The Overnight RateThree moves
Credit. S&P Global Ratings kept Meta at AA- on Friday but moved its outlook to negative, saying “it is unclear when these revenue streams will generate material contributions that exceed their rising costs over the next few years” (CNBC). The trigger is cash. Meta’s third-quarter free cash flow came in at negative $2.12 billion, the first time it’s been in the red, while it guides capital spending to $135 billion to $145 billion and plans to raise $95 billion in stock. Meta pushed back: “We respectfully disagree with S&P’s assertion about Meta’s AI monetization capabilities.” AA- is still three notches below AAA. We’d watch what Meta’s bonds pay over Treasuries, since a cut from here would raise borrowing costs for the biggest AI spenders.
AI money. OpenAI is now seeking up to $20 billion in its latest round, down from a target of about $30 billion, CNBC reported on Saturday (CNBC). The Financial Times put the post-money valuation at $1.25 trillion and said some investors cut their allocations before a Friday deadline. Investors from the United Arab Emirates are leading the round alongside Coatue. To be fair, the round is still open, the terms could change, and $20 billion at that price is a vote of confidence most companies never get. Our view: when the most-watched private AI company trims its ask in the same week public AI stocks fell, the cost of funding the build-out is going up.
Chips. The Philadelphia Semiconductor Index fell 7.2% on Friday to 10,688.80, and the Nasdaq 100 lost 3.5% (Nasdaq). The Nasdaq Composite ended October 7.8% below its closing high after its worst month since March 2025 (Reuters). Overnight, Kioxia, the Japanese flash memory maker that competes with Micron, fell as much as 17% in Tokyo (TBS/Bloomberg). It guided December-quarter operating profit to ¥2 trillion against estimates of ¥2.35 trillion, after its average NAND selling price rose by a mid-20% rate last quarter versus 70% the quarter before (Japan Times). Memory prices are still climbing, just more slowly. We think memory was the most crowded corner of the AI trade, and US holders of Micron and Sandisk feel a slowdown first.
What could move prices
Oil fell overnight. As of 4:07 a.m. ET, January Brent was down 3.91% at $109.00 a barrel and December WTI was down 4.1% at $99.85, below $100, after reports that the US and Iran are still pursuing talks, with Qatar mediating (CNBC). The same report cites possible renewed strikes after Tuesday’s election, so the move can reverse quickly. If talks hold, fuel oil has room to ease before the coldest weeks set heating bills. If strikes resume, the risk premium returns to crude first and to delivered fuel soon after.
The calendar
ISM’s October factory survey lands at 10:00 a.m. ET, the first read on whether factories are still paying more for inputs. Treasury posts its borrowing estimate at 3:00 p.m. ET, after penciling in $628 billion for October to December (Treasury). Apple reports after the close. JOLTS is Tuesday, and October jobs land Friday at 8:30 a.m. ET (BLS).
Who pays: the heating-oil household
Residential heating oil averaged $6.23 a gallon in the week of Oct. 26, the highest in the Energy Information Administration’s weekly survey going back to 1990 and up from $3.60 a year earlier (EIA). About 4.79 million households heat mainly with it, and 82% of them are in the Northeast (EIA). Supply is thin going into winter. Distillate stocks, the pool that holds heating oil and diesel, stood at 102.8 million barrels, 8.3% below a year ago (EIA). At these prices, 100 gallons delivered costs about $623, up from about $360.
Net net: oil-heated homes in the Northeast are paying record prices before the heating season has really started.