Weekly Morning Report | 5th Week of October 2026 (10/26–10/31) Selling Spreads, Centered on High-Tech Stocks, Toward the Latter Half of the Week

1. Overview and Market Highlights

The final week of October in global markets was a week in which expectations for AI-related companies, which had been driving the market, were subjected to a realistic evaluation axis of investment profitability.

The U.S. stock market saw relatively calm movements at the beginning of the week, but selling expanded, centered on high-tech stocks, toward the latter half of the week. Following the sharp drop after Alphabet’s earnings, Intel’s worsening earnings outlook and Amazon’s massive capital expenditures and deteriorating free cash flow were met with aversion, strengthening investor caution.

In the U.S. market on October 30, the Nasdaq Composite Index closed at 25,437.00 (down 2.86% from the previous day), the S&P 500 at 7,580.07 (down 1.82%), and the Dow Jones Industrial Average at 51,770.31 (down 1.09%). For the week, the Nasdaq was down about 2.0%, the S&P 500 down about 0.6%, and the Dow Jones down about 0.9%.

Alphabet’s stock price fell about 12% after its earnings announcement on October 29, losing about $475 billion in market capitalization. This is the second-largest single-day loss in market capitalization for a U.S.-listed company in history. The following day, on the 30th, Intel plunged about 28.6%, marking its largest single-day drop since 1974.

The Nasdaq is currently down about 7.8% from its high on October 6, and has not yet reached the 10% decline that is the general definition of a ‘correction phase’. While there is no doubt that this is a significant decline, at this point, it is more appropriate to view it as a stage of being wary of entering a correction phase rather than concluding that ‘the entry into a correction is clear’.

What this movement indicates is not the end of the AI technology theme. It is that the market’s evaluation axis has begun to shift from the future potential and growth expectations of AI to the verification of investment recovery—specifically, how much profit and cash flow that massive capital investment will generate.

In the Japanese market, the Nikkei Stock Average also closed at 63,290.11 yen on October 30, down 1,369.36 yen (2.12%) from the previous day. Following the decline in U.S. high-tech stocks, selling spread to semiconductor-related stocks such as Advantest and Tokyo Electron.

The Bank of Japan kept its policy interest rate at 1.25% at its Monetary Policy Meeting on October 30. It expressed the recognition that the underlying inflation rate has reached a level generally consistent with the 2% price stability target, and has once again clarified the direction of normalizing monetary policy.

It was also decided to increase the pace of selling BOJ-held ETFs to approximately 860 billion yen per year starting in January 2027.

Crude oil prices rose following a tanker attack in the Strait of Hormuz in the Middle East. With multiple factors overlapping—the correction in U.S. stocks, the Bank of Japan’s normalization of monetary policy, and rising energy prices—market uncertainty is increasing ahead of the November market.

2. Trends in Exchange Rates, Interest Rates, and Macroeconomics

USD/JPY: Focus on the Direction of U.S. and Japanese Monetary Policy

The dollar-yen pair saw moments where it tested the 158 yen level toward the latter half of the week from the low 157 yen range on October 26, but returned to the mid-157 yen range over the weekend.

The preliminary figure for U.S. real GDP for the third quarter of 2026, released on October 29, showed a 3.4% increase at an annualized rate from the previous quarter. Growth has accelerated from the 2.2% increase in the second quarter, a result that shows the resilience of the U.S. economy.

The U.S. PCE price index for September rose 3.6% year-on-year, and the core PCE, excluding food and energy, also rose 3.1%. While the economy is solid, the fact that the inflation rate remains at a high level means there is limited room for the Fed to shift to significant monetary easing early on.

In Japan, although the Bank of Japan kept its policy interest rate at 1.25%, it expressed the recognition that the underlying inflation rate has reached a level consistent with the 2% target. The market is conscious of an additional rate hike at the December meeting, but the timing of the rate hike depends on future economic and price conditions.

When considering the direction of the dollar-yen, it is necessary to look not only at the interest rate differential between Japan and the U.S., but also at risk-averse yen buying due to the decline in U.S. stocks, U.S. inflation trends, and the normalization of Japan’s monetary policy.

As for my own market view, I believe that if the correction in U.S. stocks is prolonged and expectations for additional rate hikes by the Bank of Japan strengthen, the dollar-yen will face heavy upward pressure. A correction toward the 155 yen range is one of the assumed scenarios, but if U.S. inflation re-accelerates and U.S. long-term interest rates rise, there is a possibility that the appreciation of the yen will be suppressed.

