Weekly Wrap: Rotation Continues as Tech Earnings Unfold

Markets moved higher this week despite A.I. spending scrutiny.

For the week through Thursday’s close, the Dow Jones Industrial Average ($DJI) is up 0.24%, weighed down by a slide in Caterpillar (CAT) shares after its weak forecast. The S&P 500 is up 1.27% in that period, having climbed in three straight sessions before the streak ended with the plunge in Alphabet (GOOGL) shares post earnings. The Nasdaq-100 is up 1.5%. The Russell 2000 is shaping up to be the best performer of the week with a 3.0% rise with the yield on the benchmark 10-Year Treasury below 5% and investors and traders seeking diversification. See Why AI CapEx Concerns Continue to Outweigh Earnings as Market Broadens

The 10-year Treasury yield was near 4.91% Friday morning. That followed a strong GDP report (3.4% annualized) and in-line PCE inflation (3.6% year over year). Oil pushed above $100 and held there, with WTI settling at $102 and Brent at $114.88 Thursday, though it dipped early in the week.

The Federal Reserve held rates steady at 3.75% to 4% in a 10-2 vote Wednesday, with two dissenters favoring a hike; Chair Kevin Warsh said the economy is expanding at a "strong pace" but offered no clear forward guidance.

Among S&P 500 sectors: Healthcare and Energy led gainers; Communication Services fell sharply following Alphabet earnings. Nine of 11 sectors were green Thursday despite the index declines.

Three big themes emerged in the market week through Thursday’s close:

Tech’s Cash Burn Refocused Markets on AI ROI

Alphabet (GOOGL) shares had their worst day ever following third-quarter results late Wednesday, which showed negative free cash flow. Google’s parent maintained its full-year capex guidance of $195 billion to $205 billion. Microsoft (MSFT) earnings and revenue beat analyst estimates, with Azure cloud revenue up 48%. But after announcing a $25 billion bond sale, MSFT shares moved lower Thursday.

The selloff spread to include software companies with Fortinet (FTNT) and ServiceNow (NOW) tumbling on earnings. See September PCE In-Line Climb, Fed's Interest Rate Path & GOOGL Sells

Oil Prices Remain Elevated, Despite Diplomacy Headlines

U.S. Fed Chair Kevin Warsh cited discussion of geopolitics in the Federal Open Market Committee (FOMC) debate about interest rates this week; elevated oil prices complicate the Fed's inflation fight.

The U.S. oil benchmark, WTI, settled at $102 a barrel and the international Brent price was $114.88 Thursday. Prices remained elevated despite headlines about attempts at war-related negotiations. Tehran said it received a letter from U. S. Vice President J. D. Vance, but has not responded, according to a Reuters report sourcing Iran’s semi-official Tasnim news agency. President Donald Trump said the note was about medical supplies, the article said. Oil had surged Wednesday on fears of renewed U.S. military action against Iran and Strait of Hormuz disruption risk. See Why Crude Oil Bears Should Eye $90 & How Selloff Give Fed Lots of Breathing Room

Earnings Season Diverges, Lilly Soars, Caterpillar Sinks

Shares of Eli Lilly (LLY) jumped 6% after Q3 revenue surged 39% to $24.4 billion on demand for its GLP-1 diabetes and weight-loss treatments Mounjaro and Zepbound. The company raised full-year revenue guidance but cut its adjusted EPS guidance. Caterpillar shares were down more than 9% Thursday despite an EPS beat, as its forecast for only moderate Q4 sales growth disappointed investors. See Thursday's First Moves: FTNT Falls After Earnings, CAT Tumbles, LLY Rises

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