Big Earnings Later This Month: Will They Reignite Tech?
The market is under clear pressure. Distribution has shown up in the Nasdaq and leading growth names, inflation data has rekindled rate-hike odds, and the AI complex is no longer getting an automatic free pass. South Korea’s KOSPI just delivered the clearest illustration: it crashed more than 7% in a single session, triggered a circuit breaker, and extended a multi-day rout that has wiped out a large chunk of its recent gains. Samsung Electronics and SK Hynix, the purest large-cap expressions of the HBM/DRAM boom, fell roughly 9-11%. Foreign selling has been relentless. When the memory leaders that have been the global supply bottleneck for AI accelerators are being liquidated this hard, it is not background noise.
Later this month the earnings calendar gets dense. Meta and Tesla are expected around the 21st; Microsoft, Alphabet, and others cluster near the 28th–29th. These are the reports that have repeatedly rescued the tape over the past two years whenever growth stocks wobbled. The question is whether the same script works again while the Korean memory complex is breaking and the broader semiconductor group is already under distribution.
Historically, strong earnings from the true leaders can reverse a corrective phase—if the market is still in a general uptrend and the selling has been selective. Right now the backdrop is more fragile. The KOSPI action is not an isolated emerging-market event; it is a high-beta read on the same HBM and advanced packaging demand that has underpinned the entire AI capital-spending story. When those stocks gap down on heavy volume and fail to find support, it raises the bar for what U.S. hyperscaler and chip earnings must deliver. Guidance on capex, HBM commitments, and forward order visibility will matter far more than the headline beats.
Price and volume remain the final arbiters. A series of buyable gap-ups or constructive pocket-pivot volume in the true leaders after these reports would be constructive. Continued distribution, failed breakouts, or further weakness in the memory and equipment names would confirm that the uptrend remains vulnerable and that any earnings-driven bounce is likely to be sold. In that environment the correct posture is defensive: tighter stops, reduced new exposure, and a focus on only the highest-quality setups that hold their moving averages and show relative strength.
The coming earnings reports will either reassert institutional demand in the leaders or confirm that the recent Korean and U.S. semiconductor selling suggests deeper re-pricing. Watch how leading stocks react, not the headline numbers. The market will tell you which is which.
Gridlock an issue?
Gridlock after the midterms is not, by itself, bearish. A divided Congress is usually neutral to mildly constructive for stocks, because the big swings in tax policy, regulation, and spending get harder to pass. What the market actually discounts into November is unresolved uncertainty: who controls the committees, and what can still get through. Once the seats are known, that range narrows. Wall Street has lived with gridlock for decades for that reason.
The bearish case is narrower than the headline. Gridlock can produce a shutdown, a debt-ceiling fight, or a slow response if the economy actually rolls over. Those have hit prices before. They are usually shocks, not a standing reason the year after a midterm is weak.
The seasonal record is a real average, not a buy signal. Since 1950, midterm years have often been choppy into the fall, then stronger in the fourth quarter. FactSet data compiled puts the average Q4 gain in a midterm year at 6.6%, nearly double the next-strongest year in the presidential cycle. Silvia Insights has the following year, year three of the cycle, as the strongest of the four, with a 17.2% average annual return, more than double the post-election year. Over seven decades the S&P 500 has also averaged a 31.8% gain from its midterm-year low. This year’s low came in March near 6,400, and the index is already up more than 20% from there, so a large piece of that typical bounce is already in the price. Another 11% into early 2027 would only match the average, not beat it. The sample is about 18 midterms, and the average hides years that did not rally.
History is context. Price and volume of the indexes and the leaders are the tell. A stalemate in November does not create a bear but rates, earnings, or a fiscal fight can. As leading names start failing and distribution shows up in the averages, that is the signal to move towards cash or the short side, not the fact that one party does not control both chambers.
Interesting fact: Since 1942, every November-to-June period following a midterm has been positive for the S&P 500. 21/21. Average: +16.6%. That’s a 100% win rate.