U.S. and Japanese Long-Term Interest Rates: Interest Rate Differential is Narrowing

The yield on the 10-year U.S. Treasury note hovered in the 4.9% range on October 30. This is a decline compared to the beginning of the week, likely due to safe-haven demand flowing into the bond market following the decline in U.S. stocks.

The yield on the 10-year Japanese Government Bond also reached the high 2.7% range as of October 30. While the Bank of Japan’s policy normalization is progressing, bond buying entered the market toward the end of the week, causing yields to fall.

The 10-year interest rate spread between Japan and the U.S. varies depending on the market data referenced and the time of observation, but it is generally at a level of around 2.1 to 2.2 percentage points.

The yen carry trade, which was once premised on a large interest rate differential, may see its profit environment change due to future shifts in monetary policy. However, a narrowing of the interest rate spread does not mean that yen carry trades will be unwound all at once. Exchange rate volatility, funding costs, and investor risk tolerance are critical factors.

3. [Important] Middle East Situation, Oil Market, and Turkish Lira

Tanker Attack in the Strait of Hormuz, Supply Risks Reignite

Regarding the situation in the Middle East, vigilance regarding maritime transport around the Strait of Hormuz has intensified.

On October 30, the United Kingdom Maritime Trade Operations (UKMTO) reported that a tanker navigating the Strait of Hormuz was attacked by an explosive device attached by a small boat. No crew members were injured, and damage to the vessel was reported.

The Iranian Revolutionary Guard Corps claims that multiple tankers came into contact with mines, but there is insufficient independent confirmation regarding the individual damage situations. The fact of the attack must be distinguished from claims regarding the perpetrator and the scale of the damage.

The Strait of Hormuz is a vital maritime traffic route for global crude oil and petroleum product transport. If attacks on vessels occur, it will affect not only crude oil supply volumes but also insurance premiums, operating costs, and route changes.

In the crude oil market on October 30, the December contract for North Sea Brent crude oil futures settled at $117.64 per barrel. This December contract has reached maturity, and the next benchmark contract, the January 2027 contract, closed at $113.43. WTI crude oil futures finished trading at $104.12.

Because there is a difference in contract months between the December and January contracts, prices cannot be compared simply. In weekly comparisons, it is important to compare the same contract months.

Rising crude oil prices lead to a deterioration in the terms of trade for energy-importing countries like Japan and Turkey. Increased import costs put pressure on corporate earnings and household budgets, and may also affect monetary policy through rising prices.

In the United States as well, if high crude oil prices hinder the slowing of inflation, it becomes a factor that complicates the Federal Reserve’s monetary policy management. Caution is required for a scenario where stock price declines and energy price increases occur simultaneously.

Turkish Lira/Yen: Cannot be Evaluated by High Interest Rates Alone

The Turkish Lira/Yen (TRY/JPY) traded in a narrow range around 3.14–3.16 yen this week.

The Central Bank of the Republic of Turkey (TCMB) lowered its main policy rate, the one-week repo rate, from 37% to 36% at its monetary policy meeting on October 22. The overnight lending rate was also lowered from 40% to 39%, and the overnight borrowing rate from 35.5% to 34.5%.

The high policy rate of 36% is a factor supporting interest income on lira-denominated assets. However, high interest rates are also a reflection of inflation and currency depreciation risks, and investment safety cannot be judged by swap income alone.

Fluctuations in the Turkish Lira/Yen are influenced by both the Dollar/Yen and the Dollar/Turkish Lira.

TRY/JPY = USD/JPY ÷ USD/TRY

If the dollar-yen moves toward a weaker yen, it will provide support for the lira-yen, but if the Turkish lira falls against the dollar, that effect will be offset.

Rising crude oil prices are a negative factor for Turkey’s current account as an energy-importing country. If import costs continue to rise, it could lead to increased demand for foreign currency and inflationary pressure.

In evaluating the future of the Turkish lira, it is necessary to continuously monitor not only the policy interest rate but also the inflation rate, foreign exchange reserves, current account balance, fiscal policy, and the status of interventions in the foreign exchange market.

If policy interest rate cuts continue, it is necessary to consider both the decline in swap income and the risk of currency depreciation.

4. Stock Market and Notable Corporate Trends [Japanese Stocks/US Stocks]

US Stocks: The market begins to question the profitability of AI investments

The most notable development in the US market this week was that investors have become more critical of the massive capital expenditures by AI-related companies.

Alphabet’s stock price fell by approximately 12% after its third-quarter earnings report, losing about $475 billion in market capitalization. While Google Cloud’s growth remains solid, concerns have intensified regarding the growth rate of the search advertising business and the profitability of AI-related investments.

