According to BiyaPay market observations, last week, the three major U.S. stock indices fell, while small-cap stocks rose against the trend; Hong Kong's Hang Seng Index rebounded, yet the Hang Seng Tech Index continued to decline. The differences between indices reflect that investors are reassessing corporate earnings, funding costs, and valuations.
For those holding tech stocks, the most pressing concern is whether this round of adjustments has changed the logic of corporate growth; for those preparing to adjust their allocations, they need to assess whether the rise in other sectors can be sustained and if the rebound is supported by sufficient operating capacity and capital.
As we enter November, the market needs to continue verifying two things: whether AI investments can generate sustainable cash returns and whether corporate earnings can withstand current funding costs. This week, the earnings reports from companies like Apple, Palantir, and AMD, along with the U.S. non-farm payroll report, will provide new judgment criteria.
1. Review of Last Week: Tech Stocks Under Pressure, Market Not Fully Shifting to Safety
As of the close on October 30, the S&P 500 Index was at 7580.07 points, down 0.57% for the week; the Nasdaq Composite Index was at 25437.00 points, down 2.00%; the Dow Jones Industrial Average was at 51770.31 points, down 0.85%. The Russell 2000 Index rose about 1.3% during the same period, with large value stocks outperforming large growth stocks for the fourth consecutive week.
Medical, utility, and consumer staple-related ETFs rose 3.12%, 2.04%, and 1.31%, respectively, for the week. These are the price performance of ETFs and cannot directly replace the operational changes of all constituent companies but indicate that when tech weights are adjusted, the market is still looking for other profit supports.
Among them, Eli Lilly rose 11.31% for the week, with third-quarter revenue growth of 39% and an upward adjustment of its full-year revenue guidance. This relative strength is supported by performance, reminding investors that the market is not only trading based on the "tech" and "defense" labels.
Volatility also needs to be viewed in the context of time. The VIX closed at 19.42 last Friday, roughly flat from the previous Friday, but rose 12.91% on that day. The weekly closing did not change much, concealing the process of risk re-accumulation in the latter half of the week.
Funding data also does not uniformly indicate a shift to safety. For the week ending October 28, U.S. stock funds saw a net outflow of $6.65 billion, but tech sector funds still received a net inflow of $4.54 billion. This statistic does not cover the tech stock sell-off on Thursday and Friday, and cannot be used to explain all transactions for the week.
Thus, it is currently more appropriate to understand the market as a selective adjustment. Whether funds continue to leave tech and whether other sectors can take the relay still requires follow-up data for validation.
2. Tech Earnings: More Than Growth, Cash Recovery Must Be Compared
Microsoft and Alphabet: Both Expand AI Business, Yet Cash Flow Performance Differs
Alphabet reported a 25% year-on-year revenue growth in the third quarter, with Google Cloud revenue growing by 103%, but the free cash flow for the quarter was negative $9.065 billion. Microsoft's Azure revenue grew 48%, with operating cash flow of $58 billion for the quarter, and after subtracting expenditures for cash purchases of properties and equipment, the free cash flow calculated on this basis was about $18.633 billion.
This indicates that the growth rate of cloud business revenue cannot alone determine whether the investment is worthwhile. It is also essential to evaluate cash flow, capital expenditures, and subsequent investment commitments.
Amazon's AWS revenue grew 39.3%, but the free cash flow for the past 12 months as of the end of September was negative $42.4 billion. It is crucial to differentiate the metrics here: the numbers for Microsoft and Alphabet above are for a single quarter, while Amazon’s is for a rolling 12-month period, which cannot be directly used to rank operational performance.
For investors, the key lies in when the new facilities will come online, whether customer procurement can be sustained, and how much cash revenue growth will ultimately retain. If investment continues to outpace returns, a company’s dependence on cash reserves and financing conditions may increase; if revenue, profits, and cash returns gradually catch up, the market's recognition of capital expenditures would have a stronger basis.