QEndless global liquidity
The economy may be more dependent on money printing than anything else. As long as the government keeps spending trillions to service record debt and other unfunded liabilities, a prolonged crisis in the economy or the stock market is unlikely if history is any guide. On top of that, the US consumer and investors have convinced themselves that nothing can break the market, so they keep spending and keep buying assets. Favoring global liquidity, the government’s debt level, maturing debts, interest payments, and total debt service payments stand at record levels today and trending higher over the next couple of years. The debt burdens are at their highest level since WWII and are expected to worsen.
The second reason the market keeps defying the pessimists is momentum. Things in motion tend to stay in motion, and the stock market has had a lot of motion since the start of 2023.
There is a third reason that is gaining momentum. AI is producing major breakthroughs in math and science that amount to quantum leaps in discovery. OpenAI recently released hundreds of mathematical papers and proofs from an unreleased model, work that previously took teams of humans years and millions of dollars, now done in a few hours of compute. David Friedberg called it the biggest day of discovery in human history. These are not just academic results. Faster progress in mathematics, materials, biology, and engineering expands what is possible, raises utility, and eventually shows up as profits. That pipeline of new discoveries is another force keeping capital flowing into the market.
This is the same pattern we saw with Amazon. It was a loss-making leader through the late 1990s and into the 2000s. It kept leading right up to the March 2000 market top. Then, when the bear market ended in early 2003, Amazon was among the first stocks to lead the recovery. Markets had been pricing in that the company would eventually turn profitable and keep scaling, even while it was still posting losses.
In today's market, technology tends to lead bull markets more than ever before. The S&P 500 has made 28 new highs this year, but nine of the eleven sectors are lagging the index. Only technology and energy are ahead. Tech is nearly 40% of the market, so buying the index is a bullish call on tech. Silvia Insights calculates that technology has supplied roughly 12 of the index’s 13.6 points of return this year.
Energy’s outperformance, driven by higher oil prices and AI power demand, barely moves the index because the sector is only about 3% of it. Strip out tech and energy and the median sector is up about 1%. Four of the nine are negative.
That is not automatically a problem in an AI driven market. The index can stumble if a few mega-caps fade, but the tech sector is cheaper relative to the broad market than it has been in years. The gap between the S&P 500’s forward P/E and the information technology sector has narrowed to levels last seen at the start of the pandemic, when Nvidia was worth $144 billion. It is now near $6 trillion.
The market is under clear pressure. Distribution has shown up in the Nasdaq and leading growth names, inflation data has rekindled rate-hike odds, and the AI complex is no longer getting an automatic free pass. South Korea’s KOSPI just delivered the clearest illustration: it crashed more than 7% in a single session, triggered a circuit breaker, and extended a multi-day rout that has wiped out a large chunk of its recent gains. Samsung Electronics and SK Hynix, the purest large-cap expressions of the HBM/DRAM boom, fell roughly 9-11%. Foreign selling has been relentless. When the memory leaders that have been the global supply bottleneck for AI accelerators are being liquidated this hard, it is not background noise.
Later this month the earnings calendar gets dense. Meta and Tesla are expected around the 21st; Microsoft, Alphabet, and others cluster near the 28th–29th. These are the reports that have repeatedly rescued the tape over the past two years whenever growth stocks wobbled. The question is whether the same script works again while the Korean memory complex is breaking and the broader semiconductor group is already under distribution.
Historically, strong earnings from the true leaders can reverse a corrective phase—if the market is still in a general uptrend and the selling has been selective. Right now the backdrop is more fragile. The KOSPI action is not an isolated emerging-market event; it is a high-beta read on the same HBM and advanced packaging demand that has underpinned the entire AI capital-spending story. When those stocks gap down on heavy volume and fail to find support, it raises the bar for what U.S. hyperscaler and chip earnings must deliver. Guidance on capex, HBM commitments, and forward order visibility will matter far more than the headline beats.
Price and volume remain the final arbiters. A series of buyable gap-ups or constructive pocket-pivot volume in the true leaders after these reports would be constructive. Continued distribution, failed breakouts, or further weakness in the memory and equipment names would confirm that the uptrend remains vulnerable and that any earnings-driven bounce is likely to be sold. In that environment the correct posture is defensive: tighter stops, reduced new exposure, and a focus on only the highest-quality setups that hold their moving averages and show relative strength.
The coming earnings reports will either reassert institutional demand in the leaders or confirm that the recent Korean and U.S. semiconductor selling suggests deeper re-pricing. Watch how leading stocks react, not the headline numbers. The market will tell you which is which.
