General Motors did almost everything right this morning and its shares still fell nearly 6% before the open. The reason is a small line in its results that matters far beyond Detroit: the cost of memory chips is now big enough to show up in a carmaker’s profit outlook.
That lands on a strange day for the chip trade. In Seoul, investors dumped Samsung and SK Hynix, the world’s biggest memory makers, on fresh worries about AI spending and debt. In Detroit, the people buying those chips are complaining that they cost too much. Both things can be true, and Wall Street has to work out which one matters more before the open.
Where Things Stand Right Now
US futures are mixed and a little heavy. Nasdaq 100 futures are down about 0.5% near 29,580 and S&P 500 futures are down about 0.1% near 7,725, according to CNBC data shortly before midday UK time. Dow futures are up about 0.1%, helped by industrial names. The VIX, Wall Street’s main gauge of expected volatility, is up about 1.5% near 18.7.
That follows a decent Monday. The S&P 500 rose 0.41% to 7,690.73 and the Nasdaq Composite gained 1.11% as chip shares snapped a long losing run. The Dow slipped 0.07%.
Europe is in a weaker mood. The DAX is down about 0.8%, France’s CAC 40 about 0.7%, the FTSE 100 about 0.6% and the Stoxx 600 about 0.6%. Asia was rougher still. South Korea’s Kospi fell 3.7%, Japan’s Nikkei lost 1.3% and Hong Kong’s Hang Seng 1.3%.
What Has Moved Since This Morning?
Three things have changed since our Morning Brief. First, a busy run of US company results landed before the open, with GM, 3M and Northrop Grumman all reporting, and the reactions are very different. Second, Brent crude has pushed through Monday’s high and is up nearly 2% near $111.60 a barrel, its highest level since May. Third, the pound is firmer after this morning’s UK jobs data, up about 0.3% near $1.3340.
The chip bounce that lifted Wall Street on Monday has also gone into reverse before the open, with Micron, AMD and Intel all lower.
The Big Story: GM Beats, Memory Costs Bite
On paper GM had a good quarter. Adjusted earnings came in at $3.70 a share against forecasts of about $3.63, and revenue of $50.0 billion beat expectations comfortably, according to CNBC. The company also announced a new $20 billion share buyback and raised its forecast for automotive free cash flow to between $11.5 billion and $12.5 billion.
The problem is what it did not raise. GM narrowed its full-year profit range rather than lifting it, keeping the same midpoint, and said commodity inflation is now running at about $2 billion, the top end of its earlier range. That figure includes logistics and DRAM, the memory chips that sit inside almost every modern car, phone and data centre. Warranty costs are also at the high end of guidance. Investors had hoped for an upgrade and got a reminder that costs are creeping up.
The memory link is what makes this more than a car story. Memory is in short supply because AI data centres are swallowing so much of it. TrendForce expects DRAM contract prices to rise 10% to 15% in the fourth quarter, and Korean press reports say buyers as big as Apple and Tesla are facing higher prices and tight supply. GM’s results show that squeeze is now reaching ordinary industrial companies.
So the market is holding two ideas at once. Memory makers are being sold on fears that the AI spending boom has gone too far, yet their customers are paying more for the product than they did a few months ago. If you want to know whether the AI build-out is slowing, the price of memory is a better clue than the share price of the people who make it.
Stocks Moving Before The Open
GM is down about 5.7% before the open despite the earnings beat. 3M is up about 4% after beating profit forecasts, raising its full-year earnings guidance and expanding a data centre supply deal with Amazon that comes with warrants for Amazon to buy 3M shares. That is a neat contrast: the old industrial company selling into AI data centres is rising, while the one buying AI-era chips is falling.
Defence names are steady to firmer. Northrop Grumman raised its full-year profit guidance after sales grew 7%, and its shares are up about 0.5%. RTX is up nearly 2% before the open. Energy shares are firmer with oil, with Chevron and Exxon Mobil both up about 1%.
