The Monday Report – 19 October 2026

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The Nasdaq sold off again on Friday, led by memory and chip stocks. It was a tough week for AI-related technology stocks as indications emerge of hedge fund deleveraging being the cause of the selling pressure.

The oil price moved back above US$100/bbl on Middle East travails.

The ASX200 rallied on Friday for a third consecutive week of gains, with ASX200 futures down slightly to start the week.

World Overnight
SPI Overnight	8826.00	– 11.00	– 0.12%
S&P ASX 200	8806.70	+ 87.00	1.00%
S&P500	7659.44	– 84.62	– 1.09%
Nasdaq Comp	26140.03	– 572.99	– 2.14%
DJIA	52002.41	– 175.28	– 0.34%
S&P500 VIX	19.99	+ 3.53	21.45%
US 10-year yield	5.10	+ 0.01	0.18%
USD Index	102.02	– 0.51	– 0.50%
FTSE100	10881.90	+ 41.55	0.38%
DAX30	25622.61	+ 239.99	0.95%

Good Morning,

The ASX200 rallied sharply higher on Friday, up 87 points or 1% to 8806.70, its best one-day performance in two months, since early August.

Technology (up 5.62%) and Healthcare (up 2.49%) led the gains, as well as Materials (up 3.18%) on Friday. Financials lagged on Friday (-0.52%).

The ASX200 rose 1% over the week past, marking the third consecutive week of gains.

There is increasing evidence emerging that the sell-off in AI-related stocks globally has everything to do with hedge fund deleveraging. More details are outlined below.

On the calendar this week, RBA Deputy Governor Hauser is speaking at the Citi A&NZ Investment Conference on Wednesday, which could shed more light on how the RBA is thinking about rate hikes ahead of the September quarter CPI print on October 28 and the next RBA meeting on November 3.

Quarterly updates begin in earnest with South32 ((S32)) and Amplitude Energy ((AEL)) scheduled for market updates today, while AGM season moves into full swing, with Stockland Group ((SGP)) today.

RBC Capital on Smart Parking ((SPZ)):

“Smart Parking is a parking management technology company that uses Automatic Number Plate Recognition (ANPR) to enforce parking conditions on privately owned land.

“The large TAM in the six existing territories provides a long runway of growth, where the unit economics are very attractive (50%+ incremental EBITDA margins, <1yr payback on capex).

“Organic expansion has been the main driver of growth, but the recent move into the US has added sizable M&A into the mix (traditional parking businesses, to which ANPR can be added).

“We initiate coverage with an Outperform rating and price target of A$1.10.”

For more details and to stay in touch with which companies are reporting, AGMs and going ex-dividend, check out the FNArena Calendar https://fnarena.com/index.php/financial-news/calendar/

Market Overview, J.L. Bernstein extract

The AI Selloff Reached Software

The Nasdaq is headed for its worst week since June, while the Dow is on track for a gain.

Chip stocks fell for a ninth straight day, their longest losing streak since 2006, and software went down with them.

Goldman Sachs says investors this week demanded record extra yield on risky AI bonds, while other risky bonds barely moved.

So far, the trouble is staying inside AI.

U.S. Crude Crossed US$100

U.S. crude topped US$100 a barrel, and global Brent crude hit US$109.

Iran stepped up attacks in the Strait of Hormuz this week, and Ukraine vowed to keep hitting Russian refineries.

Energy was the best sector in the S&P500, and Chevron $CVX helped keep the Dow’s losses small.

Expensive fuel is a big reason inflation keeps running hot.

Rate Hike Bets Faded After Warsh

Fed Chair Kevin Warsh gave no hint about this month’s meeting, and traders took that as no rush.

Odds of an October hike fell to about one in seven, from more than one in four on Thursday.

Bank of America still expects a hike Oct. 28.

Its economists say more than half of prices outside food and energy are rising faster than the Fed’s target.

ANZ Bank, Australian Morning Focus extract

US equity markets traded defensively into the weekend, while European bourses rose.

Bond yields had a quieter day. The S&P500 closed down -1.1%, while the tech-heavy Nasdaq fell -2.1% on concerns about the profit outlook for heavily indebted AI firms as funding costs rise.

The EuroStoxx50 rose 0.6%, and the FTSE100 rose 0.4%.

The yield on the 10y US Treasury note rose 1.5bp to 5.07%, and yields were also modestly higher across Europe.

The active WTI future rose 3.4% to US$101.4/bbl. Gold was little changed at US$4,165.6/oz.

