Post-election rotation: chips slide while lower oil and yields support the S&P 500

The essentials

• Post-election rotation. Democrats took the House and the Senate. On Wednesday, the S&P 500 gained 1.58% to 7,688.62, its best session in three months. The equal-weight RSP did better (+1.86%) and the Dow jumped 3.03%. At midday, the rotation continues: the Nasdaq 100 is down 0.5%, the Dow is up 0.45%, and the S&P 500 index is flat.
• Semiconductors under pressure. Qualcomm (QCOM) is down about 10% ahead of the open despite revenue above expectations. In Seoul, the Kospi fell 5.3%. The cause: fears of data center regulation and the moratorium pledge by Texas's newly elected governor. Nvidia (NVDA), about 7% of the index, lost 3.17% yesterday; it is the heavyweight to watch at the open.
• Oil. Brent lost 8.67% on Wednesday, to $94.62, on bets that the war against Iran is ending. It is rebounding at midday to $96.15 (+1.6%): Iran's Revolutionary Guards (IRGC) report two tankers and a tugboat on fire in the Strait of Hormuz. Qatar, the mediator, expects the U.S. and Iranian responses within 36 hours of Wednesday.
• What the market is pricing. According to CME FedWatch, the probability of a 25 bp hike on December 9 remains close to 82%, versus 84.5% a week ago. Despite the collapse in oil, the market has therefore removed almost none of the expected tightening. Jobless claims at 14:30 Paris time (197,000 expected) and Friday's jobs report need to validate this scenario.
• Bank of England at 13:00. The market fully prices a hike to 4.00%, the first since 2023. The vote split will set the tone for global long-term yields.

Overnight and Europe

Prior session (Wednesday, November 4)

• Close: the S&P 500 gained 119.70 points (+1.58%) to 7,688.62, after +0.4% on Tuesday. It sits 2.0% below its 52-week high (7,844.52).
• Session profile: opened at the low (7,635.81), high at 7,715.57, close 27 points below. No intraday reversal.
• Breadth: roughly three advancers for every decliner, and the RSP (+1.86%) beat the cap-weighted index.
• Leading sectors: consumer discretionary (+4.26%), financials (+3.51%), communication services (+3.47%), and health care (+3.06%).
• Lagging sectors: energy (-4.74%), industrials (-1.09%), and technology (-0.01%).
• Heavyweights: Apple (AAPL, +5.31%, record), Microsoft (MSFT, +6.68%), and Amazon (AMZN, +6.12%) together contributed about 75 to 80 index points on an approximate weighting, or two-thirds of the gain. They are seen as winners from a slowdown in data center capital spending. Conversely, Nvidia (-3.17%) cost about 18 points.
• AI infrastructure and data centers: the SOX lost 3.13%, Micron (MU) 7.00%, Vistra (VST) 13.83%, GE Vernova (GEV) 9.30%, and Comfort Systems (FIX) 15.08%.
• Prior-day reports:
• Fidelity National Information Services (FIS) plunged 23.67% after cutting its annual EPS guidance to $5.82-$5.89, from $6.15-$6.24 previously.
• CVS Health (CVS) lost 12.53% after announcing a split into two companies by 2028.
• McDonald's (MCD, +6.53%) reported EPS of $3.57 versus $3.38 expected. Booking (BKNG) gained 9.83%.
• Data: ADP at 86,000 jobs, above expectations. ISM services at 54.5 versus 54.8 expected, with new orders down to 55.9 versus 59.8.

Last night: AppLovin (APP) soars and Qualcomm slumps (details in earnings). Expedia (EXPE) is down more than 7% on guidance seen as weak.

Asia

• Kospi: -5.3% to 5,383.80. A circuit breaker on program trading was triggered.
• Japan: the Nikkei 225 fell about 2%, toward 61,000 points. The broader Topix gained more than 1%.
• China: the Hang Seng rose more than 3% and the Hang Seng Tech more than 5%. The CSI 300 gained 0.29% to 4,113.41, after the PBOC cut its refinancing rate dedicated to stock purchases to 1%.
• BoJ: the September minutes (hike to 1.25%, 7-2 vote) show a board in favor of further hikes.