Chips are weaker. Micron is down about 2.8%, AMD about 1.7%, Intel about 1.5% and the iShares Semiconductor ETF about 1.5%, after Monday’s rebound. Nvidia is down a more modest 0.4%. CoreWeave, the AI cloud company, is down nearly 5% after HSBC repeated its Reduce rating with a $39 price target. Apple and Meta are both slightly lower, while Netflix is a touch higher ahead of its results after the close.
The Dollar Holds Steady
The US Dollar Index is about 0.1% lower near 101.9, so the dollar is not doing much. The pound is the stronger mover, up about 0.3% near $1.3340 after UK jobs figures kept the Bank of England’s November rate decision in play. The euro is flat near $1.1210, which leaves the euro down at about 84p against the pound. The dollar is slightly weaker against the yen, near 158.1.
Bonds
US Treasury yields are little changed. The 10-year yield is near 5.12%, down about one basis point, while the 2-year yield is up slightly near 4.78%. The 10-year sitting above 5% is still the backdrop for every stock trade this month, because it makes borrowing expensive for companies and households and makes bonds a real alternative to shares.
In Europe, the UK 10-year gilt yield is flat near 5.44% ahead of Wednesday’s UK inflation figures, and French yields are higher again near 4.96% after weekend unrest in France.
Commodities
Oil is the big mover. Brent is up nearly 2% near $111.60 a barrel after the Houthis claimed attacks on Saudi oil sites, including Aramco facilities at Yanbu and the Shaybah oilfield. Saudi Arabia has not confirmed the attacks. Shipping through the Gulf is already badly disrupted, which is why oil keeps finding buyers even after the US eased restrictions on Russian oil exports. US crude is harder to read today because the November contract expires, so Brent is the cleaner guide.
Gold is down about 0.5% near $4,140 an ounce in futures and still struggling below $4,200. Copper and silver are flat. Bitcoin is slightly lower near $81,400.
What Is Still To Come Today
At 13:30 UK time, US housing starts and building permits for September will give a read on how the housing market is coping with mortgage rates linked to a 10-year yield above 5%. The US cash market opens at 14:30 UK time. There are no Federal Reserve speeches, with officials in their quiet period before the 27 to 28 October meeting.
After the US close, Netflix reports at about 21:00 UK time, along with Capital One and United Airlines. Netflix is the first of the big technology names this week, with Meta on Wednesday and Tesla also reporting this week. In the UK, September inflation figures land at 07:00 on Wednesday.
Levels Traders Are Watching
These are reference points, not targets. S&P 500 futures are near 7,725, with Monday’s cash close at 7,690.73 and the 7,700 area just above it. Nasdaq 100 futures are near 29,580, with Monday’s futures settlement near 29,720 above. GM’s Monday close of $82.75 shows how big the gap is, and whether it narrows after the open will say a lot about how investors feel about cost pressure. For Brent, Monday’s high of $110.70 is now the line below. The US 10-year yield has 5.10% below and 5.15% above, and the pound has $1.33 underneath.
How We Read It Into The Open
The fair reading into the open is cautious, with a clear lean towards industrial and energy shares over chips for now. The evidence is a mixed futures market, a weak night in Asian chip shares, oil at a five-month high and an earnings season that is rewarding companies that sell into the AI build-out, like 3M, while punishing those paying for it, like GM.
That points to opportunities in how individual stocks react to their results rather than in a big index move. The main risk is that higher oil and rising component costs start to show up in more company outlooks this week, which would make investors question profit forecasts across the market. The view would change if chip shares recover their losses after the open and Nasdaq futures turn positive, or if Brent drops back below $110. The markets to watch are GM, 3M, Micron, the Nasdaq 100, Brent and the 10-year yield.
For beginners, the lesson from GM is that beating forecasts is not always enough. Share prices move on what a company expects next, and a beat with a cautious outlook can still lead to a fall. This is an educational view of the market, not advice to buy or sell anything.
If you want to see how you would handle a day like this, when good results still send a share lower, the free Samuel & Co Trading trader assessment is a good way to test your approach.
