Hi friends! 👋
After no update last week, we have a lot to discuss. Here’s what I’m looking at today.
The Calendar Turns Bullish
When Good News Isn’t Good Enough
Left for Dead
Everyone’s Braced
The Fine Print in Anthropic’s IPO
Trick or Treat for AI?
Thanks for reading Spilled Coffee. Let’s get into it.
Eric
Market Recap
What a way to end October.
The S&P 500 had its worst day since June on Friday, falling 1.8%. Tech and the AI trade got wrecked to close out the week. The Nasdaq dropped 2.9% on Friday alone.
For the week, the S&P slipped 0.6%. The Nasdaq lost 2%. The Dow fell 0.9%.
But not everything was red. The Russell 2000 rose 1.3% for the week. And here’s a stat that might surprise you. Small caps are now up 12.5% this year, ahead of both the S&P and the Nasdaq.
Earnings did most of the damage. Alphabet fell more than 11% on Thursday after its AI spending pushed free cash flow negative. Amazon missed. Then Intel dropped 29% on Friday, its worst day since the 1970s, and took the whole chip group with it. The Nasdaq just had its worst month since March 2025.
The Fed left rates unchanged on Wednesday after hiking in September. It was a 10-2 vote, and both dissenters wanted another hike. Wall Street expects a hike in December and one or two more next year.
Zoom out, though. The S&P is still up almost 11% this year. The Nasdaq, 9%. A bad week. Not a bad year.
Weekly Heat Map of Stocks
Sentiment Check
The bears are still outnumbering the bulls.
The Calendar Turns Bullish
Happy Halloween. That’s not just candy for the kids. For stocks, it’s the start of the best stretch of the year.
November has been the best month going back to 1950. November through January, the best three months. On average, the S&P 500 gains 4.4% over that span. The Nasdaq, 6.1%.
And this year we get a bonus. Midterms are Tuesday.
I hear it every two years. What happens if the other side wins?
Here’s what history says. Six months after every midterm since 1950, the S&P 500 was higher. All 19 times. Didn’t matter who won the House or the Senate.
The median gain was 16.9%. The median max loss along the way was just 1.8%. Not one turned into a bear market in those six months.
It’s not always a smooth ride. In 2018, the S&P fell almost 15% before turning around. Still finished higher six months out.
So the calendar is on our side. Here’s what bugs me.
The market isn’t following the script. Stocks usually drift higher heading into a midterm. Not this year. The Nasdaq just wrapped up its worst month since March 2025.
History says up. The market hasn’t gotten the memo. And one stock in particular has me paying attention.
When Good News Isn’t Good Enough
Earnings up 45%. Sales up 17%. A record backlog of $78 billion, nearly double last year.
That’s a great quarter. Most companies would kill for it.
The stock fell 9.3%.
That was Caterpillar on Thursday. Its worst day since COVID. It opened down almost 11%, the biggest earnings gap down in 24 years. Then it dropped another 3.8% on Friday.
CAT is the stock I call the industrial bellwether. When CAT is healthy, the economy usually is too. And this year, CAT was more than healthy. It led the Dow in the first half, up 87% at its peak. A big part of that story was AI. Data centers need power, and CAT sells the equipment that makes it.
Look at it now.
CAT is up just 9.6% for the year. From its high, it’s down 42%. That’s not a pullback. That’s a bear market in one of the market’s biggest winners.
So what went wrong? The outlook didn’t go up. Investors wanted more, and a record quarter wasn’t enough. When good news gets sold this hard, it tells you how much was already priced in.
The chart is ugly too. CAT flashed a death cross, when the 50-day moving average falls below the 200-day. And it sliced right through support. It closed Friday at its lowest level since late January.
And CAT wasn’t alone. Other AI power names like Vertiv and GE Vernova got hit too.
One stock doesn’t make a market. But the warning signs are spreading.
Cyclical stocks, the ones tied to the economy like banks, industrials, and carmakers, just fell below their 200-day moving average against defensive stocks like utilities, food, and pharma. Investors are quietly playing it safe. A Fed that still wants to raise rates isn’t helping.
Financials are flashing the same warning. Banks have been losing ground to staples for weeks. When the market is stuck in a range, this ratio often hints at which way it breaks. Right now, it’s pointing the wrong way.
So here’s the question I can’t shake. Is CAT just a bad reaction to a good quarter? Or is it the first sign that the AI build-out is losing steam?
That’s the trick. Now for the treat.
The group everyone said AI would destroy is quietly beating the chip stocks. And hedge funds are positioned for a crash that may never come. Upgrade to read the rest.
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