.

This week, two giants from the Magnificent Seven will report — Tesla and Meta. Also reporting: GE Aerospace, Netflix, RTX, Lam Research, Philip Morris, Thermo Fisher Scientific, Texas Instruments, IBM, Abbott Laboratories, Procter & Gamble, Western Digital, Lockheed Martin, Spotify, and American Express.

Top trading ideas for this week

🔴 Tesla (TSLA). Report on October 21 after market close. Last quarter, profit fell short of forecasts due to spending on autonomous transport and robotics, but deliveries exceeded expectations. Last week, Tesla unveiled a Roadster capable of moving through the air. Meanwhile, U.S. regulators are reviewing the safety of Cybercab robotaxis. Investors will be watching investments in AI, Robotaxi, Cybercab, and the Optimus robot. As always, Tesla stocks are maximally unpredictable after the report.

🔴 Western Digital (WDC). Report on October 22 after market close. The stock has fallen about 32% over the quarter. Wells Fargo cut its price target from $730 to $450, and UBS from $525 to $470, citing risks to HDD production and pricing. Analysts prefer Seagate (STX). Additional pressure comes from Chinese CXMT's plans to produce NAND and Toshiba's investment to double HDD capacity by 2027. Given the negative backdrop, strong moves in WDC are possible after the report.

🔴 Meta (META). Report on October 21 after market close. Analysts expect revenue growth to slow and adjusted operating profit to decline quarter-over-quarter and year-over-year. At the same time, Truist Securities raised its price target from $763 to $1,000 thanks to the early success of the Muse AI agent. Since its launch in September, the stock has risen 21% versus 2% for the S&P 500. All recent reports have produced a strong gap in the stock; we expect elevated volatility.

🟡 Utilities sector. During market turmoil, investors often rotate into defensive assets: electricity and water get paid for even in a crisis. Stable cash flows allow utilities to pay regular dividends. If you expect further sell-offs, some funds can be allocated to defensive stocks: NextEra Energy, Southern Company, Duke Energy, American Electric Power, Dominion Energy, Sempra, Exelon, Entergy, and Public Service Enterprise.

🔴 Netflix (NFLX). Report on October 20 after market close. Since the start of the year, the stock has fallen 25% on concerns about audience engagement and slowing revenue growth. The company also cut 6% of its staff — the deepest reduction since 2022. Morgan Stanley lowered its price target from $83 to $80 while maintaining an "Outperform" rating. Positive factors include new content and licensing deals. On October 26, former Walt Disney Television chairman Peter Rice will join Netflix as Chief Content Officer. Medium-term prices look attractive, but it's better to wait for the report and management guidance. On the daily chart, there is no reversal yet: the stock is in a downtrend with support around $65.

Choose what suits you best:

🟡 Medium risk, for traders with some experience;

🔴 High risk, for professionals.

Profitable deals!

[button label="Trade on UTEX" url="https://margin.utex.io/stocks-usdt/exchange?utm_medium=website&utm_source=utmedia_en&utm_campaign=post"]