Gridlock an issue?
Gridlock after the midterms is not, by itself, bearish. A divided Congress is usually neutral to mildly constructive for stocks, because the big swings in tax policy, regulation, and spending get harder to pass. What the market actually discounts into November is unresolved uncertainty: who controls the committees, and what can still get through. Once the seats are known, that range narrows. Wall Street has lived with gridlock for decades for that reason.
The bearish case is narrower than the headline. Gridlock can produce a shutdown, a debt-ceiling fight, or a slow response if the economy actually rolls over. Those have hit prices before. They are usually shocks, not a standing reason the year after a midterm is weak.
The seasonal record is a real average, not a buy signal. Since 1950, midterm years have often been choppy into the fall, then stronger in the fourth quarter. FactSet data compiled puts the average Q4 gain in a midterm year at 6.6%, nearly double the next-strongest year in the presidential cycle. Silvia Insights has the following year, year three of the cycle, as the strongest of the four, with a 17.2% average annual return, more than double the post-election year. Over seven decades the S&P 500 has also averaged a 31.8% gain from its midterm-year low. This year’s low came in March near 6,400, and the index is already up more than 20% from there, so a large piece of that typical bounce is already in the price. Another 11% into early 2027 would only match the average, not beat it. The sample is about 18 midterms, and the average hides years that did not rally.
History is context. Price and volume of the indexes and the leaders are the tell. A stalemate in November does not create a bear but rates, earnings, or a fiscal fight can. As leading names start failing and distribution shows up in the averages, that is the signal to move towards cash or the short side, not the fact that one party does not control both chambers.
Interesting fact: Since 1942, every November-to-June period following a midterm has been positive for the S&P 500. 21/21. Average: +16.6%. That’s a 100% win rate.
QEndless global liquidity
The economy may be more dependent on money printing than anything else. As long as the government keeps spending trillions to service record debt and other unfunded liabilities, a prolonged crisis in the economy or the stock market is unlikely if history is any guide. On top of that, the US consumer and investors have convinced themselves that nothing can break the market, so they keep spending and keep buying assets. Favoring global liquidity, the government’s debt level, maturing debts, interest payments, and total debt service payments stand at record levels today and trending higher over the next couple of years. The debt burdens are at their highest level since WWII and are expected to worsen.
The second reason the market keeps defying the pessimists is momentum. Things in motion tend to stay in motion, and the stock market has had a lot of motion since the start of 2023.
There is a third reason that is gaining momentum. AI is producing major breakthroughs in math and science that amount to quantum leaps in discovery. OpenAI recently released hundreds of mathematical papers and proofs from an unreleased model, work that previously took teams of humans years and millions of dollars, now done in a few hours of compute. David Friedberg called it the biggest day of discovery in human history. These are not just academic results. Faster progress in mathematics, materials, biology, and engineering expands what is possible, raises utility, and eventually shows up as profits. That pipeline of new discoveries is another force keeping capital flowing into the market.
This is the same pattern we saw with Amazon. It was a loss-making leader through the late 1990s and into the 2000s. It kept leading right up to the March 2000 market top. Then, when the bear market ended in early 2003, Amazon was among the first stocks to lead the recovery. Markets had been pricing in that the company would eventually turn profitable and keep scaling, even while it was still posting losses.
In today's market, technology tends to lead bull markets more than ever before. The S&P 500 has made 28 new highs this year, but nine of the eleven sectors are lagging the index. Only technology and energy are ahead. Tech is nearly 40% of the market, so buying the index is a bullish call on tech. Silvia Insights calculates that technology has supplied roughly 12 of the index’s 13.6 points of return this year.
Energy’s outperformance, driven by higher oil prices and AI power demand, barely moves the index because the sector is only about 3% of it. Strip out tech and energy and the median sector is up about 1%. Four of the nine are negative.
That is not automatically a problem in an AI driven market. The index can stumble if a few mega-caps fade, but the tech sector is cheaper relative to the broad market than it has been in years. The gap between the S&P 500’s forward P/E and the information technology sector has narrowed to levels last seen at the start of the pandemic, when Nvidia was worth $144 billion. It is now near $6 trillion.