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Weekly Newsletter
🏛️ Impact of Potential Blue Sweep
📊 Earnings Season Tracker
📈 Key Takeaways From This Week's Earnings
🤖 OpenAI Valued at $1.25T in New Funding Round
🚀 The Tesla-SpaceX Merger Math
QUOTE OF THE WEEK:
“The demand for the neoclouds is off the charts. Their capabilities are extraordinary. And so what is missing in the middle is the working capital to fuel that growth, to fund that growth. And because there's just so much demand across so many sectors of AI, there's a scarcity of capital. The demand for capital is much greater than the availability of capital. That's going to get solved. And that's going to get solved because, fundamentally, the most important things are the values that these guys are providing.” -
Jensen Huang, CEO - NVIDIA
KEY US ECONOMIC EVENTS NEXT WEEK:
MARKET CLOSE:
WEEKLY MARKET WRAP:
Good Afternoon. Volatile week for the markets, with financing fears spooking AI stocks, especially cloud firms like CoreWeave and Nebius. The WSJ flagged that ~10 companies account for roughly two-thirds of S&P profit growth — breadth beneath the index is thinning. Rates eased with the 10Y back below 5% at 4.99% and the 30Y at 5.32%, which reads as growth-risk pricing more than disinflation. In short: the AI re-pricing isn’t done, oil is back as a top macro variable, and leadership has rotated to value and defensives. Next week stacks the Oct 28 FOMC decision with Alphabet, Amazon, Microsoft, and Meta earnings — three binary catalysts in one week.
For the week:
CNN's Fear & Greed Index now stands at 21 (Extreme Fear) out of 100, up 3 points from last week. Details here
The top five trending stocks on Reddit are SPY, Microsoft, NVIDIA, SpaceX, and QQQ. 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) is $0.
Here is a summary of this week’s key economic releases:
Target Rate Probabilities for Oct 28th FOMC Meeting:
CURATED INSIGHTS & ANALYSIS:
The Tesla-SpaceX Merger Math:
Tesla stock is weak this year while SpaceX just posted a blow-out Q3 with 161% revenue growth and its first operating profit as a public company. Tesla's real upside isn't just the takeout premium; it's the re-rating onto SpaceX’s hyper-growth trajectory, cash-generative AI exposure through the Super Intelligence platform, and Starlink’s 55% gross-margin annuity. Musk ends with 37% equity and 56% voting control through SpaceX’s dual-class structure. Polymarket odds for a year-end close sit at 18%, suggesting the market is under-pricing the setup. The asymmetric trade is being long Tesla into the announcement window before the December 3 annual meeting.
Election Bets Are Up 20%. The S&P 500 Is Up 2.6%:
Since August, the odds of Democrats winning both the House and Senate have climbed from 23% to 64%. JPMorgan’s Democrat basket, built to track those odds, is up 20%, while the S&P 500 is up 2.6%. BofA’s Michael Hartnett sees a sweep as negative for stocks, expecting a pullback of more than 10% on higher taxes and regulation. History gives a different picture. Prediction markets have tended to overstate the challenging party’s sweep odds at this stage, fading about 5 points on average into Election Day across the 2002–2022 midterms. And all 19 midterms since 1950 saw the S&P 500 higher 12 months later, with an average one-year gain of 14.7% since 1990. The election trade has already moved. Historically, the index has made its bigger move after the vote.Earnings Season Tracker:
Q3 reporting is about a quarter done across the S&P 500, and the early read is solid: revenue is up 9.1% across reporters, 85% are beating, and the typical company is growing GAAP net income 12.0%. Large-cap growth names are running further ahead on revenue, up 21.7%.
Both figures come from a sample still concentrated in financials and early-calendar names, where blended earnings growth is only 4.6%. Information technology revenue is running at 41.0%, and almost none of those companies have reported yet.
That matters for the thesis we ran two weeks ago. The season-start estimate of 29.6% has barely moved, sitting at 29.5% on a blended basis — not the six-point lift the five-year average pattern implied. The lift usually comes with the mega-caps, so this week tests whether an estimate that tripled in a year still leaves room to be beaten.