Chips and Optical Communications: Weekly Fluctuations May Conceal Holding Volatility
Intel fell 24.38% for the week, with a single-day drop of 28.58% on Friday. The company reported third-quarter revenue of about $16.5 billion, but its fourth-quarter revenue guidance is $15 billion to $16 billion, while management has warned of pressure in the PC market.
This change increases trading risks for semiconductors, but it is not sufficient to prove that the orders for the entire AI server industry chain are deteriorating in sync. PCs, data centers, storage, and optical communications still need to be analyzed separately.
AMD fell 2.32% for the week but dropped 10.88% on Friday; Lumentum rose 11.18% for the week but fell 8.57% on Friday. Looking only at weekly changes might underestimate the risks brought by reversals during the week.
For those holding positions, orders, deliveries, profit margins, and customer budgets are closer to the operational basis than price fluctuations. After the rebound, it is necessary to combine future positions and funding data to determine whether buying momentum can extend from short covering to new long positions. Price increases alone cannot confirm the nature of buying.
3. Hong Kong Stock Observation: Banks and Oil Support Hang Seng Index, Tech Buying Still Needs Recovery
Last week, the Hang Seng Index rose 0.87%, closing at 23294.42 points; the Hang Seng China Enterprises Index rose 1.37%, closing at 7862.22 points; the Hang Seng Tech Index fell 3.02%, closing at 3754.90 points.
Banks, insurance, and oil weights supported the broader market. Industrial and Commercial Bank of China rose 9.12% for the week, China Construction Bank rose 5.02%, AIA Group rose 6.12%, and CNOOC rose 6.83%. Tech hardware faced pressure, with Semiconductor Manufacturing International Corporation and Lenovo Group falling 8.67% and 9.45%, respectively.
Therefore, the rise of the Hang Seng Index cannot yet be regarded as a general stabilization of growth sectors. Financial enterprises need to look at net interest margins, credit costs, and dividend capabilities; upstream oil companies are affected by oil prices, production volumes, and costs; tech hardware relies more on customer procurement and product deliveries. The basis for the increase in different companies needs to be verified separately.
In terms of funds, based on daily net buying and selling data, southbound funds saw a net outflow of about HK$11.036 billion for the week, with net selling on all five trading days. On Friday, the Hang Seng Index rose 1.46%, yet southbound funds still had a net outflow of about HK$3.56 billion.
This indicates that the index repair has not gained simultaneous confirmation from southbound buying. However, southbound only represents trading through the Stock Connect and cannot equate to the overall market fund flow, nor can it be used to draw conclusions about foreign capital direction.
This week, the Hong Kong stock market should observe whether the southbound net selling narrows, whether tech stocks can maintain continued support after retracement, and whether the range of increases can expand from finance and resources. The recent sharp drop in chip stocks on Friday in the U.S. occurred after the Hong Kong market closed, and the added impacts need to be verified in this week's trading.
Cross-Market Observation: Fund Allocation and Trading Tools Are Equally Important
The pressure on U.S. tech stocks and the relative strength of Hong Kong financial and resource stocks have led investors to begin reassessing opportunities across different markets. However, asset distribution across different markets does not mean that risks have been diversified. U.S. stocks, Hong Kong stocks, and digital assets may all be affected by U.S. dollar liquidity, interest rate expectations, and expectations for tech growth.
For cross-market investors, in addition to assessing the assets themselves, it is essential to consider how funds are exchanged, how to participate in trades, and how they will be utilized subsequently. Account dispersion, different currencies, and multiple operational entry points all increase the complexity of funds management.
As a global one-stop asset allocation platform, BiyaPay uses USDT as the core funding entry point, connecting U.S. and Hong Kong stocks, cryptocurrencies, commodity futures, and cross-border remittances through a unified account system, supporting exchanges of over 30 fiat currencies and more than 200 digital currencies, and providing zero-commission trading services for real stocks of U.S. and Hong Kong stocks. A centralized entry helps reduce switching between different tools, making currency exchanges, trading, and subsequent fund arrangements more seamless. Specific service scope and fees are subject to the platform's actual rules.
