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the NASDAQ down about 0.2% and of course the bond markets closed for uh the holiday today. So obviously it's it's a big week. We've got earnings, we've got CPI, we've going to hear from uh the Fed chair this week as well on the macro front. And I think really in focus is this question about earnings and whether the expectations are too elevated going into the quarter. Uh what's your take Jenny? So my guess is that the expectations for the earnings numbers that we're going to hear in the next four to six weeks, I don't think it's elevated. I think things are going to come in very much exactly as expected and that's kind of baked in where I think the expectations may be elevated and this is where the um you know
the pedal will hit the road or whatever that you know I always screw up my analogies. Rubber will hit the road. Thank you. Where the rubber will hit the road, it's Monday. um where the rebel will hit the road will be in what the guidance is and what the forecasts are and what the pace of earnings growth is going to be and is that pace of earnings growth relative to what it's been is that enough for people what the outlooks are and I think that's where things could get dicey and I don't have a great sense of if it's going to come in as robust as expected um I've been wait I feel like I've been waiting in no man's land for about 2 months now to see what these numbers are and I've thought that
earnings overshadowed everything they overshadowed interest rates. They've overshadowed um you know, everything that's gone on with oil and the Fed. And it's all about earnings this year. So, we really need to see if the setup now is for earnings really to be up another 15% in 2027 like they're expected to be or if things start to get just a little bit squishy. And you know what else, Leslie? I think how the market responds to each of these is going to be so interesting, too. I wonder if it'll be almost like that, you know, like what we see from Nvidia where you see Nvidia deliver amazing numbers and then the share price is kind of squishy in the aftermath. So what's the response going to be? There's going
to be a lot of behavior in this more than actual act the behavior will be more telling than the actual data I think. Yeah, just the uncertainty around kind of EPS expectations, Jim. And I think it also begs the question whether the expectations are elevated maybe in certain sectors more than others and how we should be looking at the sentiment and the psychology around say tech visav everything else in this environment. Well with tech in particular Leslie I think the question is not so much the earnings which I'd be surprised if they disappointed and they're probably baked in but the question that I'm expecting to be confirmed is whether the capex
plans are still intact. Um it's been three months obviously since we've heard from the hyperscalers and their increased spending plans back then. Um every indication is that those plans are intact. Maybe they even go a little bit higher. Yes, there's political blowback on data centers, but interviews with various CEOs and other leaders of these companies indicates that nobody is pulling back on the spending that this race they feel is still in the early innings uh and pulling back on spending is a way to lose the race. Um, with regards to your question though about other sectors and earnings expectations, I do think something that is still important is where interest rates are
because we are still expecting good earnings growth outside of technology and not just energy and materials, but good earnings growth in financials and industrials. Not on par with technology, but still good. And so the question is why have some of those sectors languished recently? And the easy answer, and I think the right answer is because of interest rates. Now over the last week or so the tenure has kind of stabilized here at 5 and a/4%. Where we go from here depends a lot on this week's CPI and PPI numbers but if you can get further stabiliz stabilization in interest rate and if you pair that with good earnings starting from the banks tomorrow I think you can see non tech start to perform going forward
and some of it too Weiss is just the mind share. Right now we haven't had any earnings for the last few weeks. And so I mean we have but not in bulk like we're about to get. And so the attention has really been on the bond market. It's really been on what's oil doing, what's going on in the macro front. The earning season kind of changes that picture. It gives us more micro uh companies and micro analysis to focus on. Do you think that bodess well given just the expectations for growth in the quarter? Let's back up just a little bit to your original question which saying market near new highs. And I'm going to take issue with that because obviously the market's at new highs, but you're really
