Morning Note

Trading Observations

• The big day has finally arrived

• FOMC expectations are 25bps (do we get 50?) and a plan to end QT

• Powell presser key

• 3 Mag 7s tonight: GOOGL + META + MSFT all expected to be good, let's hope

• CAT higher, GNRC lower BA flat

• Tech continues to ramp after NVDA jump post event yday

• Thus far, 70% of S&P 500 reporters have exceeded sales estimates, the highest proportion of positive surprises in about four years

• 85% of benchmark companies have beat on earnings, just 14% have missed https://tinyurl.com/3c859nwh [tinyurl.com]

• Trump/Xi tomorrow, reports China already buying soybeans so a deal actually going to happen it seems?

• And NVDA expecting 0, but a chance to start selling in China again?  

• Path of least resistance with the calendar remains higher

• Breadth awful yday, the worst EVER for an up day per Bespoke https://tinyurl.com/w6z8pjbt [tinyurl.com]

• Notable consumers took a hit,  BKNG, CAKE, NCLH, CCL, and MMYT on volume among the losers

• II Bulls up to 57.7% from 52.8% (over 60 a headwind)

Futures

DOW +113

S&P +18

Nasdaq +108

Charts/Sentiment

Financials / Consumer / Healthcare

Visa – Flat – Solid beat, solid guidance as they think Holiday spend will be strong. Travel spending finally outgrew pre-covid levels. They said AI a bunch of times too.

FI – Fiserv – Down 38%, absolute disaster – New EPS $8.55 vs $10.25 street. Organic revenue was suspected to be +9% came in +1%. They did know that this whiff constituted a whole new management team and have already moved to change the C-suite. The CEO is new from May, so this is a bit of a 90ish day towel throw, but the lack of growth is real and won’t get anyone aboard. At $78 this morning, this stock will open at a sub 10x P/E.

FIS, GPN – Down 7% with FI.

ETSY – Down 9% on new CEO named, decent earnings beat.

LRN – Education stock Stride Learning down 44% on technology issues spurring a cut. Chat GPT eating lunch again.

CZR – Down 8% on weakness in Vegas. Macau had been helping casino stocks, which Caesars doesn’t have.

CWH – Camping World down 5% on a solid beat. RV numbers have actually turned positive due to terrible comps from last year. Still there isn’t a lot of extra money for this stuff.

MAS – Building product name Masco down 7% on poor guidance.

Technology

AAPL: EPS on deck / bottom of megacap rankings but bullish narrative has been developing since mid-Sept. Stock has traded down T+1 7 out of last 9 prints ....BofA lifts PT to $320 - cites its new five-year outlook for the target increase.

ADBE: reaffirms Q4 and FY2025 financial targets

ADP: #s just hit … reit FY rev/EPS outlook. Q1 revs inline

CTSH: +6% boosts FY adj EPE view - $5.22 to $5.26, saw $5.08 to $5.22; sees rev ccy +6% to +6.3% (saw +4% to +6%) .. conf call @ 830am ET - 877-810-9510 password: Cognizant Call ... sentiment/positioning leaned negative

ETSY: #s just hitting, -5% on mgmt. shake up …. GMS $2.72B (bogey 2.7B); healthy top line beat. Take rate / Active buyers ahead of St ..... Depop : GMS was $292.1 million, up 39.4% year-over-year, an acceleration from the prior quarter

GOOGL: #s Wed night / 6% implied move. Positioning ~9 out of 10 with AI narrative turning into a freight train coming out of I/O in May; add DoJ clearing event + durable search and here we are ...... Q3 Search 13% y/y vs St at 11%, YouTube 12% vs St at 12%, GCP ~33% vs 30%; EBIT inline with St at $32.2B; Q3 capex $23B, CY25 capex - reit prior $85B. FY26 buyside ~ $110b

Memory movers: SNDK+5.6%, MU+3%, KIOXIA+7%, NANYA+2.3%, PHISON+2%, Samsung+1.5%

Memory Capex: HYNIX plans to devote more capital to ramping up capacity next year and will begin supplying next-gen HBM4 components to customers this quarter. Insatiable HBM demand is likely to persist into next year, accelerated by massive projects like OpenAI’s Stargate,” on top of demand from hyperscalers and countries pursuing their own sovereign AI

MSFT: #s Wed night / 4.4% implied move. Positioning ~6.5 out of 10 ... hearing Q1 Azure 40-41% y/y vs guide of 37%; Q2 Azure 1-2ppt decel

NVDA: #s going higher post wildy bullish GTC presentation from Jensen .... remains adament in early innings of a massive / global buildout ... Jensen cont to make pitch for China access

NVDA: large volume of names which ripped / faded or both during GTC - after hours: JOBY+9% rallying on Nvidia collaboration - only aviation launch partner for the new Nvidia IGX Thor platform, which is designed to power the next generation of physical AI applications

OpenAI could conduct an IPO as soon as 2027 in what would be one of the biggest offerings in history - WSJ

UBER targets 100k NVDA robotaxis starting in 2027 - Bloomey

PANW -- Palo Alto Networks debuts automated AI agents to fight cyberattacks – CNBC

Industrials 

AI POWER BLOWOUT / BLOOM: BE +17% beat + raise. Margins strong. “Bloom is at the center of a once-in-a-generation opportunity to redefine how power is generated and delivered. Powerful tailwinds—surging demand for electricity driven by AI, nation-state priorities, and our relentless pace of innovation—are converging to accelerate our audacious journey to becoming a standard for onsite power globally.”

CAT – Q3 beats handily, stock trading up 5% to $551 – reported $17.64B in Revenue and EPS of $4.95, compared to cons of $16.77B and $4.53. Conference call scheduled for 8:30 this morning.

ITT – Q3 beat and raise (by more than beat). Reports Q3 EPS $1.78 ex-items vs FactSet $1.67. FY 2025 EPS $6.62 to $6.68 ex-items vs prior guidance $6.35 to $6.55 and FactSet $6.52.

ODFL – Q3 Revs/Op Income/EPS beats, stock trading up 3.5% - reported $1.41B/$360M/$1.28, compared to cons of $1.4B/$340M/$1.22. Operating ratio beat, coming in at 74.3% compared to expectations of 75.6%.

SLGN – reports inline Q3 but Q4/FY25 guide is well below consensus. Guide includes the negative impact ~ $0.10 per diluted share due to higher tax rate. FY 2025: EPS $3.66-3.76 ex-items vs prior guidance $3.85-4.05 and FactSet $3.92.

Generac Holdings Inc. (GNRC) - First Look: Big 3Q Miss, Guide Lower, Large MW Backlog 2x Notable. Residential energy tech shipments were robust. Initial shipments of large-MW generators to datacenter customers shipped in 3Q, with backlog doubling in the last 90 days (previously ~$150, implying ~$300mln).

ENPH: solid upside in Q3 on earnings (higher sales and margins) but the Q4 rev guide is light at $330M (vs St $380M), although the outlook doesn’t include any safe harbor shipments (which contributed ~$71M in Q3 sales).

Latest Media

$NBIS has experienced great revenue growth, but is likely to end up as a REIT...

Like $CRWV, Nebius's business model requires tremendous capex

With a large negative FCF, capex funds come from either debt or equity

We think equity holders will get diluted or own a highly levered security