OpenAI - World's Most Valued Private Company

Good Afternoon. Another positive week for the market, with all the major indices up more than 1% for the week. Last week, I covered the comparison of Carson vs BCG/MS analysis, which showed that the US market is currently fairly valued but not overvalued. The ISM services data came in weaker than expected, but a similar reading came in July and then improved in August, so it will be good to wait and see if the slowdown continues.

Below are the key things to note this week:

Government Shutdown: Lawmakers left Washington for the weekend with no breakthrough on a federal funding deal. The stalemate between Democrats, Republicans, and President Trump over enhanced Obamacare subsidies remains unresolved, ensuring that the government shutdown will extend into next week.
Since 1976, there have been 21 shutdowns averaging about eight days, with equities generally holding steady or even posting modest gains. Treasury operations and interest payments continue as essential functions, and fixed-income markets usually remain stable, sometimes even benefiting from a flight to safety that pushes yields lower. BLS did not release the job market data on Friday due to the shutdown, but other reports suggest an uneven picture.

LPL Finance

ISM Services PMI: The ISM Services Index weakened sharply in September, sliding from 52 to 50—right at the line between growth and contraction. Consensus expected 51.7, but the print came in below every individual Bloomberg forecast. Business activity dropped to 49.9 from 55.0, marking the weakest reading since the pandemic shutdown in May 2020, while new orders slipped to 50.4 from 56.0. The employment index edged up to 47.2 from 46.5, signaling a slower pace of job losses but still pointing to overall contraction in hiring.

ISM

Earnings Season: The most crucial factor for market direction will be the kickoff of the new earnings season in the week starting October 13th. Considering the robust economy, I expect the earnings to continue to surprise to the upside.
 

For the week:

• The S&P 500 is up 1.09%, the Nasdaq is up 1.32%, and the Dow 30 is up 1.10%.

  

  Barchart

CNN's Fear & Greed Index now stands at 54 (Neutral) out of 100, down 8 points from last week. Details here

The top five trending stocks on Reddit are Dragonfly Energy, SPY, Safety Shot, Tesla, and Nebius Group. Read More

Here is a summary of this week’s key economic releases:

Target Rate Probabilities for the October 29th FOMC Meeting:

CME FedWatch

No Immediate Liquidity Concerns: Fed liquidity facilities experienced lower-than-expected demand at quarter-end, despite rising repo rates, indicating mild funding pressure. Quarter-ends often strain money markets as firms retreat and volatility rises, and this one was expected to be tougher amid shrinking liquidity from the Fed’s ongoing QT. Read

OpenAI Reaches $500bn Valuation: OpenAI, the maker of ChatGPT, has reached a $500 billion valuation after its employees sold approximately $6.6 billion in shares, according to Reuters. The jump from $300 billion highlights its accelerating growth in users and revenue. Read

Kraken Funding: Kraken is reportedly seeking fresh funding that could value it at around $20 billion, according to Bloomberg. The round may include a strategic investment of $200–$300 million, contingent upon market conditions. Read

ETF Inflows: ETF inflows are surging, with $917 billion added through Sept. 29, setting up another record year after 2024’s $1.1 trillion. A recent policy move from Washington is poised to maintain the momentum. Read

Tesla Record Deliveries: Tesla reported record quarterly deliveries, but shares fell amid worries that expiring U.S. EV tax credits could turn the sales surge into a slowdown. Musk pushed hard before the $7,500 credit’s withdrawal, using discounts, financing offers, ads, and direct outreach to boost demand. Read

Carnival Corp Beat: Q3 Non-GAAP EPS came in at $1.43, beating by $0.11, on revenue of $8.15B, up 3.2% Y/Y. Adjusted EBITDA reached a record $3.0B. Cruise costs per ALBD rose 4.6% from 2024, while adjusted costs ex-fuel rose 5.5%, 1.5 points better than June guidance. Fuel consumption per ALBD fell 5.2% on efficiency gains. Customer deposits hit a record $7.1B, surpassing the prior August 2024 peak.

Nike Beat: Nike posted earnings of 49 cents a share for the quarter ended Aug. 31, beating estimates of 27 cents. Revenue rose 1% to $11.7 billion, exceeding expectations of $11 billion, with wholesale sales up 7% driven by strong demand for running products. For Q2, revenue is expected to dip by a low single digit; however, a stronger spring order book suggests wholesale growth for the whole year.

Paychex Beat: Q1 adjusted EPS came in at $1.22, above $1.20 estimates, up from $1.19 in Q4 and $1.16 last year. Revenue held at $1.54B, matching consensus, rising from $1.43B in Q4 and $1.32B a year ago. Expenses edged up to $998.1M from $996.2M in Q4 and $771.8M last year. Adjusted operating margin was 40.7%, versus 40.4% in Q4 and 41.5% a year earlier.