Apple’s margin warning and a reported strike on Iranian soil are pulling markets in opposite directions this morning, and the combination is raising questions about whether the AI trade can survive the crossfire.
Dow Jones Industrial Average futures point to a weak start on midterm Election Day. They were down 323 points in early trading, while Nasdaq 100 futures traded higher. Two problems are hitting the Dow at once: a disappointing margin forecast from Apple (NASDAQ:AAPL | AAPL Price Prediction) and a jump in oil after a reported U.S. strike on Iran’s Qeshm Island.
| Index | Premarket Reading (About 7:53 a.m. ET) |
|---|---|
| S&P 500 futures | Down 0.1% |
| Dow futures | Down 0.5% |
| Nasdaq 100 futures (proxy for the Composite) | Up 0.4% |
| Russell 2000 futures | Roughly flat |
| VIX | About 21, up from 19 at Friday’s close |
Apple’s Margin Warning Hits the Dow Hardest
Apple beat estimates with EPS of $2.10 vs. $1.99 expected. Then it forecast gross margin to 45% to 46% because of the global memory chip shortage.
Shares fell about 4% premarket. The Dow is price-weighted, so a stock trading near $325 has outsized pull on the index. That is a big reason Dow futures are trailing the Nasdaq 100.
Oil Rebounds as Iran Strikes Revive War Risk
WTI crude rose to about $97, and Brent traded near $105. Iran said it is ready to respond “forcefully”. Results at Chevron (NYSE:CVX) have already shown what expensive crude does: third-quarter adjusted EPS came in at $5.28 vs. a $4.83 estimate. Archer-Daniels-Midland (NYSE:ADM) also benefits from demand for biofuels.
Higher oil also raises inflation fears. The 10-year Treasury yield rose to about 5%.
AI Jitters Push the VIX Back Above 20
The Nasdaq 100 ended Monday in correction territory, more than 10% below its October 6 record. The index’s largest weight, NVIDIA (NASDAQ:NVDA), is down 15% over the past month to $202. Futurum Group’s Daniel Newman said that “a ceasefire could do more for the AI trade this month than any earnings report.”
A VIX in the low 20s means traders expect bigger swings than usual. Cboe Global Markets (CBOE:CBOE) runs the VIX franchise, and its chief executive noted that volatility “has picked up heading into year-end amid rising bond yields and growing geopolitical uncertainty.”
Oil Now Drives Tech-Heavy Index Funds
So far, the selling is narrow. The Dow’s losses trace back to Apple and to concerns about oil, while small caps are holding steady. Oil is now the variable to follow for anyone holding index funds that lean heavily on tech. Each move higher in crude pushes inflation expectations up and makes data-center borrowing more expensive.
JOLTS, Election Results, and Friday’s Jobs Report Come Next
The September JOLTS report comes out later today and is expected to show 7.1 million job openings. Election results arrive tonight. After that come ISM services and ADP data on Wednesday, then October payrolls on Friday.
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