Key takeaways from this week’s earnings:
Tariff refunds are lifting some reported profits
Tariff refunds added $0.25 to RTX’s quarterly EPS of $2.26 and $0.15 to Thermo Fisher’s. Procter & Gamble booked about $90 million, and Tesla said refunds helped lift its energy margin from 20% to 33%. These are one-time gains from the Supreme Court tariff ruling. Without them, RTX and Thermo Fisher still beat, but by less.
High oil prices are raising costs
SAP’s finance chief noted oil has risen from $60 to about $110 and said interest rates above 5% are starting to slow the economy. Procter & Gamble’s gross margin fell 1.5 points on raw material, energy and freight costs, which it expects to rise further. GE Aerospace said airlines are trimming some flight schedules. Energy costs appear to be spreading through more of the economy.
Chip supply, not demand, is limiting growth
Lam Research said supply shortages held back its revenue and will last into next year, even as chip-equipment spending heads above $200 billion in 2027. Texas Instruments said it has added little new capacity for basic chips in four years and is raising some prices. Tesla said it is building its own chip plant to avoid shortages. Shortages may hold back growth more than weak demand.
AI agents are moving into everyday use
Meta’s Muse personal agent reached 10 million users in about six weeks, and shopping is its most common use, with average purchases above $200. SAP said it now offers 3,000 AI agents inside its software. IBM said growth in its OpenShift platform topped 30% as companies move agents into daily work. AI agents are starting to do real tasks, not just answer questions.
Defense and aircraft orders are filling backlogs for years
RTX’s backlog hit a record $340 billion, up 36%, after multiyear contracts worth about $23 billion for Tomahawk missiles and $14 billion for AMRAAM missiles. GE Aerospace’s orders rose 49%, and it said aircraft makers’ order books are full through the end of the decade. Backlogs this large can support revenue well beyond next year.
Ad money keeps flowing to the largest platform
Meta’s ad revenue rose 26% to $63.1 billion, and the number of ads it showed rose 10%. Netflix cut its 2026 ad revenue target to about $2.7 billion from about $3 billion after new ad tools rolled out slowly. Its ad business is still growing over 80%, but from a much smaller base. Advertisers appear to favor scale and proven tools.
FRONT PAGES:
Tesla-SpaceX Merger Talks Confirmed: Elon Musk confirmed on Tuesday’s SpaceX earnings call that Tesla and SpaceX have each formed special committees to explore a potential merger, which would create a combined entity valued near $3.5 trillion. SpaceX stock closed at $159 on the news. Governance questions dominate the setup: Musk has reportedly recused himself from the talks over conflict of interest, though SpaceX leadership indicated his word on terms would be final.
OpenAI Nears $30B Round at $1.25T Valuation: OpenAI is nearing the close of a funding round of up to $30 billion at a $1.25 trillion valuation, led by UAE-based investors with participation from existing backers. The round would roughly double OpenAI’s valuation from the $500 billion secondary sale completed in August and extend the company’s capital base ahead of a planned IPO. The targeted close is next week.
Anthropic Doubles Nscale Bet to $45B: Anthropic is in talks to sign a second $45 billion AI compute deal with Nvidia-backed Nscale, roughly doubling the arrangement it signed in August. The deal would further anchor Anthropic’s compute roadmap on Nvidia hardware delivered through Nscale’s data centers in the UK, US and Norway. Nvidia continues as both an equity investor in Nscale and a chip supplier, extending the AI vendor-financing loop.
Boeing 737 MAX 10 Cleared by FAA: The FAA certified the Boeing 737 MAX 10 for passenger service on Monday, ending a seven-year delay since the model was first announced. The certification clears Boeing to begin deliveries to launch customers United, Delta, and Ryanair, with roughly 1,000 orders in backlog. Boeing has committed to a staggered delivery ramp through 2027. The approval closes one of the longest regulatory holds in commercial aviation.
