S&P 500 and Nasdaq 100 futures are erasing the bulk of yesterday’s losses ahead of the open on Friday.
On Thursday, an FT report indicating that OpenAI’s annual revenues were $20 billion lower than previously reported kneecapped the AI trade.
This saga involves a difference in accounting rather than a change to fundamental realities. However, that being said, fundamental realities may have been misunderstood due to the previous press on the subject!
The prior reporting represented an attempt from OpenAI to show its ARR using the “gross” approach that Anthropic has adopted, rather than its traditional “net” figures. So in “Anthropic-equivalent” terms, OpenAI’s ARR is $70 billion; by OpenAI’s traditional metrics, it’s $50 billion. Clear? Clear.
Data center stocks were among the most beaten-down on this news, having already been on the back foot after an Australian peer pulled its IPO.
Robinhood traders swarmed to buy the dips in CoreWeave, Nebius, IREN, Cipher Digital, and Applied Digital, all of which were in the top 20 most traded single securities. On the other hand, the rallies in consumer-geared names — Netflix, Uber, Walmart, McDonald’s, and Home Depot— were treated as an opportunity to exit, seeing the most selling pressure among single securities.
As a subsidiary of Robinhood, Sherwood Media is restricted from writing about any company in which Robinhood is or was a selling group member of the IPO during the regulatory "quiet period" for that company.
Blow Your Cover (Story)
There have many, many attempts to call a bottom in long-term bonds/a top in yields as rates headed skywards amid strong growth, rising oil prices, AI borrowing needs to fuel the boom, and European political hijinks.
Such calls have crescendoed over the past 24 hours thanks to one potent technical indicator and one contrarian sentiment signal:
“30yr yields overnight made a new high by less than 1bp, and are now red and below yesterday's lows, a key reversal day,” wrote BTIG chief market technician Jonathan Krinsky on Thursday. “Again, we don't think this is the end of the cycle for yields, but the risk/reward for tactical trades is now firmly lower for yields.”
“Odds are good we finally have that bottom for a reversion trade,” wrote Mark Dow, former hedge fund manager, IMF economist, and author of Behavioral Macro. “A red opening tomorrow would be ideal--not blood red, just red.”
Indeed, 30-year yields are modestly higher early this morning.
That’s the technical side. As for how brutal sentiment on bonds has become, The Economist’s cover story includes the evocative title, “Will bonds blow up?”
(However, Spectra Markets president Brent Donnelly — perhaps the king of incorporating magazine covers and pop culture references as trading tools — noted that the publication “also invokes Betteridge’s Law here,” which is a complicating factor. If a headline is phrased as a question, it is generally a “question to which the answer is no.”)
Whatever the case, bond bulls seemingly enjoyed having two different hooks to hang their hats on.
ETFs that either provide exposure to long bonds or to pockets of the market that have struggled amid surging interest rates have seen options activity tilted to the bull side lately. That’s particularly true for the Invesco S&P 500 Equal Weight ETFand the State Street Utilities Select Sector SPDR ETF, where five day put/call ratios are hovering near local lows.
Even here, however, there’s some nuance between how upside is being priced into options on those two products. For XLU, one month 25 delta calls trade with a higher premium to puts, with the normalized risk reversal at the upper end of its one-year range. That points to relatively elevated demand for calls versus puts. For RSP, one month risk reversals are still deeply negative.
BTIG’s Krinsky, for his part, spotlighted homebuilders (via the iShares US Home Construction ETF) as a way to capitalize on the potential for lower yields.
“ITB made a fresh 52wk low this morning below the May lows, but is now back above that, giving a 'false breakdown' signal,” he wrote. “This creates a very attractive and timely entry point, with a well-defined stop below the ~$83 level.”
Investor Inertia
One prominent feature of the equity investing landscape is that certain groups of stocks are traded together. Think factors (like momentum), sectors/industry groups, or themes (like “China sales exposure”). Sometimes these groupings are based on common features in how these companies perform operationally. Other times it’s based on their trading behavior. But many times it’s based on an expected convergence in outcomes.
Making predictions is hard — especially about the future. So I’ve become convinced that there are tremendous alpha opportunities by sorting through stocks that have explicitly or implicitly been grouped together and trade the same way because of it, and finding babies that are getting thrown out with the bathwater.
The easiest example of this comes from Q1 2026, when pretty much every iShares Expanded Tech Software ETF component would sell off in unison every time there was a press release about a new Claude capability. That pushed a name like CrowdStrike down 25% year to date in late February. It ended Thursday as one of the top 20 S&P 500 stocks in 2026, up roughly 125% so far.
Babies get thrown out with the bathwater when stocks trade in baskets.
That’s something I’ve been thinking a lot about amid the rise (well, really the fall!) of so-called “consumer inertia” stocks. These companies are supposed to face headwinds from AI agents that will cancel dormant subscriptions, move money into higher-yielding accounts, or just disintermediate their utility. As I’ve flagged, many stocks thrown into the “consumer inertia” bucket were getting hammered long before Instinct or Muse were A Thing!
This cohort had a big bounce on Thursday amid the confusion over OpenAI’s revenues. In fact, it was the mirror image of the move in semiconductors, which underscores how mechanical and mindless the price action can be.
Consumer inertia and the rise of personal AI agents may be a threat to many of these stocks. But a blind belief that this nascent dynamic will meaningfully impair sales and profit growth across all these names? Well, that would be investor inertia.
Seen on Socials
Via Corey Hoffstein on X:
What to watch
Tuesday:
Earnings from JPMorgan, Goldman Sachs, Citi, and Wells Fargo slated for release ahead of the open.
Wednesday:
ASML releases earnings overnight.
Bank of America, Morgan Stanley, BlackRock, Fastenal, and Progressive release earnings premarket.
September CPI inflation report scheduled for 8:30 a.m. ET.
Thursday:
TSMC slated to report results overnight.
Earnings from BNY Mellon, Schwab, and Interactive Brokers slated for release ahead of the open.
September retail sales and PPI inflation scheduled for 8:30 a.m. ET.
American Airlines and JB Hunt results due out postmarket.
