Earnings Face an AI Fire Drill With Oil on Edge.
Friday’s closer ended on a question: whether the December hike stays the plan or moves up. The Fed is in a blackout period. Last week hot inflation cracked the AI trade, and this week’s company earnings reports will show whether it stands back up. Netflix and SpaceX report Tuesday after the close, and Meta, Tesla, IBM, Lam Research and Texas Instruments report Wednesday after the close. The Middle East is the second driver, after Iran said two tankers hit mines in the Strait of Hormuz over the weekend and said its offer to reopen the strait is still on the table. Section 02 explains why this week’s earnings carry so much weight, and Section 03 maps how the week could play out.
AI stocks bounced early Monday but sagged back after the open, and Hormuz fears kept crude near $99.
Monday started with a bounce in AI stocks, led by CoreWeave, the heavily indebted AI cloud company at the center of last week’s selloff, and by Intel, which both rose on analyst upgrades. The bounce sagged back after the open, with long-term rates and the dollar popping back above Friday’s levels. Section 05 has the detail.
Friday’s fund flows, which posted after the closer went out, showed Bitcoin funds selling again and Ethereum funds selling for a third straight day. Bitcoin ETFs are funds big investors use to hold Bitcoin without owning it directly, so money leaving them usually means institutions are selling. Bitcoin funds lost about $229 million over the week, well under the roughly $681 million the week before.
Over the weekend Iran said two tankers hit mines in the Strait of Hormuz, the waterway that carried about a fifth of the world’s oil before the war, and one count put last week’s attacks there at the most since the war began. The US says the strait is open. Iran’s offer to reopen it within seven days is still on the table, President Trump warned the US could soon finish the job, and Houthi strikes on Saudi Arabia continued.
Crude on the OKX perpetual dipped just under $97 early Monday, then climbed back to $99.20, about where it ended Friday. It also spiked to $101.50 for roughly 15 minutes around 8:10pm ET on Friday before fading back near $99.30.
This week’s earnings reports will decide whether the AI trade stands back up.
Last week hot inflation hit the AI trade hardest. With the Fed silent until its meeting, this week’s company earnings are the main thing that can tell us whether last week was a one week break or the start of something bigger. The Nasdaq just had its worst week since June, which is why every report from here carries extra weight.
Some companies are profiting from the AI buildout, and others are spending enormous amounts on it, many with borrowed money. When rates rise the borrowers feel it first, which is why CoreWeave sat at the center of last week’s selloff.
Every company reporting this week faces the same question: is the spending turning into growth that can pay for itself? A good answer calms the trade, and a weak one gives sellers a reason to press.
The biggest tests come Wednesday. Meta is the clearest, because investors want to see what its heavy AI spending is getting back. Tesla reports the same night, and signs that it and Meta will keep spending would help the chip names that sold off. Lam Research, Texas Instruments and IBM add reads on chip demand and business spending.
The rate backdrop is why the reports matter so much. The cracking AI trade pushed traders to move the next hike from October to December, and FedWatch, the CME tool that turns futures prices into rate odds, puts the chance of a December hike at 90.4%. Traders also see a second hike by March, with the chance of at least two hikes by then at 80.4%. That second hike looms over a shaky AI trade because it means higher borrowing costs for the companies the trade depends on.
The second driver is the Middle East. Oil feeds the inflation worry behind those hike odds, so a big move in the Strait of Hormuz headlines can reach rates and tech stocks within hours, whatever the earnings say.
Earnings decide the AI trade, and the Middle East can change the rate story overnight.
Here’s the current state, plus three ways this week could evolve from here.
With no Fed voices before the October 27 to 28 meeting, earnings and Middle East headlines are the two things that can move prices. On Hyperliquid, a crypto exchange where positions are public, traders who bet on a fall in the Nasdaq 100 last week are closing those bets, while new bets on a rise are opening on the S&P 500, Section 05 has the detail.
This is the path where last week’s selloff turns out to be a break, not the start of a slide, and the rate backdrop would matter less even with a December hike expected.
This is the path where the selloff resumes. Weak reports against a high rate backdrop give sellers a reason, and the March hike would weigh more.
This path does not depend on earnings. A deal to reopen the strait would do the opposite, easing oil and rates, so the headlines can cut either way.
Three Academy lessons, run against this week’s real numbers.
Earn means buying the coin and selling the perpetual contract against it to collect funding. Borrow means raising cash against Bitcoin you keep, and the cost is the funding you pay. Earners got more than Friday, and the latest day paid 9.6%, above the 7-day average. Deribit stays the cheapest place to borrow at 5.3% on average, though the latest day cost 5.8%, so borrowing is edging back up. Over the past 30 days the cost averaged 5.0%.
