U.S. Futures & World Markets

US equity futures are mixed ahead of the opening bell following Thursday's bounceback. The S&P is slightly higher, while the Nasdaq is trading lower on this options expiration Friday. Technology stocks have had a difficult week as investors question whether companies spending massive amounts of capital will see a return on their investments.

As for the AI trade, it all comes back to your investment time horizon. Will AI companies see an ROI in the next three years? What about the next decade? Those are two very different questions. Most investors should be focused on the long game rather than getting caught up in every short-term swing. The potential is real, but so are the questions about the price tag and the payoff.

S&P Futures vs. Fair Value: +13.00  |  10-Year Yield: 5.12%

CORE Headlines

Charts & Data

The KOSPI (South Korea's index) went from 6,000 to over 9,000 and then dropped back under 5,500. That is some serious volatility — and it's heavily tied to the AI trade. TradingView via Daily Chartbook.

South Korea and Taiwan exports currently give little sign that the AI investment cycle is imminently about to turn down — if there were a pervasive capex problem, it should show up early in their export data. Simon White, Bloomberg via Daily Chartbook.

October rate hike expectations fade. After reaching as high as 53% following CPI, the probability of a hike has dropped below 30% amid a strong rally in Treasuries and dovish Fed pushback. @interest_rates via Daily Chartbook.

The cost of insuring against defaults by major US tech companies has reached record highs as investors worry about AI spending, rising debt, and higher interest rates. @deitaone via Daily Chartbook.

For the moment, AI-linked financing costs are not excessive relative to the rest of the credit stack, although the gap opens up further out the curve. Jim Reid, Deutsche Bank via Daily Chartbook.

Bears outnumbered bulls in the latest AAII Sentiment Survey — flipping the bull-bear spread back to negative. AAII via Daily Chartbook.

MCG & Tech positioning has started to cool, but the trade remains crowded compared with the rest of the market. Deutsche Bank via Daily Chartbook.

On Wednesday, global AI stocks saw the second-largest net selling of the past year, behind only the Situational Awareness blow-up in July. Long sales outpaced short sales 3.5 to 1. Goldman via Daily Chartbook.

The Russell 2000 has cycled from a 3-year high back into a -10% correction. Historically, the first month after these signals tends to rebound, but the following two to three months are prone to setbacks. SentimenTrader via Daily Chartbook.

An equal-weight basket of the six big publicly traded PE firms is now down 45% from highs — worse than its 2022 bear market drop and similar to its COVID crash. Bespoke via Daily Chartbook.

Maybe, unlike in 2000, any contemporary AI stock price collapse won't be nearly as bad for the overall stock market — because the price-beta of "Old Era" stocks is currently zero. Jim Paulsen via Daily Chartbook.

Historically, days where Tech, Semis, and Software all fall over 2% in a single session account for about 5% of trading days since 1995. Despite the big drops, these days have usually been followed by positive returns. Bespoke via Daily Chartbook.

Interesting Reads

Want this in your inbox every morning?

Morning Core subscribers get this analysis two days before it's published here — plus charts, data, and Nick's unfiltered take on the markets. It's free.

Subscribe to Morning Core — Free
This content does not constitute legal, tax, accounting, or other professional expert advice. Everything published is believed to be reliable, but its accuracy or completeness is not assured. Past performance does not indicate future results. The opinions expressed herein are subject to change without notice and are solely those of the author as of the date indicated.