Europe around 11:30

• The Euro Stoxx 50 is up 0.4% at 6,291 and the CAC 40 up 0.6% at 8,230.
• The DAX is up 0.5% at 26,570, after a record in the morning. The Stoxx 600 is above its August record.

U.S. futures

• S&P 500: around 11:30, the indication stands at 7,699 (+0.1% versus the cash close). The December ES is therefore barely above its 7,720.50 settlement, after a low at 7,693.50 (-0.35%) around 06:55.
• Other indices: the Nasdaq 100 limits its decline to 0.5%, versus -1.3% at the overnight low. The Dow is up 0.45% (53,619) and the Russell 2000 0.4% (2,866).
• Premarket: AppLovin +16.5%, Qualcomm about -10%, Expedia -7%. The first two roughly offset each other on the index (about 2 points each).

Today's calendar

Weekly claims are often revised the following week (seasonal factors): watch the four-week average and continuing claims as much as the headline number.

Friday, November 6

• 14:30, October jobs report: consensus estimate of about 65,000 jobs, versus 29,000 previously. Unemployment expected at 4.2%, average hourly earnings at +0.3% month over month (+0.1% previously). September is likely to be revised.
• 16:00, preliminary Michigan: about 48 expected (48.0 previously). One-year inflation expectations were at 4.7%.
• Fed: John Williams (New York) speaks at 10:30 and Michelle Bowman (vice chair for supervision) at 18:15.

Fed and rates

• Last decision (October 28): hold at 3.75-4.00% by a 10-2 vote, after a 25 bp hike in September. Beth Hammack (Cleveland) and Lisa Cook (governor) voted for an immediate hike. Chair Kevin Warsh reaffirmed the goal of bringing inflation back to 2%.
• Speakers: today Barkin at 15:10, Hammack on a panel at the "The SNB and its Watchers" conference, then Logan at 01:00. Williams and Bowman speak on Friday.
• CME FedWatch: about 82% probability of a 25 bp hike on December 9, versus 84.5% on October 29.
• Yields (around 11:30):
• 10-year: 4.877% (-1.6 bp). It touched 4.84% overnight, its lowest since September 10, after 4.89% on Wednesday (-6 bp).
• 2-year: 4.591% (+1 bp).
• 30-year: Wednesday close at 5.28% (-4 bp).
• The 2s10s spread narrows to about 29 bp.
• Rates-oil link, visible hour by hour: the 10-year fell to 4.84% as Brent dropped below $94, then rose back with the rebound to $96. According to Citi, a lasting reopening of Hormuz could shift the Fed from hikes to cuts. As long as the FedWatch probability stays above 80%, the decline in long-term yields rests on oil, not on the Fed.

Corporate earnings

The third-quarter season is entering its final stretch, and reactions are now mostly punishing guidance and capital spending.

Reported last night

Qualcomm

• The stock had gained 5.3% on Wednesday ($173.19), lifted by a multiyear contract with SpaceX.
• The market is punishing quarterly guidance below expectations and capital spending of $2.49B, versus $1.86B expected.
• Smartphone chips are down 26% year over year, automotive up 89% to $1.99B. The memory shortage, which makes components more expensive, is weighing on smartphone sales.
• Spillover: pressure on memory makers (MU) and on Nvidia, in a SOX already down 3% yesterday.

AppLovin: guidance clearly beats the Q4 consensus estimate. The signal is favorable for digital advertising, but the index impact remains marginal (about +2 points).

Expedia (EXPE): -7% on its guidance. It is a direct read-through for Airbnb tonight, while Booking gained 9.83% yesterday.

Upcoming

ConocoPhillips and EOG are today's tests for an energy sector down 4.74% yesterday. Maintaining buybacks despite oil would limit the sector's underperformance. Duke and Southern will show whether the "power for AI" narrative withstands regulatory risk.

