Big Tech beat, and the stocks slipped anyway

The Close

The S&P 500 rose 0.6% to 7,757, close to the record it set earlier this month. The Nasdaq gained 278 points, or 1.1%, to 26,703. The Dow added 360 points, or 0.7%.

Small companies lagged this time. The Russell 2000 rose 0.3%. Tech led the sectors, up 1.7%.

SpaceX started it. Its quarterly sales came in at $14.6 billion, up 161% from a year ago and well above forecasts. That lifted the AI trade. Super Micro jumped 9.6% after raising its sales forecast, Dell rose 5.3% and Tesla gained 3.4%.

Netflix fell 5.3% the day after its report, on a softer forecast and a cut to this year's ad revenue outlook. AT&T dropped 6.5% after its quarterly report, the worst in the S&P. Chipotle lost 5.2% after TD Cowen cut its rating.

What The Market Is Pricing In

Here's what happened after the bell. Meta's sales rose 26% to $64.6 billion, above the $63.4 billion analysts expected. Tesla's adjusted profit of 48 cents a share beat forecasts. IBM, Lam Research and Texas Instruments all beat too.

And still, the stocks fell. Early Thursday morning, New York time, Lam Research was down about 8%, IBM about 6% and Tesla about 5% before the open. Meta was down about 1%. Nasdaq futures had slipped about 1% overnight.

This is what Wall Street means by guidance: a company's forecast for the months ahead. A beat tells you about the last three months. Guidance tells you about the next three. When stocks have already run up, investors care more about the next three.

Meta's number to watch is spending. It narrowed this year's budget for buildings, servers and chips to $135 billion to $145 billion, raising the low end. That's the AI bill again. Investors want to see it shrink as a share of sales, not grow.

I've seen this before. In October 2022, Meta told investors it would keep spending heavily on its metaverse plans. The stock fell about 25% the next day.

This time the reaction is much smaller, and that matters. Investors are nervous about the AI bill, but they haven't given up on it. The open today will show how nervous.

What's Next

Three things I'm watching today and next week:

01  The Open

Early moves before the open can change a lot by 9:30 a.m. Eastern. Watch Lam Research and the chip stocks first. If they hold most of their losses, the AI selling from last week is back.

02  The Fed

The Fed meets Tuesday and Wednesday, October 27-28. It's in its quiet period, so no officials are speaking. Traders expect no change in October. The PCE inflation report, the Fed's favorite price gauge, follows on Thursday, October 29.

03  More Big Tech

Amazon and Intel are both scheduled to report Thursday, October 29, after the close. Amazon jumped 5% on Monday after Morgan Stanley named it a top pick. Its cloud numbers will tell us more about AI demand than any forecast.

Big Tech beat. The stocks slipped. The market wants a better outlook, not just a better quarter.