Apple Beats on Earnings, Gets Punished Anyway as AI Doubts Deepen

Apple beat September-quarter earnings expectations on Monday, and investors sold the stock anyway, sending it down 1.83% at the close and another 4.71% in overnight trading.

The sell-off came after new CEO John Ternus, 51, introduced himself to Wall Street on his first quarterly earnings call. Ternus has spent his first two months in the role promoting new products, notably the foldable iPhone Duo. The numbers were strong; the guidance was not.

Why did the stock fall on a beat?

Apple warned that margins will keep shrinking under pressure from a memory chip shortage and slowing growth in its services segment. Investors also remain unconvinced that the revamped Siri has a winning formula for the AI age.

"We're going into this [holiday period] with more downside than upside," Apple investor Gene Munster told Fortune's Sebastian Herrera. On X, Munster went further after results posted: "It's clear they don't want to talk about personalized agents. They're the biggest risk to the Apple ecosystem."

The company did not address that risk directly — a silence that arguably said as much as the guidance. Apple's problem now is proving its AI story before the holiday quarter tests it.

What is the 'tech wreck' doing to markets?

Apple was not alone. Palantir also beat expectations, and traders punished it too: down 3.13% at the close and another 6.29% overnight.

A Goldman Sachs note on Tuesday called it a "tech wreck" — traders fleeing anything linked to AI and rotating into non-tech stocks. The equal-weight S&P 500 rose Tuesday, while the market-cap-weighted version fell. Over the past month, the equal-weight index is up 4%; the cap-weighted version is down 3%.

• The S&P 500 closed down 0.51% Tuesday; futures slipped another 0.12% Wednesday morning.
• Nasdaq futures rose 0.23% Wednesday — the session's only encouraging signal.
• Europe: the Stoxx 600 fell 0.44% early; the UK's FTSE 100 lost 0.58% before lunch.
• Asia: South Korea's KOSPI dropped 3.59%; India's Nifty 50 rose 1.18%; China's CSI 300 slipped 0.2%. Japan's Nikkei 225 was closed for a holiday.
• Brent crude traded at $106 per barrel; Bitcoin edged up to $76,908.

The rotation is broad, and it is punishing earnings beats as readily as misses. That is a market pricing sentiment, not fundamentals.

How far does the Fed still have to go?

Apollo chief economist Torsten Sløk examined the historical relationship between Fed rates, GDP and inflation. His conclusion is bad news for anyone expecting Fed Chairman Kevin Warsh to deliver lower rates soon.

Sløk's research suggests the Fed would need to hike roughly 4 percentage points, to 6.75%, by the end of 2027 to force inflation back to the 2% target. Even then, inflation would not hit target until the second quarter of next year.

Wall Street disagrees: it broadly expects a one-hike-one-hold pattern. The FOMC will also vote on rates less frequently, per Warsh's last press conference. Someone in this standoff is wrong about 2026.

Are midterm expectations too high for Democrats?

Americans vote in congressional elections today, and nearly every signal points Democratic:

• Kalshi bettors put 75% odds on Democrats taking the Senate (a 53-seat majority) and 94% on the House.
• Polymarket shows 77% for the Senate, 95% for the House.
• Nate Silver puts Democratic odds at 80% for the Senate and 95% for the House, Axios reported.
• AtlasIntel's generic ballot gives Democrats a 14-point lead.

President Trump called these "the most important midterm, I believe, in our lifetime." The bar is now so high that anything short of full control reads as failure — even though a Senate takeover was unthinkable a year ago. And if the polls miss again, expect another reckoning over survey reliability, following surprises in Brazil and Israel.

How expensive is gas, really?

Pew Research found the typical American must work 9.5 minutes to afford a gallon of regular gasoline as of October 2026, and 14.4 minutes for diesel.

Counterintuitively, that is better than the 2011-2014 stretch, when the figures were roughly 13.5 minutes for gas and 14.6 for diesel. Affordability complaints persist anyway — which is one reason inflation dominates the ballot.

What is happening to candy prices?

The U.S. Bureau of Labor Statistics reported in September that about two-thirds of confectionery sales come from Halloween, Christmas, Valentine's Day and Easter. Between December 2019 and November 2024, the producer price index for confectionery materials such as cocoa powder and corn sweeteners rose 87.6%. The import price index for sugar and confectionery manufacturing climbed 73.3%.

That outpaces even the elevated food inflation of recent years. Holiday shoppers will pay for it this season, and cocoa offers no sign of relief.