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Weekly Newsletter
⚖️ Short- And Long-Term Impact Due To Supreme Court Tariff Ruling
📊 Q2 Earnings Tracker
💡 Key Takeaways From This Week’s Earnings
☁️ Oracle Invokes Force Majeure
🤖 Meta Goes All-In On Muse
💵 Foreign Money Chooses US Equities Over Debt
QUOTE OF THE WEEK:
“It's actually more normal to have a rate structure with a 3%, 3.5%, 4% Fed funds rate to, you know, 4.5%, 5% ten-year rate. That's more of a natural curve and a curve that is consistent with a growing, strong U.S. economy. So a little bit is just getting used to a different environment than we were post-financial crisis for many, many years.” - Bank of America CEO Brian Moynihan
KEY US ECONOMIC EVENTS NEXT WEEK:
MARKET CLOSE:
WEEKLY MARKET WRAP:
Good Afternoon. Positive week across the board with a full reversal of the prior week's Fed hike selloff. Stocks rallied despite 10Y Treasury yield hitting ~5.2% this week, reportedly the highest level since June 2007, and the 5-year crossed 5% on Wednesday, Sep 23.
For the week:
CNN's Fear & Greed Index now stands at 37 (Fear) out of 100, up 8 points from last week. Details here
The top five trending stocks on Reddit are SPY, Micron, DTE Energy, VOO, and Amazon. Read More
Liquidity:
Banking Reserves + ON RRP: Banking reserves remain at approximately $2.9 trillion. ON RRP balance remains immaterial.
Standing Repo Operations: The New York Fed’s standing repo operation (primarily reflecting SRF take-up) as of Feb 6th is zero.
Here is a summary of this week’s key economic releases:
Target Rate Probabilities for October 26th FOMC Meeting:
CURATED INSIGHTS & ANALYSIS:
Earnings Tracker:
Little has changed in the Q2 earnings tracker since last week.
Short- and long-term impact of Supreme Court tariff ruling:
In Q2 earnings, many companies reported tariff refund gains, so I looked into the current state of the tariff situation and the impact due to the Supreme Court ruling.
On February 20, the Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA), a 1977 law meant for national emergencies, does not let the President impose tariffs. That ended the reciprocal and fentanyl tariffs. Tariffs under other laws were not affected. Tariffs did not end, but the government is now paying back much of what it collected.
Collected: About $166 billion was paid under the IEEPA tariffs before the ruling.
Refunded: By September 11, Customs had certified about $122 billion, including interest, and sent it to Treasury for payment. Refunds go to importers, not consumers.
This year: The Congressional Budget Office (CBO), Congress’s nonpartisan budget scorekeeper, projected $418 billion of customs revenue for fiscal 2026. It has cut that by $250 billion, to roughly $168 billion. In July, refunds of $36 billion exceeded collections of $26 billion, so customs revenue was negative for the month.
Long term: Right after the ruling, CBO said deficits would be $2.0 trillion higher over ten years. With the new tariffs, its latest estimate is $0.9 trillion, measured over a slightly different window.
Replacements: A 10% tariff under Section 122 ran from February to July. Since July 24, imports from about 60 economies pay 10–12.5% under Section 301, a law aimed at unfair trade practices, with China at 37.5%. Some Canadian goods pay 50% under Section 338, a rarely used retaliation law. National-security tariffs under Section 232 on metals, autos, drugs, chips and drones stay in place.
Tariff rate: CBO puts the average tariff rate at 10% under current policy, down from 15% at the peak but well above 2% in 2024.
What it means for earnings: Importers paid these tariffs, and many passed at least part of the cost on to customers. The refunds now come back to them as one-time gains. They showed up at Walmart, Target, Costco, and AutoZone this season, where $4.43 a share turned AutoZone’s miss into a reported beat. With billions still being processed, these gains should keep appearing for a few more quarters. It is worth checking every headline beat for them.