Amazon reported third-quarter revenue of $201.9 billion and AWS revenue of $46 billion, with AWS showing strong growth of 39% year-over-year.

Free cash flow was negative $42.4 billion for the trailing 12 months. The capital expenditure outlook for 2026 is approximately $220 billion.

What is important here is that a deterioration in free cash flow does not necessarily mean a decline in business competitiveness. If upfront investments in AI data centers and the like generate future earnings, short-term cash flow deterioration can be a rational management decision.

The larger the investment amount, the more important the payback period and cost of capital become. The market will henceforth strictly evaluate not only the scale of AI-related investments but also how much revenue, profit, and cash flow those investments will generate.

Intel reported third-quarter revenue of $16.5 billion, while its fourth-quarter earnings outlook fell short of market expectations. The stock price fell by approximately 28.6%, marking its largest single-day decline since 1974.

This sharp drop served as a catalyst to re-examine the competitive environment in the semiconductor industry, the burden of capital expenditure, and the superiority of manufacturing technology.

Anthropic’s IPO-related documents

Anthropic, the developer of the generative AI “Claude,” submitted its S-1 registration statement to the US Securities and Exchange Commission (SEC) on October 26th.

As the company expands its business, it is a key point that investments in the computing resources and infrastructure necessary for the development and operation of AI models are increasing.

The commitment amount field regarding computing resources in the published registration document is blank, so it cannot be concluded that the specific payment obligation is $417 billion.

In the AI industry, not only the race for technological development but also the securing of computing resources, fundraising, and the efficiency of capital investment have become factors that determine corporate value.

Japanese Stocks: Focus on the shift of funds from semiconductor stocks

On October 30, the Nikkei Stock Average closed at 63,290.11 yen, down 1,369.36 yen (2.12%) from the previous day. The intraday high was 64,589.04 yen, and the low was 62,711.42 yen.

Following the decline in U.S. tech stocks, semiconductor-related stocks with high index weightings, such as Advantest and Tokyo Electron, were sold off.

The Bank of Japan’s decision to increase the pace of ETF sales is also being noted as a medium- to long-term supply and demand factor. However, the annual sales amount of approximately 860 billion yen alone cannot explain the decline in the entire Japanese stock market. The sales are scheduled to begin in January 2027, and short-term stock price fluctuations are also significantly influenced by trends in U.S. stocks and investor position adjustments.

Personally, I believe we should be cautious about rushing to buy the dip in AI and semiconductor-related stocks that have driven the market so far, simply because their earnings are good.

In a rising interest rate environment, improvements in net interest margins are expected for bank stocks. Mega-banks such as Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho are sectors I want to keep an eye on while monitoring future interest rate environments and lending rate trends.

Since rising interest rates can also lead to bond valuation losses and increased funding costs, we must not evaluate bank stocks uniformly based solely on rising interest rates; it is necessary to check each company’s asset-liability structure and profitability.

5. Crypto Assets and Commodities

Over $6 billion in crypto assets stolen from Binance

In the crypto asset market, a large-scale unauthorized outflow incident occurred involving Binance, one of the world’s largest crypto asset exchanges.

On October 31, the U.S. Federal Bureau of Investigation (FBI) announced that North Korea had stolen over $6 billion in crypto assets from Binance around October 29. The FBI has dubbed this attack “TraderTraitor” and has officially confirmed North Korea’s involvement.

The FBI warns that the stolen assets were primarily converted into Ethereum, and there is a possibility that attempts will be made to launder the funds through DeFi services and instant exchange services.

This incident has once again highlighted the importance of cybersecurity and exchange management systems in the crypto asset market.

Crypto assets are traded 24/7. When reporting Bitcoin prices, it is necessary to clearly state the date and time of confirmation rather than treating them as a specific “NY close.”

Gold Market: Sharp decline in stock market and liquidation sales

In the gold market, gold prices also fell significantly alongside the sharp decline in the stock market.

On October 30, the spot gold price fell to around $3,880.97 per troy ounce, marking its lowest level since October 2025. This is a decline of approximately 3.5% from the previous day.

Rising geopolitical risks and instability in the stock market are usually buying factors for gold. However, in a situation where the entire financial market is plummeting, investors may sell profitable assets to cover losses or secure margin requirements.

The recent decline in gold prices may also have been partly caused by liquidation sales and margin calls accompanying the stock market decline. However, it is impossible to attribute the price drop to a single cause.

The fact that U.S. inflation remains high and interest rate outlooks are changing is also weighing on gold prices.

While gold is important as a long-term inflation hedge and a means of currency diversification, in the short term, it is influenced by real interest rates, the dollar exchange rate, investor position adjustments, and changes in liquidity.

