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Chips Break the Losing Streak

Wall Street finds some relief after a rough stretch, but investors remain cautious as markets navigate fresh uncertainty.

Author

Elie Zakhour
October 20, 2026

Market Snapshot

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Market News

39 Years After Black Monday, Chips Bounce Back

Funny thing about anniversaries. Thirty-nine years to the day after Black Monday, Wall Street managed a very different kind of session. The Dow slipped just 0.07%, while the S&P 500 gained 0.41% and the Nasdaq climbed 1.11%. But beneath the surface, the rally was anything but broad. Seven of the S&P 500's eleven sectors finished lower, and declining stocks outnumbered advancers. A handful of tech giants carried the indexes higher while much of the market sat out the rebound.

The biggest relief came from semiconductors. The Philadelphia Semiconductor Index gained 1.6%, snapping an eight-session losing streak that had wiped out roughly 15.7% of its value, its longest run of declines since 2008. Storage names joined the recovery, with Western Digital and SanDisk climbing 6.1% and 5.5%, respectively. Amazon jumped 5% after Morgan Stanley named it a top pick, while Tesla gained 3.8%. Investors were buying back into technology after last week's bruising selloff, though one positive session hardly erases the damage.

Meanwhile, borrowing costs remained a problem. The 10-year Treasury yield reached roughly 5.15% during Monday's session, keeping pressure on rate-sensitive sectors. Utilities dropped 2%, while real estate lost 1.2%. September's hotter-than-expected inflation report has revived concerns about further Fed tightening, although markets still broadly expect policymakers to hold rates steady at their October 28 meeting. The prospect of higher rates for longer is making investors more cautious about companies with heavy financing needs.

Housing is feeling that pressure firsthand. Builder confidence fell to 29 in October, its lowest reading since June 2012, while 43% of builders reported cutting prices to attract buyers. With the average 30-year mortgage rate reaching 7.4% last week, affordability remains a major obstacle. Higher construction costs and weaker buyer traffic are adding to the pressure. September housing starts are scheduled for release this morning, offering another look at an increasingly strained housing market.

Oil told two different stories Monday. The expiring November WTI contract rose 2.2% to $103.66 amid relatively thin trading, while the more actively traded December contract slipped 0.5% to $98.54. Brent edged down 0.3% to $109.55. Trump's decision Friday to waive certain sanctions on Russian energy exports raised expectations of additional supply, but disruptions in the Middle East remain severe.

Now attention turns to earnings. Netflix reports tonight, followed by Tesla and Meta on Wednesday, with roughly 70 S&P 500 companies scheduled to release results this week. Cleveland-Cliffs got things started Monday with a 16% surge after beating quarterly profit expectations. Amazon reports next week, giving investors another important look at cloud demand and AI spending.

Peel Take: One rebound after eight straight losses in chip stocks tells you very little, and the breadth was worse than the headline: most stocks fell. The S&P 500 rose as Amazon, Tesla, and a few chip names rallied, while rate-sensitive sectors like utilities and real estate fell. That's the kind of pressure a 10-year Treasury yield flirting with 5.15% can put on stocks. Our real worry is that the AI trade has quietly turned into a rates trade: hyperscaler capex is projected to exceed $1 trillion in 2027, and financing that enormous investment is becoming increasingly expensive. With Netflix reporting tonight and Tesla and Meta tomorrow, we'd rather see whether earnings can justify the optimism behind the rebound.

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What's Ripe

Amazon (AMZN) 4.98% 

  • Morgan Stanley's Brian Nowak named Amazon the firm's top pick and raised his target to $350 from $335, with a bull case of $410. He now sees AWS revenue growing 47% in 2027 and 42% in 2028 after Nvidia disclosed that AWS expects to deploy about 2 million of its GPUs over those two years.

  • Morgan Stanley's forecasts include capex of $355 billion in 2027 and $365 billion in 2028, AWS operating margins of 42% to 44%, and 2028 EPS near $16.50. Microsoft (+0.8%) and Alphabet (+1.1%) also gained as major technology stocks rebounded. Amazon reports Q3 earnings on October 29.

  • Peel Take: $355 billion in a single year of capex. That's more than Amazon's entire revenue in 2019. We had to look it up twice. Nowak's point is that AWS is one of the clearest places where the AI buildout can translate into meaningful operating profit, and the robotics opportunity (every additional 10% of global fulfillment units moving through robotics-enabled facilities could save $2 billion to $4 billion annually) offers another potential growth driver. We like it. But investors should also know what they're signing up for: a massive AI investment cycle that needs to deliver substantial returns to justify its cost.

Cleveland-Cliffs (CLF) 16.34% 

  • Q3 adjusted EPS of $0.28 beat analysts' expectations, while adjusted EBITDA of $612 million exceeded the company's own $575 million guidance. Revenue reached $5.6 billion, up from $4.7 billion a year earlier, with average steel selling prices of $1,177 per net ton.

  • CEO Lourenco Goncalves called it the company's strongest quarter in three years and projected Q4 adjusted EBITDA of approximately $715 million and more than $4 billion in 2027. Long-term debt still stands at $7.6 billion.

  • Peel Take: This is what a more favorable trade environment looks like for domestic steelmakers. Imports remain well below historical levels, lead times are longer, and stronger pricing is supporting profitability. Cliffs swung from a $134 million loss last quarter to $165 million of net income this quarter, and the stock did what stocks do on that kind of turnaround. Our hesitation is the 2027 outlook. More than $4 billion in adjusted EBITDA would be a major jump from Q3's annualized run rate of roughly $2.45 billion. Management sounds confident, but delivering that growth will require favorable steel prices and strong execution. And $7.6 billion of debt doesn't disappear just because tariffs are helping.

What's Rotten

QXO (QXO) 6.63%

  • Brad Jacobs' building-products roll-up (Beacon Roofing, then Kodiak) hit a new 52-week low the same day builder confidence reached its weakest level since 2012. The stock is down roughly 47% over the past year and 63% from its February high.

  • Analysts have been cutting targets for weeks: RBC to $18 from $27 on weak Q3 roofing demand, Truist to $15 from $26, and D.A. Davidson to $20 from $26. All three maintained bullish ratings despite the reductions.

  • Peel Take: "Buy rating, price target slashed" is its own genre of sell-side note, and QXO has collected three of them this month. The thesis was that Jacobs would repeat his XPO playbook: buy up a fragmented industry, wring out the costs, and let the housing shortage do the rest. That might still happen. But a housing shortage doesn't guarantee strong roofing demand when borrowing costs are high, construction activity is slowing, and distributors are sitting on excess inventory. A roll-up is a lot less fun when the businesses you're buying stop growing.

Sea Limited (SE) 5.65%

  • Sea Limited fell 5.65% despite a broader technology rebound, with no clear company-specific catalyst behind Monday's decline. The Southeast Asian e-commerce, gaming, and fintech company is now down roughly 47% from a year ago and 48% from its 52-week high.

  • Insiders have sold more than $322 million in shares over the past three months, although roughly 99% of that value came through prearranged trading plans rather than discretionary sales.

  • Peel Take: We'd love to tell you what happened. There wasn't a clear company-specific headline behind Monday's slide, which is sort of the point. A $54 billion company losing almost 6% on a day when the Nasdaq gained more than 1% shows just how fragile investor confidence can be. Shopee was supposed to be the Amazon of Southeast Asia, Garena the cash cow, and Monee the glue. Those businesses are still growing, but the market is clearly questioning how much investors should pay for that growth.

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A trader buys a call for $7 and a put for $5, both with a $100 strike price and the same expiration. What are the two breakeven stock prices at expiration?

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