Oil hit $116, and SpaceX shook the phone companies

The Close

The Dow fell 653 points, or 1.2%, to 52,215. The S&P 500 lost 0.5% to 7,624. The Nasdaq slipped 0.2% to 25,955, as tech steadied after Thursday's drop.

For the week, the S&P fell 0.5% and the Nasdaq 0.7%. The Dow still finished the week up 0.4%, and the Russell 2000 gained 2.0%.

Bloomberg reported that SpaceX is in talks with Crown Castle to use at least 80,000 cell towers for a new nationwide wireless carrier. AT&T fell 8.0% and T-Mobile 7.7%. Crown Castle, which owns the towers, jumped 9.1%.

Energy stocks led. The energy sector rose 2.6% to a record high. SLB gained 7.1% after beating profit forecasts, and Halliburton rose 5.2%.

American Express fell 3.7% and was one of the biggest drags on the Dow, even after raising its profit forecast. Comfort Systems lost 9.3% after its profit margins came in below expectations. CrowdStrike and Palo Alto Networks bounced back with gains of 8.3% and 7.2%.

What The Market Is Pricing In

Start with oil. Brent rose 3.1% to $116.72 after Houthi attacks in Saudi Arabia and a tanker strike near the Strait of Hormuz. Over the week, it climbed more than 6%.

Higher oil hits shoppers first. The University of Michigan's consumer survey came in at 48.0, near the lowest reading on record. Stocks that depend on spending, like retailers and restaurants, fell 1.7%. Even consumer staples, Thursday's safe place, fell 1.9%.

Now the phone companies. Wall Street likes to talk about a company's moat: whatever protects it from new competitors, like a castle's water-filled ditch. For decades, the moat for AT&T, Verizon and T-Mobile was simple. Building a national network is hugely expensive.

SpaceX already has satellites in orbit and deep pockets. If it rents existing towers instead of building its own, the moat gets a lot narrower. That's why the phone stocks fell and the tower owners rose on the same headline.

I've seen this before. In June 2017, Amazon said it would buy Whole Foods. Kroger fell about 9% and Costco about 7% in one day. Both are still among the biggest grocers in America today. The first day's fear was bigger than the damage.

That's worth remembering for AT&T and T-Mobile. But this week, oil and Big Tech have the bigger say.

What's Next

Three things I'm watching this week:

01  The Fed

The Fed announces its rate decision on Wednesday, October 28, at 2:00 p.m. Eastern, and Chair Kevin Warsh speaks at 2:30 p.m. Traders expect no change. The question is whether he leans toward a December hike now that oil is back above $110.

02  Microsoft, Alphabet, Amazon

Microsoft and Alphabet report Wednesday, October 28, after the close. Amazon follows Thursday, October 29, after the close. About a third of S&P 500 companies report this week, and these three will set the tone for AI.

03  Growth and Inflation

The first estimate of third-quarter growth and the PCE inflation report both come out Thursday, October 29, at 8:30 a.m. Eastern. Oil eased early Monday as Qatari mediators visited Tehran, but one calm weekend doesn't change the inflation math.

Oil is setting the mood, and SpaceX just gave the phone companies something new to worry about.