Signs of breakthrough in U.S.-Iran diplomacy triggered a sharp drop in oil prices by approximately 7%, marking the largest single-day decline in three months, which boosted the Dow Jones Industrial Average and small-cap stocks, while tech stocks remained under pressure, pushing the Nasdaq down another 1%.

Marvell announced a stock-for-stock acquisition of Lumentum, leading both stocks to plummet as selling pressure on the AI infrastructure chain persisted. After market close, Apple reported record quarterly revenue of $114.5 billion, exceeding expectations, yet shares still fell nearly 4%. Palantir also surpassed forecasts with 63% year-over-year revenue growth, but its stock surged initially before reversing course. Today is U.S. midterm election voting day, and AMD is scheduled to release earnings tonight.

Dow Rises, Nasdaq Falls — Capital Accelerates into Old Economy

On Monday, the Dow Jones Industrial Average rose 0.41% to close at 51,983.98; the S&P 500 declined 0.51% to 7,541.40; the Nasdaq Composite dropped 1.07% to 25,164.32. The divergence between the Dow and Nasdaq reached 1.5 percentage points, reflecting capital shifting from high-valuation tech stocks toward traditional sectors with stronger cash flow certainty.

The equal-weighted S&P 500 ETF (RSP) gained 0.76%, outperforming the market-cap weighted index by over one percentage point—its fourth consecutive week of outperformance. The VIX rose 8.91%, reclaiming above 20, closing at 21.15. Even with a gain in the Dow, volatility continued to climb.

On the sector level, the sharp drop in oil prices benefited consumer and industrial sectors, with discretionary consumption leading gains. Energy stocks suffered significant losses due to oil price weakness. Information technology once again led declines, falling nearly 3% for the third consecutive trading session amid persistent sell-offs.

Among the Magnificent Seven, NVIDIA reversed course from morning gains to close lower, dragging the S&P 500 down in late trading. Microsoft dipped 0.50%, Apple declined 0.89% (with post-market volatility following earnings). Tesla maintained its recent strength, surging 7.41%.

The S&P 500 closed at 7,541.40, its lowest since July 31, down 3.55% from the October 6 all-time high of 7,818.93.

Marvell’s Acquisition of Lumentum Sparks Continued Sell-Off in AI Infrastructure Chain

Marvell announced a stock-for-stock acquisition of Lumentum, the optical communications leader, with each Lumentum share receiving 4.5 Marvell shares. Based on Marvell’s Friday closing price, the implied per-share value was approximately $883, but after the announcement, both stocks plunged. By Monday’s close, the effective implied valuation had dropped to around $771 per share.

Marvell ended the day down 12.72% at $171.41, while Lumentum shed 18.59% to $684.40. Previously, NVIDIA had invested $2 billion each in both companies. Lumentum’s CEO had earlier stated that optical network capacity was already sold out through early 2029.

The transaction is expected to close in the first half of 2028, giving Marvell end-to-end capabilities from custom chips to optical modules. However, market reaction was immediate: in an environment where AI capex is already causing investor anxiety, a near-$100 billion acquisition only amplifies financial burden rather than resolving underlying issues.

The Philadelphia Semiconductor Index continued its downward trend. Combined with last Friday’s plunge, the two-day cumulative drop approached 10%.

Apple Posts Record Revenue but Drops 4% Post-Market; Palantir Surges Then Reverses

After market close, Apple reported Q4 results for fiscal year 2026 (ending September 26). Revenue reached $114.5 billion, up 12% year-over-year, setting a new record for the September quarter; EPS was $2.10, up 14% YoY, with tariff refunds contributing about $0.05. Both figures exceeded consensus estimates.

iPhone revenue hit $57.58 billion, a record for the period, driven by strong initial sales of the iPhone 18 Pro series (launched September 18, with nine days of sales included). Services revenue reached $31.57 billion, a new high. Mac revenue totaled $10.79 billion. Full-year revenue reached $47.9 billion, marking Apple’s best fiscal year ever.

Gross margin stood at 47.9%, with about one percentage point attributed to tariff refunds. Excluding this, it was below the previous quarter’s 50.1%. Rising storage chip prices and supply chain constraints continue to erode profitability.

Despite the strong numbers, Apple shares dropped approximately 3.8% post-market. Investor concerns centered on three factors: revenue beat expectations by only a modest margin (~$1 billion above consensus), iPhone Duo faces severe supply bottlenecks, and the company provided no guidance for the next quarter. This marks the first earnings report under new CEO John Ternus.

Palantir also reported Q3 results after market close. Revenue reached $1.18 billion, up 63% YoY, exceeding expectations; adjusted EPS was $0.21, surpassing the $0.17 consensus. U.S. commercial revenue grew 121%, U.S. government revenue increased 52%. Contract value signed totaled $2.76 billion, up 151% YoY. The company raised its full-year guidance. However, shares surged 3% initially before reversing, ultimately closing down ~3.6%. Renowned investor Michael Burry recently disclosed holding put options on Palantir, intensifying short-term selling pressure.

Oil Plummets 7%, Diplomatic Signals Spark Largest Drop in Three Months

WTI crude dropped roughly 7.3%, closing near $96.50 per barrel; Brent crude fell about 7.8%, ending near $104.60 per barrel—both posting their largest single-day declines in three months.

The direct trigger was positive diplomatic signals between the U.S. and Iran. After three days of talks in Doha, Tehran proposed reopening the Strait of Hormuz within two days. Markets interpreted this as a sign that war risk premium could rapidly dissipate, causing oil to fall sharply from last Friday’s near-seven-week high.

The oil selloff triggered ripple effects. Inflation expectations cooled, driving long-end U.S. Treasury yields lower—10-year yield dropped ~3.5 basis points to 4.893%, 30-year yield fell ~4 bps to 5.268%. The 2-year yield held steady at 4.581%.

Gold rebounded from last Friday’s one-year low, with December gold futures rising ~1.5% to $3,957 per ounce. Lower oil prices eased inflation concerns, while declining yields reduced the opportunity cost of holding gold. Silver jumped 4.2%.

Bitcoin remained under pressure amid lingering shadows from the Binance hack incident, closing near $76,700, down ~1.3%. Ethereum hovered around $2,200. The ISM Manufacturing PMI came in at 55.5, stronger than expected, remaining in expansion territory for the third consecutive month, with prices paid index still elevated. The U.S. Dollar Index closed at ~101.9, essentially flat.

Today’s Focus

All times are in Beijing Time.

Today: U.S. Midterm Election Voting Day. All 435 House seats and 35 Senate seats are up for grabs. Election outcomes will determine congressional control during the second half of Trump’s term, directly impacting tax policy, fiscal direction, AI regulation, and crypto monetary frameworks. Historical data shows a 95% probability that the S&P 500 rises within 12 months after midterm elections (since 1938). Results may begin to emerge Wednesday morning Beijing time, though counting in key swing districts could extend for several days.

Tonight after market close: AMD reports Q3 earnings. Consensus expects revenue of ~$13.1 billion, up 42% YoY; EPS of ~$1.94, up 62% YoY. Following Intel’s sharp drop last week, AMD’s performance in data center GPUs and AI chips will serve as a key barometer of confidence across the semiconductor industry.

This week’s other earnings: Qualcomm (after market close Wednesday), Arm (after market close Wednesday), Arista Networks (after market close Thursday). More data points along the AI infrastructure chain are soon to be revealed.

Friday 21:30: U.S. October Non-Farm Payrolls Report. September added only 29,000 jobs, signaling continued labor market cooling. This data will directly influence market pricing of a 25-basis-point Fed rate hike in December.

Written by ChaoXiang Research