Precious Metals Reverse Sharply: Gold fell below $4,100, and silver dropped to around $56 per ounce by Thursday as rising oil prices and renewed inflation concerns revived Fed rate-hike speculation. The reversal partly unwinds the recent record run, with the gold-silver ratio widening past 74. Brent crude’s push toward $112 and the hotter-than-expected September PPI print both contributed to the risk-off move in metals.
EARNINGS UPDATE:
Meta Platforms. EPS $7.40 versus $6.80, excluding a $9.9B legal settlement charge (reported $3.83); revenue $64.6B, up 26%, versus $63.4B. Its new Muse personal AI agent reached 10 million users in about six weeks. It expects $135–145B of capital spending this year. Shares fell about 7% the next day.
Tesla. EPS $0.48 versus $0.46; revenue $28.0B, in line. Demand is running ahead of production, with its largest order backlog in four years. Megapack batteries are nearly sold out for 2027 due to data-center demand. Shares fell about 3%.
Procter & Gamble. EPS $2.00 versus $1.88; revenue $23.3B versus $22.8B. Organic sales grew 4%, mostly from higher volume rather than price. Gross margin fell 1.5 points due to rising raw material, energy, and freight costs, which it expects to rise further. Shares rose about 6%.
Lam Research. EPS $2.20 versus $2.18; revenue $8.2B, a record, versus $8.1B. It said supply shortages held back revenue and will last into next year, and it expects chip-equipment spending to top $200B in 2027. Shares fell about 12%.
GE Aerospace. EPS $2.25 versus $2.01; adjusted revenue $13.3B versus $12.9B. Orders rose 49%, and it raised its 2026 earnings outlook to $8.00–8.10. It expects service revenue growth to slow to low double digits in 2027. Shares fell about 4%.
Philip Morris. EPS $2.36 versus $2.30; revenue $11.4B versus $11.3B. Smoke-free products kept growing, and cigarette prices rose by high single digits. It cited extra costs from the conflicts in the Middle East and Ukraine. Shares fell about 1%.
Netflix. EPS $0.87 versus $0.82; revenue $12.9B, in line, up 12%. It cut its 2026 ad revenue target to about $2.7B from about $3B because new ad products rolled out slowly. Its fourth-quarter profit forecast fell short of estimates. Shares fell about 5%.
SAP. EPS €1.89; revenue €10.3B, its first quarter above €10B, both above estimates. Cloud revenue grew 25%, and its cloud backlog reached €24.1B. Consulting services revenue fell 5%. Shares rose about 3%.
RTX. EPS $2.26 versus $1.78, including $0.25 from tariff refunds; revenue $25.0B versus $24.1B. Its order backlog hit a record $340B, up 36%, after large multiyear missile contracts. Shares rose about 1%.
Thermo Fisher. EPS $6.68 versus $6.40, including $0.15 from tariff refunds; revenue $12.1B, up 9%, versus $12.0B. Drug and biotech customers grew by high single digits. Shares rose about 1%.
Texas Instruments. EPS $2.62 versus $2.44; revenue $6.1B, up 28%, versus $5.9B. Data-center sales nearly doubled, and industrial sales rose over 40%. It is raising some prices as supply tightens. Shares fell about 2%.
IBM. EPS $2.95 versus $2.85; revenue $17.1B, up 6%, versus $16.8B. Software grew 9% while consulting grew 2%. It raised its free cash flow outlook. Shares were flat after a 4% gain on the day of the report.
EARNINGS PREVIEW:
Date | Symbol | Name | Time |
27-Oct | V | Visa Inc | After Close |
27-Oct | KO | Coca-Cola Co | Before Open |
28-Oct | GOOGL | Alphabet Inc | After Close |
28-Oct | MSFT | Microsoft Corp | After Close |
29-Oct | AMZN | Amazon.com Inc | After Close |
29-Oct | LLY | Eli Lilly and Co | Before Open |
29-Oct | MA | Mastercard Inc | Before Open |
29-Oct | INTC | Intel Corp | After Close |
29-Oct | MRK | Merck & Co | Before Open |
30-Oct | XOM | Exxon Mobil Corp | Before Open |
30-Oct | ABBV | AbbVie Inc | Before Open |
30-Oct | CVX | Chevron Corp | Before Open |
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