Midterm Elections and AI Earnings Drive Volatile Market Session

Key points

• Dow Jones fell 0.3%, S&P 500 rose 0.2%, and Nasdaq Composite gained 0.5% in early trading.
• AMD will report earnings after the bell, a critical gauge for AI demand after a recent chip stock sell-off.
• Apple shares fell after beating revenue estimates but forecasting lower gross margins due to soaring memory chip costs.
• Midterm election results are expected to impact policy on pharmaceuticals, housing, and AI data centers.
• Asian markets were mixed, with South Korea’s Kospi falling 4% and Taiwan’s Taiex sliding 3.8% on tech weakness.
• The Reserve Bank of Australia raised its benchmark interest rate by 0.25% to 4.85%, the highest since 2008.

Background

US markets have been volatile in recent weeks, with the Nasdaq 100 down 9% from its early October high amid AI capex concerns. The S&P 500 hit a record last month, but recent earnings from Big Tech have sparked worries about AI profitability. Oil prices have swung wildly due to the US-Iran conflict, with Brent crude recently dropping 6% on peace talk hopes before rebounding. The Federal Reserve left rates unchanged at its last meeting, but markets expect a 25 basis point hike at the next meeting.

How outlets are covering it

Yahoo Finance and Investing.com highlight the mixed US market performance and the focus on AMD and Apple earnings. AP News emphasizes the spillover to Asian markets, noting South Korea and Taiwan’s tech-heavy indices fell to three-month lows. Business Insider frames the week as a 'wild' one, citing the fragile AI trade and the historical post-midterm rally. JPMorgan predicts a 1-1.25% S&P 500 gain if Republicans sweep both chambers, while a Democratic sweep could cause a 25 basis point drop. Deutsche Bank notes markets are caught between energy and AI themes. Apple’s CEO John Ternus called memory chip cost increases 'unprecedented,' a concern not highlighted by other outlets. Prediction markets and polls diverge on Senate control, with polls showing an 80.3% chance for Democrats versus 73.1% for prediction markets.

Why it matters

The midterm election results will shape policy on key sectors like AI data centers and pharmaceuticals, potentially altering market trajectories. AMD’s earnings will test the resilience of AI demand after a recent sell-off, while Apple’s margin warnings signal broader cost pressures in the tech sector. The JOLTS report and upcoming jobs data will influence Federal Reserve rate expectations, with markets pricing in a 78% chance of a 25 basis point hike. Oil price volatility from the US-Iran conflict continues to impact energy costs and inflation. The divergence between prediction markets and polls on Senate control adds uncertainty to political risk assessments.

What to watch

Investors will watch midterm election results Tuesday evening for policy shifts on AI, housing, and pharmaceuticals. AMD’s after-bell earnings will provide a key read on AI demand. The October jobs report on Friday could shape Federal Reserve rate expectations. Oil prices may see further volatility if peace talks with Iran progress or if strikes resume. Asian markets will likely react to US tech performance and oil price movements. The Reserve Bank of Australia’s rate hike may influence regional monetary policy decisions.