Amazon Web Services outage spans globe, Trump says he wants China to buy soybeans

Key Concepts

• Amazon Web Services (AWS) Outage: A widespread disruption affecting numerous websites and applications due to operational issues with Amazon's cloud services.
• US-China Trade Negotiations: Ongoing discussions between the US and China regarding trade policies, with a focus on agricultural purchases (soybeans) and other trade-related issues.
• iPhone 17 Sales Performance: Strong initial sales of Apple's latest iPhone model, outperforming its predecessor in key markets like the US and China.
• US Government Shutdown: The ongoing closure of US federal government operations, impacting the release of economic data.
• Consumer Price Index (CPI): A key inflation metric, with the September report delayed due to the government shutdown.
• Tesla Earnings: Anticipation surrounding Tesla's Q3 earnings report, with investor focus on sales, profitability, and future growth strategies (e.g., robo taxi).
• AI Stocks and Investment: The significant investor interest in Artificial Intelligence-related companies, with concerns about potential "bubbles" and implementation challenges.
• Regional Bank Strain: Emerging concerns about the financial health of some regional banks, particularly in the context of high interest rates and concentrated loan portfolios.
• Bitcoin Seasonality: Historical patterns of Bitcoin's price movements throughout the year, with a focus on historically strong months like October.
• Beyond Meat Restructuring: A significant stock price surge for Beyond Meat following news of its debt restructuring plans.
• Caring Beauty Division Sale: The sale of Caring's beauty division to L'Oreal, allowing Caring to refocus on fashion and reduce debt.
• TKMS IPO: The market debut of TKMS, the marine defense division of Thyssen Group, amidst surging demand for defense technology.
• Japan's Political Landscape and "Takaichi Trade": The formation of a coalition government in Japan and the potential economic implications under a new Prime Minister.
• MAG 7 Capex and Free Cash Flow: Analysis of capital expenditure and free cash flow trends for the seven largest technology companies.

Market Sunrise: October 20th

This broadcast covers several key market developments and upcoming events.

US-China Trade Relations and Soybean Deal Prospects

President Trump expressed optimism about reaching a trade deal with China, specifically highlighting the importance of China resuming soybean purchases. He stated, "One of the things I want is China's going to buy soybeans. I want China to stop with the fentinol. We very, you know, normal things. I don't want them to play the rare earth game with us." He believes a deal on soybeans is achievable, emphasizing, "I do believe. Yeah. Because otherwise I'm not going to make a deal. No, I want them to buy. Our farmers have been boycotted by China as a negotiating point. I don't want that."

Key Data:

• China imported zero soybeans from the US in September, the first time in seven years.
• Last year, China imported 1.7 million metric tons of soybeans in September.

President Trump also confirmed plans to visit South Korea and other Asian nations, with trade, security, and regional cooperation expected to be central to discussions.

Amazon Web Services (AWS) Outage Impact

A widespread outage affecting Amazon Web Services (AWS) disrupted numerous websites and applications globally. AWS cited "operational issues affecting multiple services." Users reported problems with a wide range of platforms, including Amazon itself, Canva, United Airlines, Verizon, cloud-based games like Roblox and Fortnite, and the crypto exchange Coinbase. AWS has indicated that recovery is underway.

iPhone 17 Sales Outperform

Apple's newest iPhone 17 is demonstrating strong sales performance, with a 14% increase in sales during its first 10 days of release in the US and China compared to the iPhone 16. In China, sales of the standard iPhone 17 model have nearly doubled that of the iPhone 16 in the same launch window. This success is attributed to upgrades including more storage, a better screen, and Apple's new A19 chip.

Key Economic Data and Earnings to Watch

This week is crucial for economic data and corporate earnings.

Economic Data:

• US Government Shutdown: The shutdown is entering its fourth week, delaying key economic reports.
• September CPI Report: The Bureau of Labor Statistics is scheduled to release the September Consumer Price Index (CPI) report on Friday. This report was originally due on October 15th but was delayed.
  • Forecasts: Economists predict total CPI to accelerate to 3.1% year-over-year, while core CPI is expected to hold steady at 3.1% year-over-year. This data will provide insights ahead of the Federal Reserve's FOMC meeting later in October.

Earnings Reports:

• Tesla: All eyes will be on Tesla's third-quarter earnings report, due after market close on Wednesday. Investors are anticipating strong profits, potentially driven by buyers rushing to purchase vehicles before the expiration of the $7,500 EV tax credit. Following previous warnings of "rocky quarters," investors will seek clarity on Tesla's future strategy, including its robo taxi business.
• Other Key Earnings: Netflix, Coca-Cola, IBM, and Intel are also set to report.

Expert Insights on Market Trends

Ethan Devich, Senior Investment Advisor at Moneta, shared his perspectives:

• Consumer Sentiment and Tech: Devich is keen to observe consumer sentiment from companies like Coca-Cola and what tech companies will reveal. He notes the "resilient consumer" as a confounding feature of the current market.
• Tesla's Focus: He believes the focus on Tesla might shift from car sales to its "robots arm" or robo taxi business. He points to a "flooding of the zone around news flow" for Tesla, including executive compensation and a potential shift in focus from robotics. He anticipates challenges with sales figures, especially in Europe and the US, as incentives expire.
• AI Stocks as Market Leaders: Devich sees AI stocks as the current "beacon" for the market, indicating where the AI wave is heading and if cracks are forming.
• IBM and Intel (Chip Names): Regarding IBM and Intel, Devich highlights a focus on the "interconnectivity around many of these AI stocks" and potential implementation flaws in AI buildout strategies, such as data center power costs affecting communities. He expects backward-looking reports on strong orders but will look for any signs of slowdown. He uses the metaphor of "cockroaches" (from Jamie Diamond) or "canaries in the coal mine" for the AI sector.
• Regional Bank Concerns: Devich acknowledges the "cockroach metaphor" regarding regional banks, linking it to recent difficulties in underwriting within the private credit market. He notes that two more regional banks have shown signs of substandard due diligence or credit landscape cracks. However, he believes this is not systemic, citing the difference between large, diversified banks and concentrated regional banks. He sees potential for large banks to absorb regional ones, but acknowledges that high interest rates are causing strain and distress, particularly in concentrated portfolios.

