Tech Bounces, Mid-Terms Favor the Dems, Voters Push Back on Data Centers – Try the Dark & Stormy (Need I say more?)

Things You Need to Know

• Tech bounced – stocks end mixed.
• Dems Sweep – Kalshi told us this weeks ago.
• Are data centers at risk now? Ohio, TX & GA slam on the brakes.
• But a pushback does NOT mean demand goes away.
• Try the Dark & Stormy

I am joining Taylor Riggs on the Big Money Show in the Morning at 6:20 am on Fox Business.

And there is more – back and forth – and just like that…buyers came back to the AI trade. – Go figure! Who would have thought?

After days of getting smacked around over spending, financing and the question of when the cash comes back, technology stocks found some footing (again) on Tuesday. Chips rallied, cloud and software names recovered, and the S&P and Nasdaq moved higher as we headed to the polls.

I mean the whiplash is enough to make your head spin….one day they love them, the next day – not so much – and then the day after – they can’t get enough of them…

September job openings rose to 7.523 million, above the 7.1 million estimate. That is evidence that the labor market remains strong. Factory orders rose more than expected and Durable Good Orders also gained strength – again just more data that suggests the US economy remains robust.

AT the end of the day – the Dow lost 0.4%, the S&P rose 0.4%, the Nasdaq gained 0.8%, the Russell gained 0.2%, the Transports lost 0.2%, the Equal Weight S&P lost 0.3% while the Mag 7 added 0.9%.

8 of the 11 S&P sectors ended lower – the same ones that ended higher on Monday…On the plus side – we saw Tech gain 1.3%, Industrials + 1% and Real Estate rose 0.1%….

As you might expect – all those subsectors in Tech ended the day higher…Semi’s up 2.5%, Cyber up 0.5%, Disruptive Tech + 1.7%, Memory names +2.8%, Quantum +1.1%, Software + 0.75%.

Bonds…..lost ground – the TLT lost 0.75% while the TLH lost 0.55%. The 10-yr ended the day yielding 4.95%. The 30-yr ended the day at 5.320%. This morning the 10 yr is yielding 4.92% while the 30 yr is yielding 5.30% and that means we should see bond prices move higher….

Oil ended the day up 0.3% at $96.26. The API reported that US crude inventories fell by 5.3 mil barrels last week. Gasoline inventories up 1.4 mil barrels while Diesel inventories fell by 1.2 million barrels. This morning – oil is down 35 cts at $95.70. Trendline support is down at $92 – so for now we remain in the $92/$104 range.

Gold –continues to trade in the $3900’s unable to pierce $4,000. Well that changed overnight….Gold is up $100 and is now trading at $4,030 as gold investors digest the implications of a Democratic sweep. Rising bond prices, falling yields supports higher gold.

Eco data today includes – Mortgage Apps, ADP employment change – expected to show 67k new jobs created, S&P Global Services PMI and the ISM Services PMI – both expected to be well into the expansion zone at 57.3 & 54.8 respectively.

Then came the earnings…and the reactions told the story. AMD jumped about 9% after hours as strong data-center sales and an upbeat forecast gave investors fresh evidence that AI demand remains alive and well. ANET rallied by 8%, after revenue surged nearly 59% and its outlook topped expectations.

Healthcare got a different reception. Pfizer raised guidance but fell by 2%, while Amgen fell by 1.6% in after-hours trading despite a beat and higher outlook.

Today – is about another heavy slate of earnings….and includes QCOM, ARM, NVO, CVS, MCD, BROS, KHC, EMR, UBER, ALL, MET, MLM, ALB, SNAP…. that represent Semis, Software, Healthcare, Big Pharma, Restaurants/Consumer Discretionary, Consumer Staples, Industrials/Transportation, Finance/Insurance, Energy, Basic Materials and Communications.

And then we got the election results….and it was a disaster for the GOP – and no one should be surprised really – Kalshi has been signaling it for weeks. Futures turned lower as the results came in, but overnight – the selling has eased a bit, futures are now mixed. Remember – we have been discussing this…. the weakness we have seen – especially in tech – may have been the anticipation of last night’s results – a kind of ‘sell the rumor/buy the news’ event. And while politics will not price stocks in the long term, it can create short term confusion/chaos.

The Dems have seized control of both houses, and they seized Governor control of key states… Ohio, Texas & Georgia and that has implications for the AI trade and data center buildout. Michigan went all in for El Sayed, and Texas elected Talerico. Ohio told Ramaswamy to take a walk and Alaska is still being counted…..Decoy Dan creating a problem – as expected. CA, MA, NY went as expected, so no surprise there. California’s ‘one time’ billionaire wealth tax still has NOT been called, but it appears as if it will be DOA. (Dead on Arrival).

Data centers were on the ballot too and this IS important for investors – Ohio results scream opposition to new data centers – but here is the confusing part – Yes AND No meant opposition to development…. How? In the way the questions were asked….

Should we ban data centers? YES and the effect is to approve the ban.

Should we uphold the rezoning? NO, and this rejects permission to rezone. A YES vote would support (uphold) the rezoning – allowing the build…In the end – the common thread was opposition to development.

In addition – The pushback extended beyond Ohio. Texas and Georgia elected Democratic governors who campaigned on pausing (not banning) new data center development -adding another potential roadblock to the speed and location of the AI buildout.

Now what does this mean for the AI trade? Well, for now it means that more projects may need different locations, more approvals and more time. That can delay construction spending, equipment orders and electricity demand. It does NOT mean the national AI buildout stops—or that existing data centers must shut down.

In the end – voters delivered a clear warning to the AI buildout: the money may be available, but local permission to build is becoming harder to secure and project delays can shift the timing of the spending but it does NOT eliminate the demand.

Which means – Watch Elon and SPCX ($141) ….He has already floated the idea of data centers in space – unless of course they try to stop that as well.

At 3 am – US futures are mixed… Dow futures up 120 pts, S&P’s down 9 pts, the Nasdaq is down 75 pts while the Russell is up 12. I know it’s early – but I am joining Taylor Riggs on the Big Money Show on Fox Business at 6:20 am.

The S&P closed at 7,568 – up 27 pts. – We remain in the 7500/7800 trading range that we have been discussing. The Nasdaq tested and held (for the 3^rd time) its long term trendline (25,070) and that is a positive. Let’s see how all of this election and data center news unfolds…. If the market views the bans as really significant – then I would expect tech to come under more pressure….and a retest of the trendline would not surprise me. Should it fail – 24,000 becomes the bullseye.

If you’d like to discuss your goals, evaluate the risk in your portfolio or simply get a second opinion, give me a call at 561-931-0190 or better yet – click on this link to connect. https://slatestone.com/contact-us/

I’m always happy to provide a complimentary portfolio review and risk assessment.

Take good care,

Kp

[email protected]

Source: Bloomberg, CNBC, Reuters, Wall Street Journal

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