US Industrial production rose 0.7% m/m in September, above the consensus of 0.4% m/m. It has risen steadily through 2026 and is at its highest since September 2018.

Manufacturing production rose a more modest 0.3% m/m, as a 3.0% m/m fall in motor vehicle production weighed. Excluding motor vehicles, manufacturing production rose 0.5% m/m, the largest gain since April.

Capacity utilisation rose 0.5pts to 76.9% but remains below the long-run average of 79.4%.

Actions speak louder than words: The FOMC enters its blackout period tomorrow ahead of the 27–28 October meeting. The market now sees only a 15% chance of a rate hike in October, after Fed Chair Warsh refrained from providing guidance to the market in remarks at the annual meeting of the IMF.

In our assessment, data since the September policy meeting have supported the case for an October rate hike. September’s CPI and PPI inflation data showed underlying disinflation has stalled and pipeline pressures are building.

Against a backdrop of solid growth and a stable labour market, we think the appropriate monetary policy strategy is to act decisively and deliver consecutive rate hikes, as has been typical of Fed tightening cycles since the early 1990s.

In the absence of forward guidance from Warsh, action is required to anchor the Fed’s inflation-fighting credibility.

Supply risks pushed up energy prices last week. The rest of the complex suffered, as risk appetite remained subdued.

US Market Call: Yes, AI Is Too Big To Fail, Ed Yardeni & Toby Hearst, Yardeni QuickTakes, extract

I. Bonds: We’ve all been suffering from AI fatigue for a while. The daily news about it has been head-spinning. We’ve been warned that AI is a bubble that will burst, just as the late-1990s tech bubble led to the Tech Wreck in the early 2000s.

Analogies to the credit excesses of the Great Financial Crisis have also been proffered. Last week’s rout in AI-related stocks convinced the naysayers that the AI bubble is bursting, just as they’ve long predicted it would.

Our happier spin is that the Bond Vigilantes are now doing a good job of regulating and allocating capital to the AI ecosystem. Credit-quality spreads are widening to reflect the riskiness of the bonds issued by some of the dodgier AI-related borrowers like CoreWeave and Oracle.

The rapidly rising cost of credit for such borrowers should deflate the AI bubble without bursting it. If some AI-related credits do blow up, the Godfathers of the AI mafia (along with their protectors in the government) will clean up the mess.

As in “The Godfather II,” Michael Corleone has too much at stake to let his brother Fredo screw up the family business.

Meanwhile, the rout in the AI corporate bond market has triggered a flight to quality and safety that has stopped the rout in the US Treasury bond market. This confirms our thesis that the recent rise in US bond yields mostly reflects better-than-expected economic growth.

Tougher credit conditions in the AI corporate bond market should curb some of the AI excesses.

However, we doubt this will trigger an economy-wide credit crunch or a recession. We aren’t convinced that it will slow capital spending much, since labor and materials shortages, along with public NIMBY pushback, have already slowed the pace of data center construction.

II. S&P Earnings: The big banks reported mixed but solid overall Q3 earnings last week. On average, they met banking industry analysts’ expectations.

Last week, the consensus EPS for all analysts covering S&P500 companies edged up to US$365.70 this year, US$424.19 next year, and US$492.62 in 2028. Those are extremely bullish expectations, considering that we are still forecasting US$500 in 2030!

If the analysts are right, the S&P500 could rise to 10,000 by the end of next year, assuming a forward P/E of 20.0–21.0. For now, we are sticking with 10,000 by the end of the Roaring 2020s, i.e., at the end of 2029.

Last week, Q3’s consensus EPS growth rate remained at 24.0% y/y, while the Q4 estimate rose to 29.8%. We’ve been among the most bullish investment strategists on the Street, but analysts are still ahead of us.

The S&P500, S&P400, and S&P600 continued to rise to record highs last week.

III. Stock Valuation: The recent stock market selloff has been driven by falling forward P/Es even as forward earnings have been rising to record highs. The former are nearing the troughs they made during last year’s “Liberation Day” lows.

Since roughly mid-2025, rising FEMO (fabulous earnings momentum) has more than offset falling FOMO (fear of missing out). Since October 6, the reverse has been true: Falling FOMO is outpacing the rise in FEMO.

IV. Performance: The stock market had a tough week last week. Leading the -1.95% pullback was MAGS (down -3.89%), while XMAGS fell -1.38%. The Russell2000 fell -2.4%, while the Nasdaq fell -4.5%. The DJIA rose 0.67% for the week.

