Market Snapshot

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📉 Banana Bits

• Tech stocks extend their rally as Broadcom jumps 4% following a $63 billion Anthropic-related financing deal.

• Nvidia, AMD and Broadcom show interest in buying up to $5 billion in Meta shares as its AI financing plan expands to $97.5 billion.

• The “Buy, Borrow and Die” wealth strategy helps fuel a $5.4 trillion securities-backed credit market, according to Deloitte.

• Anthropic reports an $80.7 billion first-half net loss, despite posting $1.62 billion in adjusted operating profit ahead of its planned IPO.

• Boeing shares plunge nearly 11% after the company warns it will miss its 2026 production and delivery targets.

Market News

Tech Leads Stocks Higher Ahead of Fed Decision

Stocks moved higher Tuesday as tech and AI names continued to rebound. The S&P 500 gained 0.6% and the Nasdaq rose around 1.2%, while the Dow finished nearly flat as Boeing's sharp decline weighed on the index.

Semiconductor stocks were some of the biggest winners as investors returned to the AI trade. Broadcom jumped 4% after a $63 billion financing deal was unveiled to fund AI chips and infrastructure for Anthropic. Nvidia was also in focus after announcing a $3 billion investment in Meta's equity offering, adding to the optimism around AI spending.

SoFi jumped after beating earnings expectations and raising its outlook, while Royal Caribbean also climbed following strong results. Overall, tech did most of the work for the market Tuesday, with most S&P 500 stocks actually finishing lower.

The bigger focus now is the Federal Reserve, which began its two-day meeting Tuesday and will announce its decision Wednesday at 2:00 p.m. ET, followed by Fed Chair Kevin Warsh's press conference at 2:30 p.m. ET. The Fed is widely expected to hold interest rates steady at 3.75%–4.00%, with investors watching closely for signals about another possible rate hike.

The 10-year Treasury yield stayed close to 5%, keeping borrowing costs high even as stocks moved higher. Meanwhile, U.S. consumer confidence unexpectedly improved in October, rising to 91.7 from 84.2 in September, although concerns about the cost of living remained.

Investors are also preparing for a packed stretch of Big Tech earnings, with Alphabet and Microsoft reporting Wednesday after the close and Amazon on Thursday. These results will be closely watched for signs that massive AI spending is translating into stronger revenue and profits.

Meanwhile, oil moved lower Tuesday, giving investors at least some relief on inflation. Brent crude fell nearly $2 to $113.88 per barrel as renewed Middle East diplomatic efforts eased some supply concerns, although prices remained elevated.

S&P Global also made news by announcing a strategic review of Capital IQ and related data businesses, including a possible separation. The move comes as AI continues to reshape the financial data industry.

After Tuesday's closing bell, Robinhood shares fell around 7% after the brokerage reported weaker-than-expected quarterly profit despite record revenue of $1.42 billion, as slower crypto trading and rising expenses weighed on results.

Peel Take: Tuesday was another good day for tech, but the bigger questions haven't gone away. A 10-year Treasury yield around 5% still makes borrowing expensive, and investors don't know yet what the Fed will signal about another possible rate hike. Big Tech earnings will also show whether all this AI spending is actually translating into stronger results. For now, investors are willing to keep buying tech, but the Fed and earnings could quickly decide whether this rally keeps going.

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What's Ripe

SoFi Technologies (SOFI) 13.42% 

• SoFi reported record quarterly revenue of $1.4 billion, up 44% from last year, while adjusted EBITDA jumped 70%.

• The company also raised its full-year guidance after membership grew 35% to a record 17.1 million.

• Peel Take: SoFi gave investors pretty much everything they wanted: strong growth, record revenue and a better outlook. The company keeps adding customers while also becoming more profitable. That's a combination Wall Street was happy to reward Tuesday.

Royal Caribbean (RCL) 5.46% 

• Royal Caribbean reported better-than-expected quarterly earnings, helped by continued strong demand for cruises.

• Management also raised its full-year profit outlook despite higher expected fuel costs and currency headwinds, giving investors more confidence that travel demand is holding up.

• Peel Take: Consumers might be worried about the economy, but they apparently aren't giving up their cruises. Royal Caribbean's strong results and raised outlook show travel spending is still holding up. Investors liked the proof that demand remains strong.

What's Rotten

Boeing (BA) 10.69%

• Boeing said it expects to miss its 2026 target for roughly 500 deliveries of the 737, as production increases continue to take longer than expected.

• Boeing also forecast just $3 billion in free cash flow for 2027, well below analysts' $5.5 billion estimate, while its commercial-aircraft business posted a $697 million operating loss.

• Peel Take: Boeing's problem wasn't just this quarter; it was how long the recovery is taking. Investors want to see the company build and deliver more planes, and Tuesday's update showed that progress is still slower than expected. Until production improves, Boeing has a tough road ahead.

Meta Platforms (META) 1.64%

• Meta priced a $25 billion common-stock offering and $12.5 billion in mandatory convertible preferred stock as part of a broader AI financing plan that could raise up to $97.5 billion.

• Investors are worried that issuing so much new stock could dilute existing shareholders, especially as Meta is already spending heavily on AI infrastructure.

• Peel Take: Meta isn't struggling because investors suddenly stopped believing in AI. The concern is how much it's going to cost to build all of it. Raising tens of billions of dollars might fund future growth, but existing shareholders aren't thrilled about having their ownership diluted along the way.

🧠 Technical Trip

Interview Q&A from Lazard

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🦈 Deal Dispatch

M&A, IPOs, And Other Notable Transactions

• Ares Capital seals $2.6 billion deal for Apollo's MFIC as consolidation continues.

• Guidewire to buy UK insurance AI firm hyperexponential in deal worth up to $2.1 billion.

• UMB Financial agrees to acquire El Dorado Savings Bank in a $506 million deal.

• Howard Energy Partners agrees to acquire Sixth Street-backed Iron Horse Midstream.

Student Success Corner

Banana Brain Teaser

Previous

Company A trades at 20x earnings, while Company B trades at 10x earnings. Company A acquires Company B entirely through newly issued shares at their respective market valuations. Assuming no synergies or transaction costs, will Company A's EPS increase or decrease?

Answer: EPS increases (accretive)

Today

A hedge fund starts with $100 million, earns 20% in its first year, and loses 20% in its second year. The manager charges a 20% performance fee on annual gains above the previous high-water mark, with no management fee. What minimum return must the fund earn in year three before the manager can collect another performance fee?

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Happy Investing,
Elie, Mitchell, Fernanda, Nick, & Patrick

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