A covered call is when you hold a coin and sell someone the right to buy it from you at a higher price, collecting a fee up front, so your gain stops at that price. At the same strikes as Friday, yields slipped a little, 12.1% against 12.3% on Bitcoin and 23.2% against 23.8% on Ethereum. The Bitcoin strike sits slightly closer to the price and the Ethereum strike slightly farther, because Bitcoin edged up and Ethereum edged down.
| Call | Strike | OTM | Fee per coin | Annualized yield |
|---|---|---|---|---|
| Bitcoin | $91,000 | 11.1% | $1,044.16 | 12.1% |
| Bitcoin, wider | $92,000 | 12.3% | $900.85 | 10.4% |
| Ethereum | $2,700 | 12.4% | $58.86 | 23.2% |
| Ethereum, closer | $2,650 | 10.3% | $70.27 | 27.7% |
| Annualized funding | 1-day | 7-day | 14-day | 30-day |
|---|---|---|---|---|
| WTI crude (long side) | -20.75% | -30.20% | -34.66% | -18.09% |
| Natural gas (short side) | +15.77% | +116.76% | +259.25% | +132.94% |
The WTI against Natural Gas spread, long oil and short natural gas, is a funding-carry trade rather than a directional bet. Oil and natural gas perpetuals roll to the next month’s contract between the fifth and tenth business day of the month, which is what made the carry so large. On price, the trade has kept working: oil keeps gaining ground on natural gas, and the ratio sits above Friday’s reading. The funding side is paying less, though. The roll window closed last week, so the roll is finished, and at these spread levels the 7-day carry has shrunk by about a third as the heaviest roll days aged out of the window.
The pairs below track stocks. Intel against Tesla is the earner-versus-spender rotation, whether the market favors companies profiting from the AI buildout over those spending heavily on it. SanDisk is a flash memory maker and Dell a computer maker. Tesla reports Wednesday, so its pair is one to watch. Bitcoin is gaining ground on QQQ over the 100 hours but sits below Friday’s ratio because QQQ bounced on Monday.
| Pair | Now | Friday | Gaining ground, 100 hours |
|---|---|---|---|
| Intel vs. Tesla | 0.2515 | 0.2543 | Tesla |
| SanDisk vs. Dell | 3.02 | 2.88 | SanDisk |
| Bitcoin vs. QQQ | 113.91 | 114.76 | Bitcoin |
Tech and Bitcoin bounced, while oil held near $99 and Ethereum and gold slipped.
On Hyperliquid, S&P 500 open interest jumped 14% as price rose, a sign of fresh longs. Ethereum saw the biggest liquidations, $23.80M of longs and $20.65M of shorts.
| Asset | Backdrop | Open interest change | Volume | Longs liquidated | Shorts liquidated |
|---|---|---|---|---|---|
| Bitcoin | flat | -2.88%$3.3B open | $4.39B | $3.78M | $18.87M |
| Ethereum | fresh shorts opening | +0.89%$2.6B open | $2.25B | $23.80M | $20.65M |
| WTI crude | flat | -7.09%$138M open | $344M | $4.0K | $1.78M |
| Gold | longs giving up | -8.24%$270M open | $58M | $1.60M | $6.0K |
| Silver | flat | +0.58%$163M open | $64M | $21.7K | $0 |
| Nasdaq 100the index QQQ tracks | shorts covering | -6.77%$302M open | $600M | $326.3K | $38.6K |
| S&P 500the index SPY tracks | fresh longs opening | +13.88%$377M open | $515M | $214.2K | $395.9K |
Hyperliquid is a different exchange from the prices above, so its numbers will not match them exactly. Nasdaq 100 and S&P 500 are the indexes that QQQ and SPY track. Hyperliquid lists the indexes themselves and has no QQQ or SPY market.
Open interest is the number of contracts still open, measured in contracts so price moves do not distort it. Volume is the dollar value of all trades over the same window, estimated from Hyperliquid’s one-minute price data. A backdrop needs price and open interest to each move 0.5% or more: open interest up with price down is fresh shorts opening, both down is longs giving up, open interest down with price up is shorts covering, and smaller moves read flat. A liquidation is a position an exchange force-closes because the trader can no longer cover the losses. Longs liquidated are traders betting on a rise who were forced out as price fell, and shorts liquidated are the reverse.
Earnings carry the week, with the Fed quiet and little economic data.
Earnings and Middle East headlines are the movers this week. Plan for either one to gap prices.
Bitcoin fell with tech last week and its funds sold again on Friday, so Wednesday’s reports can move it even though none of the companies reporting are crypto companies.
Reports land after the close, so the biggest gaps can come at the next morning’s open, and Middle East headlines can gap oil at any hour. Section 05 shows where new bets are piling up, and crowded positions can unwind fast if a report disappoints.
The market is waiting on earnings. Watching how Meta and the chip names are received before choosing a direction is a position too.
This content is produced by Harmonic for educational purposes. It is strategy education, not investment advice.