cherry-picking the performance because most stocks are not trading above their 50-day average. More than half's trading below their 200 day average. So using the term market gives a false sense of security to this when most of the market has underperformed except for tech. So that's where we are. So it's critical then again for technology to not only meet expectations but also to give good guidance going forward. I have no reason to believe they won't but we do know that even a slightness is going to be an issue for the market if it happens in more than one company. We can get over whether it's an Alphabet or even a Meta or anybody else but we wouldn't be able to get over a pattern of missing
expectations. The other question is how much we've pulled forward. The market's not trading up because it doesn't because it's ignorant of what's predicted which is 30% uh earnings growth. It's trading up because of that. So you're in a restrictive rate environment which shows no signs of letting up. You know fictitious deals between Russia and Ukraine aside the market now is smarter to look at the reality and not what's coming out of white of the White House. So that will remain an issue. Number one. Number two, while the Fed will be on pause regardless of what the numbers are this week because they're not going to tighten that close to the election. Not they couldn't, but they won't, right? So you'll have another tightening in
December. So you put all that together and we're going to look for guidance to really dictate the direction of the market and particularly with the banks. While the bank should have had a good quarter and they will be very optimistic uh optimistic about their pipeline of IPOs from Enthropic and you know open AAI who knows but others and that'll feed it will be optimist optimistic with some guardedness because of where rates are on M&A. So I don't think it's a slam dunk quarter as everybody's you know intimating and if all you have to do is look at the other sectors and see what's happening and frankly even in some sectors you know like we've seen like Micron just can't move forward past highs SKH heck same thing so it's
just not an easy setup I'm still more on the cautious side I think I'm still in a bull market but I just think there'll be an opportunity to put money Well, just to underscore what you were saying, Barclay said indices haven't done much, but there has been an abundance of market stress elsewhere with over 50% of S&P down at least 20% from all-time highs and some of the poorest breath divergences witnessed since data collection began in the 1990s, Jenny. So it does kind of feel like this bifurcation of Q3 earning season where you have kind of tech doing one thing and then there are pockets of tech which are not uh as beneficial in this environment as others and then everybody else and then everybody else. I'm in the
everybody else category since the beginning of September. But I just finished writing the first draft of my quarterly market letter. And that's exactly what I was trying to explain and flesh out for my clients, which is when you look at the quarterly return of the S&P 500 for the third quarter, you're up 2.3%. And holy moly, was that misleading, you know, and then we saw all these strategists come out and say like, "Oh, I think large cap equities should be fine." Okay, but we're referring to a very small group. So, as soon as you step out, as soon as you step out from that very narrow kind of um top 25% of the S&P 500, as soon as you step out, a very different story is being told. Um, building on something
that Jim said and then what Steve said too is Jim said, you know, we need to see if their capex plans are intact. And something that I've been wondering about, Leslie, is it everyone's going to say their capex plan is intact. Nobody's going to want to pull back. But there were two interesting things that I read this morning. One was in the FT saying AI borrowing slows as investors grow wary of debt binge. And then Hawk Tan from Broadcom was out saying the biggest obstacle to the AI industry um is access to capital. And so that should be really interesting too in earnings if we start to see a little bit of like, hey, our capex budget's on track. How are you gonna get the money, you know?
Yeah, I read those articles, too. So, you I know what you're talking about. And then at the same time, I also read articles that talk about how much compute is still in demand. Um so you know if you look at Anthropic going to archeneemy SpaceX to get compute demand or Meta uh transitioning some of its business plans to uh open it open its compute to others uh to use. It just indicates to me that there still is enough demand that while those debt worries are there and certainly we saw that with how badly Paramount's debt traded two weeks ago. Granted Paramount is not AI but still it just shows that the market is saturated.
It does appear to me that de the demand is still there to support all there. The demand's there, but look, there's way more demand for Ferraris than they could ever manufacture. Everybody wants a Ferrari, but how many can afford it? So at some point the market gets tired of financing these companies particularly when it's costing more and more to finance them and they want to see they want to make sure their coverage ratios are actually there and doable not based upon some ridiculous you know projections. If you take a look at the uh at the failed IPO in Australia which is on data center buildouts now they had no revenue. So I think those will be the first to fall down. But guess what?