The Impressive 493 is still outperforming the Magnificent 7 on a year-to-date basis, with a gain of 14.1% versus 10.2%.

V. Sentiment: The market letter writers have been more bullish than retail investors lately. Odds are they will both be a bit more pessimistic this week.

Only 47.4% of the S&P500 are trading above their 200-day moving averages.

VI. Commodities: Aluminum prices are falling after matching their 2022 peak. This suggests that supply-chain disruptions attributable to Gulf War III are receding, as they had done after Russia invaded Ukraine.

Copper prices remained near their recent record high last week despite chatter that tightening credit conditions could slow the AI buildout and weigh on overall GDP growth.

The outlook for higher-for-longer diesel prices offers no relief.

We aren’t giving up on gold yet. The current correction resembles previous ones that occurred in the middle of significant gold bull runs. This time, rising interest rates have been weighing on the metal’s price.

However, significant buying by the People’s Bank of China and other central banks isn’t interest-rate sensitive.

We are still aiming for a gold price of US$5,000 an ounce by the end of this year or early next year.

Bull/Bear Market Report, Lance Roberts, SimpleVisor, extract

The market sold off hard to finish the week. The S&P500 fell -1.09% on Friday to 7,659.44, closing the week down -1.95%, its worst week since June.

The Nasdaq Composite fared worse, dropping -2.15% on Friday and -4.48% for the week. Meanwhile, the Dow eked out a 0.67% weekly gain, and the Russell2000 lost -3.05%.

That split tells you most of what you need to know about what happened: there was a continued rotation from growth and risk to value and safety.

The selling was concentrated and professional. The trigger was a scare about how the AI buildout would be financed. CoreWeave lost a quarter of its value this week, with its bonds yielding above 15%, and that gave investors an excuse to dump anything “AI-adjacent.”

The semiconductor ETF (SMH) fell -10.5% on the week. Lam Research dropped -17.2%, Micron -14.6% and Intel -14.2%.

Per Goldman Sachs prime brokerage data, hedge funds net sold global AI stocks for five straight sessions, unwinding every dollar of net buying since early 2025. Long sales outpaced short sales roughly 3.5 to 1, so this was “de-risking,” not a new bet against the market.

Here is the part the headlines missed. It was NOT a liquidation of everything. Staples rose 5.0%, energy 4.9% and health care 3.5%, and the equal-weight S&P500 actually gained 0.5% while the cap-weighted index fell -2.0%.

Does that set up a rally? Possibly. Positioning is cleaner, and Goldman puts hedge fund AI allocation at 26.1%, down from 31.7% in June. But the same Goldman note says this deleveraging is “closer to its beginning than its end,” with gross leverage still near five-year highs.

Of course, that note was before Friday’s selloff.

The single most important level next week is 7,567. Hold it, and this is a pullback inside an uptrend that sets up a tradeable bounce.

Lose it on a closing basis, and the market is telling us the AI unwind has further to run.

The AI Pendulum May Have Overshot: Stepen Innes, Dark Side of the Boom, extract

• Mark Wilson at Goldman Sachs thinks the AI unwind has moved far enough that positioning and sentiment may now be overshooting the underlying fundamentals.

• The hedge-fund damage has been severe, especially in Asia and TMT, but Goldman still sees no convincing evidence that compute demand or pricing has rolled over.

• The next phase may be less about chasing every AI beneficiary and more about separating the biggest self-funding spenders from the weaker parts of the financing chain.

• Bonds have finally started to behave like a hedge again, which could matter just as much as the AI positioning reset if yields have genuinely exhausted their latest move.

Corporate news in Australia:

