• Stocks: Happy birthday to the S&P 500 bull market, which turns four on Monday. Indexes gained today as investors backed off yesterday’s AI sell-off.
• Bonds: Treasury yields rose, then steadied after a volatile week that saw record highs and a slight cooldown.
• Commodities: Oil prices jumped in the morning as the incoming Hurricane Isaias began disrupting US crude oil production in the Gulf of Mexico, easing by the day’s close.

Energy

Illustration: Morning Brew Inc., Photos: Adobe Stock

Good thing Santa’s sleigh doesn’t run on jet fuel. The stuff has been getting expensive again, and airlines—not to mention passengers—are feeling the cost.

Delta Air Lines cut its full-year profit forecast after reporting earnings today, citing a surge in fuel prices that added roughly $6 billion to its expected costs this year. Its Q3 fuel bill jumped 62% from a year ago to $4.1 billion, overwhelming still-strong travel demand and higher fares that would have otherwise carried the airline through.

Fuel can account for nearly a third of airlines’ operating costs, according to IATA, and the swings have been big enough to repeatedly blow up carriers’ earnings forecasts. Delta stock dropped today before closing flat.

Delta CEO Ed Bastian told the Wall Street Journal that the company had expected fuel prices to come down by now. “Obviously that didn’t come to pass,” he said.

Fuel bills are taking off

While US carriers have already pushed fares substantially higher this year, those increases have recovered only part of the fuel shock. Earlier this summer, Deutsche Bank estimated that airlines were recouping roughly 60 cents of every extra dollar spent on fuel through higher revenue.

Delta has more protection than most. It owns a refinery expected to generate about $700 million in profit this year, has aggressively trimmed tight-margin routes, and has spent years building a premium customer base that’s less sensitive to higher fares.

But that strategy is also starting to expose a divide among travelers. Bastian says lower-income customers are showing the most resistance to higher fares, while premium travelers are still spending. Delta has already cut back on budget options, offering fewer cheap tickets and dumping routes with lower profits.

That split matters because carriers with wealthier customers and stronger pricing power can pass more of the bill along. Airlines competing mainly on cheap fares have much less room to maneuver. And travelers are already seeing some of that bill.

Holiday travel’s fuel problem

Thanks in part to fuel costs, data from Hopper finds Thanksgiving round-trip domestic fares are averaging $402, up 31% from last year, and Christmas fares are averaging $452, up 23%—putting both at 10-year highs.

So far, demand hasn’t cracked. Delta expects Q4 revenue to grow about 20%, and Bastian said holiday bookings are strong.

Travelers are still price-conscious: Nearly half of Americans surveyed by The Points Guy and YouGov said price is the most important factor when booking holiday flights, and roughly seven in 10 said cost matters more than sticking with a preferred airline or hotel.

But airlines have enough demand to charge more, and they’re pulling back from price-sensitive travelers. So when you try to book a holiday flight and wonder where all the cheap options went, don’t just blame the rush. Fuel costs have given carriers a reason to offer fewer bargain seats.—HC

      

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Stocks

🟢 What’s up

• Humana jumped 11.02% after federal data found that more members enrolled in its Medicare Advantage plans.
• Fastly surged 15.86% on an Oppenheimer upgrade to Outperform that highlighted growing opportunities from AI-powered web traffic.
• Lumentum Holdings rallied 5.22% after its CEO said the company’s optical components are nearly sold out through 2029 amid booming AI demand.
• Teva Pharmaceutical Industries gained 4.77% following FDA approval of its once-monthly injectable treatment for schizophrenia.
• Archer Aviation climbed 5.08% thanks to a Barclays upgrade citing the electric air-taxi maker’s growing opportunities in defense tech.
• Moderna rose 14.21% following reports of a new national effort for cancer vaccine development.
• American Tower, SBA Communications, and Crown Castle gained 9.30%, 7.34%, and 15.60%, respectively, as a SpaceX deal to acquire wireless spectrum boosted cell tower stocks.

🔴 What’s down

• AT&T, Verizon, and T-Mobile US, meanwhile, fell 9.81%, 8.75%, and 13.27% as the SpaceX deal raised concerns about their competition from Starlink.
• Apple dropped 1.11% on reports that weaker demand for its pricier iPhone 18 Pro models prompted the company to cut component orders.
• Avient sank 7.78% following the departure of CEO Ashish Khandpur, who will be replaced by Mike Frank.
• Park Aerospace tumbled 11.06% as its fiscal second-quarter results disappointed investors.

Stat of the day

Life, liberty, and the pursuit of $5.3 million

Illustration: Morning Brew Inc., Photos: Adobe Stock

Inflation is raising the price of everything from orange juice to airfare. But how much does it cost to live comfortably in the US over a lifetime? Brace for some serious sticker shock: $5.3 million.

This sum is up 4.1% from a year ago and nearly $2 million from three years ago, according to a new analysis from Investopedia. Homeownership takes the biggest bite at $1,275,782 over a lifetime, which includes a $420,000 house and a 30-year mortgage at 6.32%, plus taxes, insurance, and maintenance. Next comes two cars ($1,205,627), retirement ($1,205,119), raising two kids and putting them through college ($953,763), and health care ($413,271).

Dream versus reality

So how close is the average American to that number? Grinding full time from age 25 to 64 earns a median $3.6 million before income taxes; throw in 20 years of Social Security to get to $4.1 million, and the final tally still comes up more than a million dollars short.