Geopolitics and conflicts

Iran, the United States, and Israel: the Strait of Hormuz

• Last 48 hours:
• Iran called the U.S. response to its seven conditions for reopening Hormuz "unconvincing." It ties that reopening to sanctions relief, an end to the U.S. naval blockade, and the unfreezing of its assets.
• Donald Trump confirmed strikes on an Iranian island near the strait. He then told the Financial Times he had no immediate plans to resume hostilities.
• Vice President JD Vance blamed the Republican defeat on the war.
• Overnight, the IRGC reported two tankers and a tugboat on fire, one of them hit by a mine. Brad Cooper, Centcom commander, says transit routes are clear of Iranian mines.
• Indicator: Brent was near $118 last Friday. It lost about 20% this week before this midday's rebound.
• Channel: the energy sector, then inflation expectations, the 10-year, and the Fed hike probability. Defense is also affected (Lockheed Martin, LMT, -6.88% yesterday).
• Toward a deal: a constructive response relayed by Qatar and escorted transits without incident. Brent would drop back below $90, the 10-year below 4.80%, with a rotation favoring cyclicals and energy still struggling.
• Toward escalation: a breakdown in contacts or new strikes. Brent would climb back above $100, the 10-year above 4.95%, and Wednesday's gains would be largely erased.

Washington: Democratic Congress, data centers, and AI

• Facts: Democrats control both chambers and Donald Trump has accepted the results. Gina Hinojosa, Texas governor-elect, has pledged a moratorium on new data center permits. According to Wells Fargo, Texas accounts for about 27% of U.S. data center gigawatts.
• Indicators: SOX -3.13%, Kospi -5.3%, Vistra -13.83%.
• Channel: semiconductors, power producers, and data center builders, with the opposite effect on megacap platforms that would spend less.

Oil and commodities

• Oil: January Brent closed Wednesday at $94.62 (-8.67%) and WTI at $88.12 (-8.29%), a two-month low. After a low of $93.63 for Brent in Asia, Brent is back up to $96.15 (+1.6%) and WTI to $88.65 (+0.6%) around 11:30. The driver remains diplomacy around Hormuz rather than physical supply. For WTI, the $86.80-$87.00 zone corresponds to the 100- and 200-day moving averages.
• Other commodities: gold is up 1.5% at $4,133. U.S. natural gas closed Wednesday at $2.95 (+1.80%).
• Index impact:
• On lower oil: Brent below $94 weighs directly on energy, but eases inflation expectations and yields, benefiting consumer, transportation, and long-duration stocks.
• On a rebound: a return above $100 would do the opposite and make the December hike unavoidable.

Dollar and volatility

• FX: the DXY closed Wednesday at 101.53 (-0.34%). The euro, which rose to 1.1263 in Asia, is back at 1.1235, nearly unchanged, and USD/JPY is climbing back toward 158.3 after 157.8 in Asia. The dollar has thus erased its overnight decline.
• VIX: closed at 16.61 on Wednesday (-20.26%). The November future trades at 17.80 (+0.4%), keeping the curve in contango.
• Sentiment: a return of the VIX above 20 (20.83 on Tuesday) would signal renewed hedging. At midday, the divergence is sectoral, not broad-based: the Dow and the Russell 2000 are rising while the Nasdaq 100 falls. There is no overall risk aversion.

Watch points for the session

1. 13:00, BoE: a hike to 4% is neutral. A hold or a sharply split vote would push long-term yields lower, gilts then Treasuries.
2. 14:30, labor: claims below 185,000 and unit labor costs above 1% would invalidate the easing-yields scenario: 10-year above 4.92%, pressure on the ES. Above 210,000, the 10-year would return toward 4.84%.
3. 15:30, open:

• Expected sell imbalance on Qualcomm, memory makers, and Nvidia; buy imbalance on AppLovin, Apple, Microsoft, and Amazon.
• A stronger open for RSP than SPY would confirm the rotation.
• Prior-day cash reference levels: 7,635.81 and 7,715.57.

1. Cross-market: Brent above $100 or the VIX above 20 would reverse the tone. Brent below $93.60 would extend the easing.
2. Liquidity: eve of the jobs report, with volume likely to thin in the afternoon. Two Fed appearances are scheduled, Barkin at 15:10 and Logan at 01:00.
3. 22:00: Airbnb, EOG, Monster, and Akamai will trade in the electronic session until 23:00, before the CME's one-hour break (resuming at midnight).

Morning tone: rotation, not retreat, with a flat S&P 500 supported by lower oil and yields against the rout in semiconductors. It would flip on Brent above $100, jobless claims below 185,000, or the VIX above 20.