After making the funding paths more convenient, investment judgments still need to return to the assets themselves. Profit sources, valuations, and risk characteristics vary across different markets and should be evaluated in conjunction with investment cycles and risk tolerance to avoid seemingly diversified holdings that are concentrated in the same risk.
4. Macroeconomic Observation: Declining Yields May Not Be Sufficient to Support Tech Stocks
On October 28, the Federal Reserve maintained the target range for the federal funds rate at 3.75%-4.00%, with two committee members advocating for a 25 basis point rate hike. The statement continued to indicate strong economic expansion and high inflation, and the policy has not yet clearly shifted to easing.
The September PCE price index rose 0.5% month-on-month and 3.6% year-on-year; core PCE rose 0.3% month-on-month and 3.1% year-on-year. Nominal personal consumption expenditures grew 0.5%, while actual consumption growth was less than 0.1%. The increase in expenditure amounts has been largely absorbed by rising prices.
This means for businesses, revenue growth needs to separate price increases from volume. If consumer purchasing power is under pressure, companies may have to balance price increases with sales volumes and profit margins.
On Friday, the yield on the U.S. 10-year Treasury bond fell to about 4.93%, yet tech stocks still declined, indicating that valuation pressure has involved earnings realization. Lower yields typically aid valuations, but if cash return expectations simultaneously decline, support from interest rates may be offset.
To assess the future market, it is essential to consider both funding costs and corporate earnings together, rather than focusing on only one variable.
5. This Week's Focus: Earnings Reports and Employment to Verify Market Expectations
Apple, Palantir, and AMD: Observing Terminal, Application, and Computing Power Demand
According to the current schedule, Apple and Palantir will release their earnings after the market closes on November 2, U.S. local time.
For Apple, key areas to watch include iPhone sales, service revenue, gross margin, and holiday season outlook. After internal differentiation within tech stocks, whether stable cash generation capability is sufficient to support valuations needs to be confirmed by operational data.
Palantir should focus on U.S. commercial business, order conversion, and full-year guidance. There is a time lag between contract amounts, recognized revenues, and actual payments; whether customers expand their usage to generate sustainable revenues is more informative than merely increasing product usage.
AMD has confirmed that it will announce its earnings after the market closes on November 3. Key areas to watch include data center revenue, AI product deliveries, gross margin, and guidance for the next quarter. After substantial fluctuations last Friday, the market requires actual delivery and profit data to validate demand.
On Wednesday, attention can also be drawn to companies like AppLovin and Arm, assessing AI-related demand through different aspects such as advertisement monetization, licensing, and royalties. The timing of earnings reports is subject to company announcements.
Non-Farm Payroll: One Cannot Only Look at Job Growth Numbers
At 11:00 PM Beijing time on November 3, the September JOLTS job openings report will be released, followed by the initial value of third-quarter productivity and costs at 9:30 PM on November 5, and the October non-farm payroll report at 9:30 PM on November 6.
The non-farm payroll report needs to be considered alongside the unemployment rate, wages, and historical adjustments. If employment and wages are both relatively strong, inflation and interest rate constraints might continue to draw attention; if there is a moderate cooling while the unemployment rate remains stable, policy pressures may ease; if there is a significant weakening, it is necessary to consider both demand and earnings down revision risks.
The midterm elections in the U.S. on November 3 may also influence tax, fiscal, and regulatory expectations. However, there exists a transmission process between outcomes and actual policies, making it inappropriate to directly deduce a definitive stock price direction.
Moving forward, to determine whether the repair can be sustained, it is essential to revert to two questions: whether corporate earnings and cash returns have improved and whether buying momentum can continue to expand. A significant decline in tech stocks does not automatically imply they are cheap; the recent strength in banks and small-cap stocks also requires operational performance support. Aligning the basis for holdings with subsequent validation indicators can reduce passivity in chasing up and down price movements.
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