“AAPL selloff sparked an SMH rally, rotation coming out of staples now.”

That was Stock Trader Network Chief Market Strategist Dennis Dick tracking the after-hours flow last night with the dynamic carrying into Tuesday’s open. The major indices may look foggy and tentative with traders handcuffed by U.S. Midterm Election Day.

Look under the hood, however, and this morning feels like a risk-on tape as institutional money is rotating out of defensive consumer staples and rotating back into semiconductors (SMH) and the AI trade.

The move was triggered by a selloff in Apple, and traders used the pullback to rotate in high-growth chips and software:

• Apple (NASDAQ: AAPL) Slides on Margin & CapEx Guide: Apple beat Q4, but fell $8 after hours after guiding Q1 sales up 7% to 10% with the CFO admitting company and product margins would be down without recent tariff refunds.
• AI & Chips Catch the Rotation: Palantir (NASDAQ: PLTR) crushed Q3 and guided Q4 revenue well above the Street. Beat-and-raise prints also rolled in from Fabrinet (NYSE: FN), Aehr Test Systems (NASDAQ: AEHR), and DigitalOcean (NYSE: DOCN), while onsemi (NASDAQ: ON) beat Q3 and announced a $600M cash buyout of Ferric, and Shopify (NYSE: SHOP) guided Q4 sales growth to the low-30% range.
• Anthropic’s $1.5T Push & Chip Ambitions: WSJ reports Anthropic investors want a more cautious IPO valuation near $1.5T, while The Information notes the company is pitching Claude’s chip-design skills, which will also have chip parts made at Samsung’s second Texas plant.

“I fade all peace talks [headlines],” Dennis said on PreMarket Prep this morning after the SPY caught brief pops on Russia/Ukraine peace chatter and Al Jazeera reports that Washington approved a draft MOU with Tehran on steps toward an interim nuclear deal.

Beyond the morning earnings and geopolitical headlines, the biggest macro undercurrent driving the tape is today’s vote and how institutions are positioning for the next two years:

• Midterm Gridlock & A Solar Insider Buy: Dennis agrees with The Kobeissi Letter that the recent market drop is pricing in two years of Washington gridlock with odds of a Democratic midterm sweep jumping 30 points in 45 days to nearly 80% and President Trump vowing to become “Mr. Veto.” Meanwhile, Enphase Energy (NASDAQ: ENPH)’s CEO bought 10,000 shares ahead of the vote, raising eyebrows on the STN desk as a potential bet on solar under a Democratic Congress.
• Big Pharma’s Beat-and-Raise Wave: Healthcare keeps putting up clean numbers, led by beat-and-raise quarters from Pfizer (NYSE: PFE), Teva (NYSE: TEVA), Vertex (NASDAQ: VRTX), Waters (NYSE: WAT), and Revvity (NYSE: RVTY).
• Disney Layoffs & Morning Earnings Splits: Disney (NYSE: DIS) is planning thousands of layoffs targeting 20% in cost savings.

STN Desk Takeaway: While headline indices are handcuffed waiting on tonight’s midterm results and pricing in potential Washington gridlock, the underlying flow is leaning risk-on as money rotates out of overbought consumer staples and Apple into high-conviction AI, semiconductor, and pharma beat-and-raise stories.

AJ Fabino, Editor in Chief, Stock Trader Network