Going forward, the focus will be on whether the market can recover to the $4,000 level, as well as at what level buying demand will emerge during the downturn.

6. Points for Consideration [5 Key Themes]

1. AI-related stocks enter the investment recovery phase
   Beyond growth expectations for AI, the rate of return on massive capital expenditures and free cash flow have begun to be strictly questioned.

2. Intel’s sharp decline and Amazon’s deteriorating cash flow
   In the semiconductor and cloud industries, we have entered a stage where not only sales growth but also the burden of capital expenditure and capital efficiency determine corporate value.

3. Normalization of Bank of Japan’s monetary policy
   While maintaining the policy interest rate at 1.25%, the Bank indicated its recognition that the underlying inflation rate has reached a level consistent with its 2% target. A December rate hike is a theme of market attention, but it is not a certainty.

4. Tensions in the Strait of Hormuz and rising oil prices
   Supply risks have been highlighted by tanker attacks, pushing Brent crude to a six-month high. For energy-importing nations, caution is required regarding both inflation and the current account balance.

5. US midterm elections and market uncertainty
   With the US midterm elections approaching on November 3, the cost of living, prices, and energy costs are becoming political issues. We should pay attention to the impact of election results and policy directions on market sentiment.

7. [Special Deep Dive] Perspectives from John Authers (Bloomberg)

The column by John Authers of Bloomberg Opinion titled ‘Lord, Let Me Hike Rates, Just Not Now’ evokes the dilemma of ‘necessity’ versus ‘feasibility’ in monetary policy.

Behind this title lies the structure where, while monetary tightening is necessary to curb inflation, central banks are forced to be cautious about the timing of policy changes when considering the impact on the economy and financial markets.

Similar issues can be seen in the current US market.

While the inflation rate is not falling sufficiently, maintaining high interest rates increases corporate financing costs, which negatively impacts the stock market and capital investment. Conversely, rushing into monetary easing increases the risk of reigniting inflation.

The same applies to AI investment. The potential for technological innovation and the justification for current stock prices and investment amounts are separate issues.

Major technology companies are pouring massive amounts of capital into AI data centers, semiconductors, and power infrastructure. As these are investments that anticipate future growth, it is inevitable that it will take time to recover the investment. However, in an environment with high capital costs, delays in investment recovery put pressure on corporate value.

Alphabet’s significant stock price decline, Amazon’s deteriorating free cash flow, and disappointment with Intel’s earnings outlook symbolize that investors have begun to prioritize capital efficiency over just the future potential of AI.

Regarding the Bank of Japan, the direction of monetary policy normalization has become clearer as it indicated that the underlying inflation rate has reached a level generally consistent with its 2% target.

The Bank of Japan has not fully confirmed the sustainable and stable achievement of its price target. Future timing for rate hikes and the final policy interest rate level will be influenced by trends in wages, service prices, the economy, and overseas economic conditions.

In the market going forward, the three elements of monetary policy, corporate investment recovery, and energy prices will influence each other.

What is required of investors is not to rely solely on future growth stories, but to identify companies and assets that can continuously generate returns exceeding the cost of capital.

‘Investing in a growing market’ and ‘investing at a high price’ are not the same thing.

In the November market, this fundamental principle is likely to be tested once again.

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Summary

The final week of October 2026 was a week in which multiple risk factors were simultaneously recognized, including adjustments in AI-related stocks, the normalization of the Bank of Japan’s monetary policy, escalating tensions in the Middle East, rising crude oil prices, and security issues in the cryptocurrency market.

Of particular note is the possibility that the decline in U.S. stocks is not merely profit-taking, but that the market has begun to seriously scrutinize capital investment and return on investment for AI-related companies.

The U.S. economy recorded 3.4% growth in the third quarter, and corporate earnings have generally been solid. Therefore, it is premature to conclude at this point that the growth scenario for the entire AI-related market has collapsed.

November will focus on the U.S. midterm elections, U.S. employment and inflation statistics, speculation regarding additional interest rate hikes by the Bank of Japan, and trends in the Middle East situation and crude oil prices.

It is important to calmly assess corporate earning power, capital efficiency, monetary policy, and exchange rate fluctuations rather than being swayed by short-term price movements.

[Disclaimer]

This report is prepared for informational purposes only and is not intended to solicit the purchase or sale of any specific financial product or investment strategy. The data and outlooks contained in this report are based on information available at the time of preparation, but their accuracy and completeness are not guaranteed. Market prices may vary depending on the exchange, data provider, and time of verification. Please make final investment decisions based on your own judgment and responsibility.