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Alphabet falls after hours and Microsoft gains as investors weigh AI spending against cash flow

Stocks edged higher on Wednesday as the Fed held rates: the S&P 500 rose 0.28% to 7,743.98, the Nasdaq 100 0.55% and the PHLX Semiconductor Index 1.75%, with Oracle up 10.58% on its long-term outlook. Participation was thin, with only 247 of 502 S&P 500 constituents advancing, and decliners edged out advancers by about 7 to 6 on the NYSE.

Seoul reversed on Thursday: the Kospi closed 1.24% lower at 5,937.66 after touching 6,100.11, as Samsung Electronics fell more than 4% despite record third-quarter operating profit of 107.44tn won, slightly short of expectations. Tokyo held firmer, with the Nikkei 225 ~1.1% higher late in its session, while Taiwan's Taiex was ~1.9% lower in early afternoon trade.

Nasdaq 100 futures were about 1% lower early on Thursday after Alphabet's results, while S&P 500 futures were little changed. December WTI eased 1.56% to $101.19/bbl on reports of a US approach to Iran over talks, leaving oil 15.97% higher over the month. Treasuries rallied overnight as markets read the Fed chair's press conference as dovish: the October 10-year yield future eased 3.6bp to 5.01%, and December 10-year note futures rose 0.24% to 106.05.

Amazon and Intel report after Thursday's US close, following the ECB decision and US third-quarter GDP and September PCE inflation. Amazon will test whether cloud growth can carry its spending; options imply moves of ~±8.4% for Amazon through the 2 November expiry and ~±11.0% for Intel through 6 November.

Libella Insights • 4-minute read

THE DAY IN NUMBERS

MARKETS

LIBELLA AI BASKETS (5 DAY)

Alphabet fell 10.5% after hours on Wednesday. Revenue was in line, but profit missed, partly on paper losses on investments, and press reports put free cash flow at about −$9bn for the quarter. The company kept its 2026 capital-spending range at $195–205bn but expects a significant increase in 2027, reported a Google Cloud backlog of $561bn and warned that renting third-party computing capacity will weigh on near-term margins.

Microsoft rose 4.5% after hours. It guided December-quarter revenue to $96.0–97.1bn against $95.63bn expected, with Azure growth of 49–50% in constant currency and demand still above available supply; quarterly capital spending is to exceed $50bn, about $170bn for calendar 2026, while the company expects to stay free-cash-flow positive. Earlier, Oracle closed 10.58% higher after targeting at least $225bn of revenue by FY30 and at least $30bn of free cash flow in FY29, with new market funding limited to ~$20bn.

The common thread is funding. Investors rewarded the companies that showed spending can be paid from operating cash and penalised the one that could not, while spreads on the weakest credits keep widening (Exhibit 1b).

Exhibit 1b: Credit divergence: weakest v broad

Read: top panel rising = the weakest high-yield credits paying more over single-B; bottom panel below 0 = broad credit stress below its long-run average. Both are at their 98th–99th percentile of the past year. Daily to 28 Oct (proxy) and 26 Oct (OFR). CCC−B credit spread (ETF proxy): Libella calculation from BondBloxx XCCC and XB ETF closes (EODHD), scaled to ICE spreads by back-test, typical error ±35bp; not an ICE index. OFR: US Treasury, Office of Financial Research.

Twenty-nine of 47 baskets rose over the five sessions to Wednesday (median +1.48%), a 25.69 percentage-point gap between best and worst: AI Cybersecurity (+21.01%) and AI Software & Data Infrastructure (+12.02%) led, while AI Power Generation / Grid (−4.68%) and AI Robotics / Machine Vision (−3.72%) were weakest. AI Cybersecurity's gain came from all three members: Rapid7 (+30.87%), Tenable (+19.79%) and SentinelOne (+12.38%), alongside broker notes pointing to a security spending refresh cycle and consolidation towards platforms; Tenable then fell 6.4% after hours on Wednesday despite beating forecasts. Wednesday itself brought a median basket gain of 1.64%, led by AI Data-Centre Cooling / Thermal (+7.53%), Semiconductor Subsystems & Materials (+6.80%) and Memory (+6.45%). Summit Insights downgraded Seagate to Hold, while Morgan Stanley reiterated its Overweight rating.

Exhibit 2: Libella AI baskets, five-session return (%)

Five sessions to 28 Oct; equal-weighted USD price returns. Oversold (RSI): NAURA, SMIC, Hua Hong, AMEC. Overbought: PTC, Rapid7, Tenable, Texas Instruments. Source: Libella data.

