Oil rose sharply on Friday as selling spread across U.S. stocks. The Dow fell 1.2%; rebounds in some chip and software stocks were not enough to lift the wider market. Next week's Fed decision and major technology companies' earnings will test whether this divergence continues.

Expensive oil can raise companies' transport and production costs. If it also makes inflation harder to bring down, interest rates may stay high for longer. That is why I assess data-center investment by looking at today's financing costs and when the spending will pay back, alongside future demand.

Key takeaways

  • A modest index decline does not mean most stocks held up well. Gains in a few large technology companies can support the average; a more convincing recovery needs buying to spread to more companies.
  • Oil rose while gold and silver funds fell. The assumption that geopolitical tension will lift all precious metals at once did not work on Friday.
  • I use the session lows and highs below as nearby monitoring boundaries. Moving beyond them provides new information; it does not by itself establish lasting support, a target or a buy signal.

What happened?

  • Reuters reported on October 23 that Houthi attacks in Saudi Arabia had increased concerns about energy supplies. Brent rose 3.14% to settle at $116.72 a barrel. The risk described in the report is the possibility of further disruption; it does not establish that oil production or shipments stopped entirely. A sustained cost increase could squeeze the profits of energy-intensive companies.
  • Associated Press (@AP) reported that nearly three-quarters of S&P 500 constituents fell on Friday. The index declined to 7,623.68. The Dow closed at 52,215.16, while the Nasdaq Composite lost 0.2%. Following Thursday's technology-led selloff, weakness was being felt across more companies.
  • In the U.S. Treasury's daily figures, the 10-year Treasury yield rose from 4.96% on Thursday to 5.00% on Friday. Higher yields give investors an alternative to stocks and can also raise the cost of new borrowing. Persistently higher oil prices and borrowing costs could make it harder for strong sales growth to translate into a higher share price.

What changed since yesterday?

  • The semiconductor fund rebounded on Friday after Thursday's sharp decline, and software companies also rose. Funds tracking small companies and long-term U.S. Treasuries fell after finishing the previous day higher. Buying and selling are moving between groups; no single sector tells the whole market's story.

Market levels

Global risk and oil

  • December Brent was at $116.72. Friday's $112.74 low is potential nearby support; a move above the $117.45 high could intensify pressure from oil costs. With this upper threshold close, supply news remains important; a return to the lower boundary would unwind most of the latest jump.

U.S. equities and bonds

  • SPY ($SPY), which tracks the S&P 500, finished Friday at $759.97. The session low of $758.68 is potential support; reclaiming its $763.47 high is the first threshold I will watch for a recovery from the latest session's loss.
  • QQQ ($QQQ), the Nasdaq 100 ETF, stayed very close to its previous close at $704.40. Friday's lower boundary of $701.16 is potential support, with $709.30 the first confirmation threshold. Until the upper boundary is cleared, it is too early to treat one flat session as a strong reversal; losing the lower boundary would mean renewed weakness.
  • SMH ($SMH), the semiconductor ETF, rose to $527.20. The first threshold for the rebound is Friday's $533.34 high, with potential support at $521.33 below. While prices remain within this range, it is still unclear whether buying after Thursday's loss will last.
  • IGV, the ETF tracking software companies, closed at $110.59, near its session high of $110.76. Clearing the upper threshold while holding potential support at $107.64 could strengthen the rebound. I am not extending this relatively strong close to the whole technology sector.
  • TLT ($TLT), which tracks U.S. Treasuries with maturities longer than 20 years, fell to $81.34. A move below $81.27 would also lose Friday's low, which is potential nearby support. The first recovery threshold is $81.80. Falling bond prices and rising yields are two sides of the same move.

Gold and silver

  • GLD ($GLD), which tracks gold, finished the latest session at $366.61. I am watching Friday's $364.33 low as potential support; falling below it would increase the risk of an extended selloff. The first recovery confirmation threshold is $369.25. Rising Treasury yields also increase the opportunity cost of holding gold, which pays no interest.
  • SLV ($SLV), the silver ETF, declined to $48.72. Friday's $48.98 high is the first upper threshold, with potential nearby support at $47.87. Industrial demand also matters for silver, so rising oil prices alone are not automatically positive for the metal.

Red flags

  • Fresh news about energy infrastructure or tankers could move prices quickly. A report of an attack, a facility's operating status and the continuation of shipments are separate facts; the cost scenario depends on which of them changes.
  • A company's earnings can beat expectations while its stock falls. For companies increasing capital spending, cash needs, borrowing terms and the outlook also deserve close attention alongside reported earnings.

Calendar

  • October 27-28: Federal Reserve policy meeting (FOMC). Guidance about subsequent meetings will matter alongside the decision.
  • October 29: First estimate of U.S. third-quarter GDP, plus September personal income, spending and personal consumption expenditures (PCE) inflation.
  • October 30: U.S. third-quarter Employment Cost Index, tracking changes in wage and benefit costs.

My analysis

Today I am looking at how companies will finance growth as closely as how much they can grow. On CNBC, Apollo Chief Economist Torsten Slok highlighted the question of where the capital needed for data centers and energy infrastructure will come from. High interest rates can reduce the present value of projects whose earnings are years away; a company generating strong cash flow is therefore in a different position from one continually seeking fresh debt.

Next week, I will first watch whether oil holds its gains, then the response in yields and the cash outlook in earnings reports. My confidence in a recovery would increase if energy pressure eased, borrowing costs fell and buying spread to more companies. Improvement in only one of those conditions would not automatically resolve the other two.

Sources

This is not investment advice; it is a research and monitoring note.