• Cleanaway Waste Management ((CWY)) shares fall -5.8% as EQT considers proceeding with its proposed $9.4bn takeover
• Anthropic secures a 15-year contract at DigiCo Infrastructure REIT’s ((DGT)) Sydney data centre, replacing Datasection as the expected customer
• Gold Fields presses Northern Star Resources ((NST)) to engage over its proposed $38.7bn takeover following meetings with shareholders
• Ingenia Communities ((INA)) planned acquisition of Peet ((PPC)) faces uncertainty as Brown-Neaves reconsiders its Flagstone City stake transaction amid Warburg Pincus’s takeover pursuit
• Brookfield’s $4.1bn takeover of Reliance Worldwide ((RWC)) clears the go-shop period, with shareholder approval the next hurdle
• Ares joins KKR and Global Infrastructure Partners in the $7bn auction for Rio Tinto’s ((RIO)) Australian and Canadian power assets
• XRG establishes Australian entities ahead of potential energy acquisitions, with North West Shelf negotiations ongoing and no renewed bid for Santos ((STO)) confirmed
• DAZN reviews Foxtel’s future following its $3.4bn acquisition, with preliminary discussions involving Tabcorp Holdings ((TAH))
• Microsoft cancels a major Nscale data centre agreement, raising uncertainty over Australian entrepreneur Joshua Payne’s planned multibillion-dollar listing
• Firmus canvasses shareholders for a capital raising of up to US$3bn ($4.3bn), with a Nasdaq listing now targeted for late 2027
• Fund managers reassess Firmus’s valuation and early investors’ paper gains following the collapse of its proposed ASX IPO
• Australian-backed Margaux Platforms leads a EUR200m equity and debt financing package for Astor to develop data centres across Europe
• Deep Yellow ((DYL)) delays its Tumas project investment decision beyond 4Q 2026 amid weak equity markets and funding constraints
• Overwatch Technologies ((OWL)) raises $8m through an ASX IPO to fund growth in maritime security and naval data intelligence
• Blackstone-owned Crown Resorts reports higher revenue but flags ongoing debt and regulatory risks
• Daniel Petre backs Sydney-based Savana Active ETFs at a $20m valuation as existing investors increase their stakes
• FitzWalter Capital secures a worldwide asset-freezing order against Vietjet over US$250m in unpaid aircraft leases, complicating the airline’s Australian expansion plans

On the calendar today:

-NZ Sep Trade balance

-CH 3Q GDP

-CH Sep Industrial production

-CH Sep Retail sales

-CH Sep Unemployment

-AMPLITUDE ENERGY LIMITED ((AEL)) Qtrly update

-F.F.I. HOLDINGS LIMITED ((FFI)) ex-div 12.50c (100%)

-SOUTH32 LIMITED ((S32)) Qtrly update

-SOLARIS AUSTRALIAN EQUITY INCOME PLUS LIMITED ((SET)) ex-div 0.7c (100%)

-STOCKLAND ((SGP)) AGM

-WHITEFIELD INCOME LIMITED ((WHI)) ex-div 0.58c (100%)

-WAM INCOME MAXIMISER LIMITED ((WMX)) ex-div 0.66c (100%)

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

Spot Metals,Minerals & Energy Futures
Gold (oz)	4173.22	+ 71.68	1.75%
Silver (oz)	57.45	+ 1.84	3.31%
Copper (lb)	6.53	– 0.02	– 0.31%
Aluminium (lb)	1.37	– 0.01	– 0.86%
Nickel (lb)	7.02	+ 0.01	0.15%
Zinc (lb)	1.73	– 0.01	– 0.47%
West Texas Crude	97.66	+ 2.56	2.69%
Brent Crude	105.81	– 0.18	– 0.17%
Iron Ore (t)	90.57	– 0.17	– 0.19%

The Australian share market over the past thirty days…

Index	16 Oct 2026	Week To Date	Month To Date (Oct)	Quarter To Date (Oct-Dec)	Year To Date (2026)
S&P ASX 200 (ex-div)	8806.70	1.03%	0.20%	0.20%	1.06%

BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS
BSL	BlueScope Steel	Upgrade to Buy from Lighten	Ord Minnett
CXO	Core Lithium	Upgrade to Buy from Lighten	Ord Minnett
EBR	EBR Systems	Downgrade to Speculative Buy from Buy	Morgans
FPR	FleetPartners Group	Downgrade to Equal-weight from Overweight	Morgan Stanley
GLF	Gemlife Communities	Downgrade to Hold from Buy	Bell Potter
JIN	Jumbo Interactive	Upgrade to Buy from Hold	Bell Potter
KAR	Karoon Energy	Upgrade to Overweight from Equal-weight	Morgan Stanley
LIC	Lifestyle Communities	Upgrade to Hold from Lighten	Ord Minnett
MIN	Mineral Resources	Upgrade to Buy from Accumulate	Morgans
PDN	Paladin Energy	Upgrade to Buy from Accumulate	Morgans
		Upgrade to Accumulate from Sell	Ord Minnett
PLS	PLS Group	Upgrade to Buy from Hold	Bell Potter
		Upgrade to Accumulate from Trim	Morgans
RGN	Region Group	Downgrade to Hold from Buy	Bell Potter
SKG	Storage King	Downgrade to Sell from Hold	Bell Potter
WES	Wesfarmers	Upgrade to Buy from Hold	Ord Minnett

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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