Treasuries settled mixed on Wednesday: the 2-year yield was unchanged at 4.74%, the 10-year rose 5bp to 5.05% and the 30-year 6bp to 5.36%, so the gap between 2- and 10-year yields widened to 31bp. December WTI settled $2.87 higher at $102.74/bbl, while the MOVE index of Treasury volatility fell 3.32 points to 94.55. At the weak end of credit, spreads are still widening (Exhibit 1b).

Exhibit 3: WTI crude oil, three months 90th WTI percentile v past year · $101.19, 05:54 29 Oct WTI crude, Generic 1st (December contract), $/bbl, daily to 29 Oct (05:54 London). Read: higher = tighter oil supply or higher risk premium. Source: Libella data (YFDP)

Exhibit 4: Treasury volatility (MOVE), three months 87th MOVE index percentile v past year · 94.55 on 28 Oct ICE BofA MOVE index of one-month Treasury option volatility, daily to 28 Oct. Read: higher = larger expected swings in Treasury yields. Source: Libella data (YFDP)

Source: Libella options data (delayed YFDP chains); snapshot 28 Oct* (pre-close, delayed). Method: see Libella Options Model at the end.

Seoul closed lower on Thursday after a volatile session: the Kospi opened slightly higher, rose to 6,100.11 and fell as low as 5,817.92 after Samsung's results before closing at 5,937.66, while the Kosdaq lost 2.34%. Samsung Electronics fell more than 4%, while SK hynix edged higher after Wednesday's jump. In Tokyo, the Nikkei 225 was ~1.1% higher at 64,650 late in the session, ahead of Friday's Bank of Japan decision; the Hang Seng was little changed and the Shanghai Composite ~0.9% lower in morning trade.

UK. The FTSE 100 edged up 0.07% to 10,694.5 on Wednesday, Budget day; GSK and Unilever fell ~4% on results while Standard Chartered rose ~5%. Lloyds Banking Group and Shell report today.

Europe. The Euro Stoxx 50 ended Wednesday little changed, while European wholesale gas reached a four-year high. The ECB decides today, with markets focused on whether it signals a December hike.

US futures. Nasdaq 100 futures were lower in Asian trade, with Dow futures firmer; Caterpillar, Eli Lilly, Merck and Mastercard report before the open.

AS OF gives the date of each value. Equities: previous close (Asia: close, or last if still trading). Futures are Generic 1st (front-month) contracts: last price, or settlement when shut. FX: last. Cash yields: settlement; credit spreads and real yields: latest published day. 52W PCT ranks the latest value against the past year.

Gen 1st = front-month contract. Fed funds: implied rate (100 − price) on the contract for the first full month after the next Fed meeting; rolls the day after each meeting.

Libella US consensus long: Libella calculation from SEC Form 13F filings. Libella US consensus short: Libella calculation from FINRA short-interest data. Raw, unhedged; equal weight, rebalanced daily; prices YFDP; RSI(14) descriptive, not a signal; RSI>70 = share of stocks with RSI above 70. OI change and positions in contracts. Open interest: CME Group daily volume and open interest. Skew (vol pts): 1-month 25-delta risk reversal (call IV minus put IV) from Libella option-chain snapshots (YFDP); negative = puts dearer. Lev. funds net: CFTC Traders in Financial Futures, leveraged funds, weekly (Tuesday positions); reading = net as % of open interest · 3-year percentile. AS OF gives each series' latest session. Credit stress = credit category of the OFR Financial Stress Index (US Treasury, Office of Financial Research; 0 = average stress). Latest -0.86 on 2026-10-26 (21th percentile since 2000; 1W +0.08, 1M +0.24). Rows: first reading at or above its 90th percentile (2.08) after 63 sessions below it; S&P 500 drawdown from its 52-week high that day, worst drawdown in the next 3 months, and price return 3 and 12 months later, all in %. Newest first. History, not a forecast. Libella calculation. CCC−B spread (ETF proxy): Libella calculation from BondBloxx CCC-rated (XCCC) and B-rated (XB) ETF closes via EODHD, scaled to the ICE BofA CCC & Lower and Single-B US High Yield spreads by back-test (Nov 2023–Oct 2026; typical error ±35bp; reliable for levels and 4-week changes, not daily moves). Not an ICE index. OFR credit stress: credit category of the OFR Financial Stress Index (US Treasury, Office of Financial Research; 0 = average stress). 4W = 20 sessions. Polymarket 'Balance of Power: 2026 Midterms' prices, last print each day (UTC); changes in percentage points (pp) of probability over calendar days. Market prices, not Libella forecasts.

Libella macro board: Sources