This affordability gap weighs on our psyches as well as our wallets. The University of Michigan’s October consumer sentiment index released today finds that our confidence fell further than expected to a five-month low, with survey director Joanne Hsu warning, “Frustration over cost-of-living continues to mount.”

If you’re hellbent on making the math work, you can skip the annual vacation to save $186,999, sidestep a wedding for another $38,800, and go pet-free for $40,772. Or rethink that two-car, two-kid plan. Maybe today’s American Dream is figuring out which parts you want to wish for versus go without.—JD

Investing

Morning Brew Inc.

Like a Netflix show trying desperately to get renewed, the stock market delivered an unreasonable number of plot twists this week. Here’s how it played out:

• Tuesday: The S&P 500 and Nasdaq hit all-time highs, fueled by enthusiasm for AI and strong corporate earnings expectations.
• Wednesday: Stocks retreated as rising bond yields rattled investors.
• Thursday: A report on OpenAI’s revenue sent AI stocks tumbling, with Nvidia, Oracle, and CoreWeave among the casualties. The tech-heavy Nasdaq dropped 1.25%, its worst day since mid-August.

The deets: OpenAI disclosed roughly $50 billion in annualized revenue by September’s end, below the $68 billion it had previously signaled. That doesn’t inspire confidence, although the discrepancy largely came down to whether or not partner revenue was included.

A lopsided affair

The whiplash exposed a problem hidden beneath market highs: The S&P 500 isn’t nearly as diversified as its name suggests.

Although the index tracks hundreds of companies, because it’s weighted by market capitalization, the biggest stocks have the most influence. Thanks to narrow breadth, a handful of tech giants can keep the index climbing—even as much of the market struggles.

Case in point: When the S&P 500 hit its record Tuesday, just 46% of its stocks were trading above their 200-day moving averages, compared with a historical average of 76% during record highs. And when the index fell Thursday, roughly 66% of its stocks actually rose. In fact, for all the talk of bullishness, a MarketWatch analysis found that over 40% of S&P 500 stocks were in individual bear markets last month.

The culprit, to no one’s surprise, is AI. Investors are wildly throwing money at the tech, and AI stocks’ outsized influence on the S&P 500 has helped mask weakness elsewhere. Since September, tech stocks have gained roughly 10%, while sectors like real estate, financials, and materials have fallen as borrowing costs continue to rise.

Diversification nation

This week showed how quickly that imbalance can spell danger. With the index’s 10 largest constituents accounting for nearly 40% of its value, trouble for a few heavyweights can drag down the benchmark even when most stocks are doing fine, as we saw Thursday. A disaster larger than one startup’s revenue report could cause much more damage.

For investors, an S&P 500 fund may offer less diversification than it appears. The equal-weighted S&P 500—or diversifying across sectors—can offer a better picture of the market. Bank of America recently upgraded healthcare for its growth prospects, for example, while Morgan Stanley sees potential in industrial stocks after a recent selloff.

That doesn’t mean investors need to abandon AI altogether. But with the bull market turning four on Monday, it might be worth checking whether your portfolio has too many eggs in one very expensive basket.—SY

      

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News

• President Trump escalated efforts to oust Fed Governor Lisa Cook, announcing that the White House would investigate unproven allegations that she committed mortgage fraud.
• The Magnificent Seven’s combined market cap would make it the second-largest economy in the world—and that has consequences well beyond Wall Street.
• Hurricane Isaias has shut down nearly two-thirds of oil production in the Gulf of Mexico as the storm bears down on the coast.
• Federal Reserve data finds that older and wealthier Americans captured most post-pandemic wealth gains, while the median household net worth barely moved.
• Netflix is reportedly preparing new layoffs, planning to cut about 5% of its workforce.
• The SALT deduction cap may be pushing some high earners to forgo marriage or consider a divorce to save on taxes.

Calendar

Monday: FedEx will deliver its quarterly earnings report, along with biopharma researcher Nurix Therapeutics.

Tuesday: A week of big banks reporting starts with JPMorgan Chase, Goldman Sachs, Wells Fargo, and Citigroup all releasing earnings, while Johnson & Johnson, UnitedHealth Group, and Domino’s Pizza will also share their quarterly numbers. The government shows us its receipts, too, with the monthly Treasury report.

Wednesday: All eyes will be on the September CPI numbers. Bank of America, Morgan Stanley, BlackRock, and State Street continue the finance earnings spree, with additional earnings from ASML, Progressive, and Fastenal.

Thursday: We’ll turn our attention to PPI to get more indicators on inflation, plus take the temperature of consumer spending with advance retail sales numbers. Semiconductor heavy-hitter TSMC reports earnings, along with Charles Schwab, Prologis, BNY, US Bank, PNC, and Marsh & McLennan.

Friday: We close out a week of bank and insurance earnings with Travelers, M&T Bank, Truist, Citizens, Regions Bank, BancFirst, and Republic Bank. We’ll also get fresh federal numbers on import prices and industrial production.

recs

🧗 If interest rates keep climbing, it’s time to adjust your investments—here are the moves strategists say to make.

⛵ A fund that puts wind in your sails: One ETF has gone exponential this year by taking to the seas.

🌴 Looking to retire with less savings than expected? These 10 key tips can make your money last for the long haul.

🏦 This bank’s big transformation could boost its stock by 30%.

🪞 Mirror, mirror, on the wall; the bond market may get uglier after all—according to these four important signals.

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