What it means going forward: The tariff burden is shifting from a broad tax on most imports toward specific industries and countries: drugs, chips, metals, autos, and Canada. The new Section 301 tariffs also face legal challenges, so the rebuilt tariff wall is less certain than the old one. Without Congress, the long-term revenue gap is likely to narrow but not close.
Key takeaways from this week’s earnings:
The AI buildout is short of electricians, not just chips
Paychex said its small-business clients are having trouble hiring because the AI boom needs “a lot of electricians and a lot of construction work.” Last week Lennar named data-center construction as a cause of labor shortages in about 20% of its divisions. The physical constraint on AI now includes skilled trades, and other industries are paying for it.
Lower-income shoppers are still under pressure
General Mills described its consumer as “very stressed, especially the middle and lower-income consumer,” with shoppers still waiting for promotions before buying. AutoZone’s do-it-yourself sales fell 0.6% while sales to repair shops grew 8.6%. Costco, meanwhile, grew traffic 3.3%. Spending is moving toward value formats and away from full-price brands.
Food companies are facing a second round of cost inflation
General Mills raised its cost inflation outlook to the high end of 4–5%, rising to about 6% by its fourth quarter, citing wheat, freight, fuel and packaging. It also flagged fertilizer costs as a risk to next year’s grain supply. Management said peers are discussing list price increases as soon as next month. Oil above $100 is starting to reach grocery prices.
Tariff refunds are still changing what counts as a beat
AutoZone’s reported $56.05 beat consensus, but $4.43 of it was a tariff refund; without it, earnings fell short. Costco booked $184 million of refunds, about $0.15 a share, and still beat without them. The same one-time item turned one company’s miss into a headline beat and made no difference to the other.
Companies are absorbing energy costs rather than passing them on
Cintas does not pass fuel surcharges to customers and said energy costs are about 100 basis points of revenue, yet it still raised guidance. Darden said a full year of elevated diesel would add only 10–15 basis points of cost. Both are covering the cost through efficiency rather than surcharges. If oil stays above $100, that cushion may get thinner.
AI is reaching payroll and the grocery aisle
Paychex now runs more than 2,000 AI agents and has automated about 20% more payroll processing since January. Its core software business still slowed to 4.3% growth, and the stock fell 9%. General Mills said 40% of consumers used an AI tool to make a food purchase last month and estimates AI agents could handle about 20% of food sales by 2030.
FRONT PAGES:
Oracle Invokes Force Majeure on Project Jupiter
Oracle sent a force majeure notice to Blue Owl's Stack Infrastructure unit Thursday for Project Jupiter, the 2.45GW New Mexico campus anchoring the Oracle-OpenAI-SoftBank Stargate initiative. Trigger: regulators denied the Energy Transfer gas pipeline permit twice, pushing the start from Aug 2026 to Feb 2027. Reuters' source pegs the total delay at ~1 year. Oracle carries $18B in project debt; Blue Owl holds $3B of equity. Project debt trading below 90¢ per Bloomberg. Morgan Stanley launched a broad review of AI data center loans and leases. Data Center Watch counted 45 projects worth $68B blocked in Q2 alone. First named case of the bear thesis: power and permits, not chips, are the AI-capex bottleneck.
Meta Goes All-In on Muse at Connect 2026
Zuckerberg used the Sept 23 Connect keynote to make Meta's Muse agent (launched Sept 8) the center of a full hardware push — Muse Charm keychain ($349, holidays), Muse for Mac with computer-use permissions, Muse on Ray-Ban glasses hands-free, and a dedicated Muse email address. App hit #1 on the Apple App Store. Meta finished the week +13%, approaching a $2T market cap. Alexandr Wang framed it as "personal superintelligence for everyone."Foreign Capital Floods US Stocks at Record; Treasury Demand Fades
Foreign investors bought a net $942B of US equities and fund shares in the 12 months ending July 31 — an all-time record — with $426B in Q2 2026 alone (up 62% YoY), per FT citing BEA data. Foreign net purchases of US debt fell to $188B in Q2 from $314B in Q1, a 40% quarterly drop. Council on Foreign Relations' Brad Setser: "less overseas demand for Treasuries." Explains a large piece of the 10Y push to 5.18% — foreign price-insensitive Treasury demand has structurally weakened, and duration is now clearing at higher yields. Foreigners are still buying America, but they are buying the AI trade, not the government's balance sheet.
