Calendar

This Week – Earnings heavy with over 100 S&P 500 names reporting, but TSLA the only MANGMAN(T). The Fed Speakers are almost all non-voting, so we would expect irrelevance.

Wednesday – Existing Home Sales, Beige Book. Earnings – T, BA, HLT, KO, IBM, TSLA, LVS, COF, NOW

Thursday – Jobless Claims, KC Fed, New Home Sales, Earnings – LUV, TSCO,

Friday – Durable Goods, Earnings - HCA

Trading Observations

• All red this morning, down ~25-50bp

• ECB’s Lagarde at 10:00 am with speculation of cutting below neutral

• TXN higher.  Will see if Auto Semis can rebound.  Group up only 4.5% YTD vs SOX up 24%

• Breadth is strong- Tech is 14% above its 50-day avg, KRE 14% too, S&P500 10%, Russell 7%

• 20-25% of mutual funds end their years next week, will watch for tax loss selling on YTD losers

• Sitting right on near-term support, 5845.  Then 5800 and 5760

Futures

DOW -247

S&P -20

Nasdaq -86

10-Year Yield

Oil

Gold

Consumer/Financial Healthcare

FI – Down 1% as the stock has had a solid run into earnings. Bottom line beat on good margins. Clover growth was +28%, which is flat sequentially. Guidance looks solid. I see nothing to worry about here except expectations.

MCD – Down 7% - Baird downgrading to neutral on the E. Coli breakout that they think could crush comps. MCD has rarely traded cheaply to boot and isn’t currently at 26x P/E in our opinion against average growth.

• They’re blaming the onions … 1 dead, 49 sickened in E. coli outbreak linked to McDonald's Quarter Pounders: CDC [msn.com]

Weekly Spending Traffic in retail up 9.2% w/w, but its noise given a Columbus Day shift and hurricane snapback.

PII – Polaris missed EPS and cut guidance as it talks up a 15-20% inventory reduction at dealers for the end of 2024.

SBUX – Down 3% on a total comp whiff as the new CEO likely towel through what he could here to get it out of the way. He did a good job setting up a 2025 recovery to growth, which is why the stock is off its lows.

HLT – Down 3.5% on FY guidance reduction.

Technology

AAPL: Apple will keep investing in China, Cook

ADSK read: Sept Architectural Billings flat MoM, say clients remain on the sidelines with regard to proceeding on planned projects, caution elevated. Backlogs of work supportive

AMD: alpha laggard Tues - MS checks said they had trimmed CoWoS wafer booking at TSMC for 2025 given uncertainty around M325 demand, saying NVDA took up extra capacity ... has been chatter for a few weeks / some think nothing that new

ARM/QCOM: both stocks lower (-2% / -4.6% respectively) ... ARM will end a license that allowed Qualcomm to use its IP to design chips, escalating a legal dispute

CART: rumors continue to swirl around UBER (flat) and potential M&A .. much more strategic fit than EXPE or AMS SM which was floated by the Betaville rag (I was reminded this used to be good source YEARS ago; definitely not the last few yrs)

SNAP: +2.6% JMP upgrading - says there is an inflection in impression growth. “The company can grow US and N.A. engagement and drive greater ad load with its new ad products”

STX: -4.6% positioning / buyside expectations biggest headwind. Qrtr beat / guide inline. Bulls remain positive on the secular demand trends from Cloud, rev and margin recovery from trough levels

TXN: +4% low expectations. Guide light but expected. CEO says inventory correction nearing end; seeing slower recovery, but gradual improvements at its Industrial and Auto segments. Bulls calling this clearing event? Mgmt said autos were a bright spot (most of the auto growth came from China, where the firm is seeing more of its chips go into EVs, while non-China autos remain weak) while industrial stayed soft

VRT: -9% neg reaction post raised FY (12 month orders +37% but Q3 specific orders grew just +17%) .. Crowded long/story stock (+202% y/y into print) - liquid cooling play - sentiment was extremely very bullish on the story as ppl view it as one of the purest plays (after NVDA) on the AI data center boom.

TSMC cut off client it discovered funneling chips to Huawei - Bloomey

IBM: #s tonight | 5.7% implied move

LRCX: #s tonight | 6% implied move

NOW: #s tonight | 5.2% implied move

PEGA: #s tonight | 11.3% implied move

Industrials 

Shares of Spirit Airlines (SAVE) jump 27% after the Wall Street Journal reported Frontier Group Holdings is exploring a renewed bid for the embattled carrier.

• M&A likely has to happen in these low cost carriers or they will go bankrupt 1 by 1.

AI Power Up/WSJ feature: Data centers + nuclear – while the hype around nuclear has surged of late, if will be years (at least) before this energy source makes a major dent in tech data center power consumption (and there are major risks associated with nuclear given the industry’s history of cost overruns while SMRs are still unproven). Nuclear is hot, solar is not right now.

ENPH -15% post shortfall on Q3 EPS/sales. US sales +43% q/q (due to higher shipments to distributors as inventory returned to normal levels) while European sales -15% due to a further softening in demand .. some positive headlines regarding tariff cuts (details below for Chinese names)

A.O. Smith (AOS) downgraded to neutral from buy at DA Davidson and upgraded to neutral from sell at UBS

Architecture Billings Index (ABI) for September remains flat at 45.7 vs. 45.7 in August – New Projects Inquiries index 51.6 vs. 52.4 in August

Canadian National Railway (CNR) upgraded to buy from reduce at Veritas Investment Research

Enphase Energy (ENPH) downgraded to sell from neutral at Guggenheim Securities

Frontier Airlines (ULCC) considering renewed bid for Spirit Airlines; early-stage talks have taken place - media report

TFI International (TFII) upgraded to buy from reduce at Veritas Investment Research and downgraded to hold from buy at Stifel