Apple and Palantir Deliver, but Investors Shrug. Here’s Why.
Rotation is still happening, but a promising open fades into another ugly close.
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Market action looked upbeat at the start of Monday. Oil fell sharply, and technology stocks bounced back from a brutal week. Breadth was running close to 70% positive at midday. But as the day went on, things turned ugly. The S&P 500 hit its high 45 minutes into the session and then declined steadily for the rest of the day.
The Invesco QQQ Trust (QQQ) led the decline with a loss of about 1.3%, while the Russell 2000 held on to a small gain. There was enough rotation to keep breadth positive at around 54%, but technology, biotechnology and oil all reversed hard.
A strong open that gets sold all day is not what you want to see after a week like the last one. It tells you that sellers were using the early strength as a chance to get out, not that buyers were stepping up.
The good news is that this is still rotation out of technology rather than broad selling. Money is moving to other areas of the market, but it is a bumpy ride, and the groups that benefit keep shifting.
Three Catalysts This Week
It is an interesting setup as we digest Apple’s (AAPL) earnings tonight, the election on Tuesday and the jobs report on Friday. Any of those could trigger a shift in the market’s character.
Palantir Shows the Bar Is Still High
We already have an early read on how the market is treating AI earnings tonight. Palantir Technologies (PLTR), which makes software that helps governments and companies analyze their data and put AI to work, was once the poster boy for AI and a clear leader. The stock came back nicely after a deep pullback, and tonight it delivered about as strong a report as you could ask for.
Third-quarter revenue of $2.31 billion beat the $2.18 billion estimate, and adjusted earnings of $0.44 per share topped the $0.41 consensus. Palantir guided fourth-quarter revenue to about $2.65 billion, well above the $2.46 billion analysts expected, and raised its full-year forecast to about $8.53 billion. Its U.S. commercial business is now expected to grow at least 143% this year, and it expects $4.8 billion to $5.0 billion in free cash flow.
The reaction has been muted. The stock dipped about 3% right after the report and has since recovered to trade slightly higher after hours. That only gets back part of today’s loss, and it is still below Friday’s close.
Palantir doesn’t have the problem that has been hitting the mega-caps. It isn’t pouring hundreds of billions into data centers, and it is producing a lot of cash. The issue with Palantir is price. The stock traded at about 149 times trailing earnings going into the report, and it had already run up on the expectation of numbers like these.
A report this strong would have sent the stock soaring a year ago. Tonight it barely moved.
Apple Beats and Slips
Apple’s report doesn’t carry the impact it once did. It is no longer the most important stock in the market, because it isn’t tied to AI to the degree the other mega-caps are. It has actually become something of a safe haven for folks trying to avoid the AI spending and profitability drama. However, it is not cheap, and any slip in the report would be punished.
There was some nervousness going in, and the stock fell 1.8% in the regular session. Apple then beat on both lines. Earnings came in at $2.10 a share against the $1.99 consensus, although that included a $0.05 boost from tariff refunds. Even without it, Apple would have beaten.
Revenue of $114.5 billion topped the $113.4 billion estimate, and iPhone revenue of $57.6 billion was ahead of the $56.6 billion analysts expected and up about 18% from a year ago. The stock dipped at first, bounced back to flat and is now trading lower again after hours, leaving it down about 3% from Friday’s close.
That makes it two strong reports tonight and two stocks that are getting little credit for them. The problem isn’t the numbers. It is that these stocks are priced for good news, and investors aren’t willing to pay up for more of it. Apple’s call should tell us more about the outlook for the holiday quarter, and that will decide which way the stock goes from here.
Game Plan
I remain optimistic about how things are developing, but it has been a tough slog lately, especially in some of the biotechnology names that have been jerked around. I have plenty of cash on hand and will be ready to put some of it to work, but we need better action than this before I act.
Have a good evening. I’ll see you Tuesday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