Trump-Xi Summit Extends Trade Truce to January 10
Xi's Washington visit concluded Friday with a limited extension of the US-China trade truce through Jan 10 — preserving current tariff reductions and pausing further actions, but no breakthroughs on export controls, tech transfers, or semiconductor licensing. Modest near-term positive for global supply chains. Real signal: Beijing is content to run out the clock into the US midterms rather than negotiate now. Sets up another cliff-edge in January.
EARNINGS UPDATE:
Costco. EPS $6.75 versus $6.54, including about $0.15 from tariff refunds; $6.60 excluding it still beat. Revenue $95.7B, up 11%. Comparable sales rose 6.7% excluding gas and currency, with traffic up 3.3%. Membership fee growth slowed to 7.3% from 14% at the start of the year as the fee increase laps. Shares rose about 3%.
AutoZone. Reported EPS $56.05 versus $54.14, but that included a $4.43 tariff refund; excluding it, earnings were about $51.62, below consensus. Revenue of $6.59B missed. Commercial sales grew 8.6% while do-it-yourself sales fell 0.6%. Management said the lower-end consumer is “definitely pressured.” Shares rose about 3%.
Cintas. EPS $1.39 versus $1.35; revenue $3.01B, up 10.9% and a beat, the first $3 billion quarter in its history. Full-year revenue and EPS guidance were raised. Management noted it does not pass fuel surcharges on to customers. Shares fell about 3%.
Paychex. EPS $1.34 versus $1.32; revenue $1.63B, in line. Its core payroll software business grew only 4.3%, slightly below plan, while its outsourced HR business grew 12%. Full-year guidance was reaffirmed. Shares fell about 9%, the worst reaction of the week.
General Mills. EPS was $0.75 versus $0.72; revenue was $4.39B, a beat. Retail sales trends improved by two points, but the company is still losing share in some categories. Input cost inflation is now expected at the high end of 4–5%, rising to about 6% by the fourth quarter. Shares rose 1% on the day, then fell about 6% over the next two.
Darden. EPS $2.05, in line; revenue $3.20B, in line. Olive Garden same-restaurant sales rose just 1%, hurt by the World Cup and a lettuce scare, while LongHorn Steakhouse grew 6.8%. Full-year guidance was reaffirmed. Shares fell about 3% on the day and a further 4% the next.
EARNINGS PREVIEW:
Date | Symbol | Name | Time |
29-Sep | CCL | Carnival Corporation | Before Open |
30-Sep | JBL | Jabil Inc | Before Open |
30-Sep | MU | Micron Technology | After Close |
1-Oct | ACN | Accenture Plc | Before Open |
1-Oct | MKC | McCormick & Company | Before Open |
1-Oct | NKE | Nike Inc | After Close |
VIDEO’s OF THE WEEK:
The ice cream shop that makes money when it's cold
28 Wishes sells ice cream in Los Angeles. Below 70°F, sales fall about 20%. The weather is out of their hands. Rent isn't.
So the owners started putting about $20 a day into Kalshi weather markets, taking the cold side. The days that keep customers away now pay something back.
This is hedging. Big companies have done it for decades, buying protection against bad weather, fuel spikes and rising rates. It used to take a broker, a trading desk, and an order size no corner shop could meet.
Kalshi opens it up. Contracts on weather, fuel prices, inflation, tariffs and regulation, starting at a few dollars. Take a position on the outcome that would hurt you. If it hits, the payout softens it. If it doesn't, the contract expires and the good month was the point.
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This newsletter's content is for informational and educational purposes only and should not be considered trading or investment recommendations. All the opinions in this newsletter are personal and do not belong to any organization.