Bitcoin Seasonality and Catalysts

Jared Blickery, in "Stocks in Translation," discussed Bitcoin's seasonality:

• October Performance: October is historically one of the best months for Bitcoin, with a median gain of 11% and an 86% positive win percentage since 2018.
• Historical Data: Analysis of Bitcoin futures data from 2018 to 2024 shows positive median gains in July (18%), February (11%), and October (11%). However, November and December tend to be negative, unlike the typical year-end rally in stocks.
• Day-by-Day Analysis: The period from mid-October to the first week of November is identified as a seasonally bullish time for Bitcoin.
• Key Catalysts for Bitcoin Investors:
  1. Bank Custody of Crypto Assets: The SEC's approval in January is leading to banks offering custody services, which may attract more investment advisors.
  2. Mt. Gox Deadline (October 31st): The distribution of confiscated coins from the 2014 Mt. Gox collapse could lead to a small risk of "whales" dumping holdings.
  3. New IRS Tax Forms (Spring 2026): New forms for reporting crypto sales may create jitters around tax day, but are considered a small risk.
  4. ETF Flows: Spot crypto funds have seen $40 billion in inflows this year. Any slowdown in these flows could signal lower demand and impact prices.
  5. Current Trading Range: Bitcoin has been trading between approximately 108,000 and 125,000 since July. Investors are cautioned about potential "rug pulls" and false breakouts.

Trending Stocks and Market Movers

• Amazon: Barely moving despite the AWS outage.
• Beyond Meat: Stock surged over 70% in pre-market trading after announcing debt restructuring. The company has lost over 99.6% of its value in the last five years and is trading around $1.
• Paramount SkyDance: Planning mass layoffs to save around $2 billion, leading to a 1% pre-market stock increase.
• Caring (Gucci, Balenciaga): Shares up over 3% after selling its beauty division to L'Oreal for 4 billion euros. Caring's stock has nearly doubled in six months (+94%) as it refocuses on fashion and debt reduction.
• TKMS (Thyssen Group Marine Defense): Made its market debut at a valuation of over $4 billion. Parent company Thyssen Group shares fell 20%, while TKMS opened sharply higher in Germany, touching +80% and trading around 70% higher midday. Demand for defense technology is high due to the war in Ukraine.
• Tesla: Trading volumes are high ahead of its earnings report. Shares were up over 1% in pre-market.
  • Q3 Earnings Estimates: Revenue projected at $26.27 billion (up nearly $1 billion year-over-year), adjusted EPS at 53 cents, and EBITDA at potentially $3.78 billion.
  • Q3 Sales: Achieved a quarterly record of 497,000 EVs sold, attributed to the EV tax credit pull-forward.
  • Future Growth: Discussion around cheaper Model Y and Model 3 standard versions for the next quarter, and updates on robo taxi deployments as Tesla's "biggest AI play."
  • China Market: Positive outlook from Tesla bulls like Dan Ives, citing good production from Giga Shanghai and popularity of the new Model Y L. Tesla's brand perception and Musk's image in China are seen as advantages. The question remains if China can offset potential losses in North America and Europe.

Japan's Political Landscape and "Takaichi Trade"

The formation of a coalition government in Japan between the Liberal Democratic Party and the Innovation Party suggests Sai Takaichi is likely to become Japan's first female Prime Minister. Analysts anticipate more stimulus and opposition to interest rate hikes, which could negatively impact the Japanese yen and government bonds but be positive for equities. The Nikkei index jumped over 3% to an all-time high, and the yen slipped modestly. However, it's a minority government, requiring support from other opposition groups, potentially including increased defense spending to deter China and stricter immigration rules.

AI Bubble Concerns

Charles Schwab's analysis, presented by Liz Ann Saunders, highlights concerns about the AI boom:

• MAG 7 Capex: The "MAG 7" (seven largest tech companies) account for about a third of overall S&P 500 capital expenditure.
• Free Cash Flow Deceleration: Free cash flow growth for the MAG 7 has shifted from over 60% positive five quarters ago to slight negative territory.
• Equity-Financed Boom: The current boom has been largely financed by equities.
• Shift in Speculative Fervor: Speculative fervor has moved from mega-cap names to more "esoteric micro small levels" like quantum computing, drones, and meme stocks. While these have cooled recently, AI-driven speculation is now concentrated in smaller pockets rather than mega-cap names.

Asia-Pacific and European Markets

• Asia-Pacific: Markets were in the green, with investors seemingly unfazed by China's economic growth rate slowing to 4.8% in July-September (in line with expectations). China also kept its benchmark lending rate unchanged at 3%.
• Europe: Stocks were positive, with defense stocks leading gains after a volatile period.

US Market Outlook

US stocks were expected to open positively, potentially on hopes of a US-China trade deal.

Conclusion

The broadcast highlights a dynamic market environment with significant events on the horizon. Key themes include the ongoing US-China trade negotiations, the impact of tech outages, strong consumer demand for new technology, and the evolving landscape of AI investment and regional banking stability. Investors are closely watching upcoming earnings reports, particularly Tesla's, and economic data like the CPI for further market direction. The analysis of Bitcoin seasonality and potential catalysts also provides insights into the cryptocurrency market.