Resilient Growth, Tamed Inflation

Good Afternoon. Major indices ended slightly in the red, with mixed macroeconomic data and no major disappointments in earnings.

Below are the key things to note this week:

PCE: The Fed’s preferred inflation gauge, the PCE, came in line with expectations. The Core PCE came in at 2.9%, and the headline number was 2.7%, slightly better than expected. This paves the way for further rate cuts in upcoming meetings if inflation does not rise significantly or exceed 3% for the headline PCE anytime soon.

Barrons

Softer PMI: US business activity slowed for a second month in September, with weaker demand across manufacturing and services curbing hiring. Tariffs drove costs sharply higher, but firms struggled to pass them on, resulting in selling prices rising at the slowest pace since April. Sluggish sales triggered a record buildup of factory inventories, though confidence improved on hopes that lower rates could offset tariff and policy risks.

GDP Upgrade: The Commerce Department sharply revised Q2 GDP growth to 3.8%, citing stronger consumer spending. That rebound followed a 0.6% Q1 decline tied to fallout from Trump’s trade wars.

Tale of Starbucks and Autozone: AutoZone is expanding aggressively, opening new “mega hub” stores as demand for auto parts rises with Americans holding onto cars longer, fueling steady sales growth and efficient large-format distribution—AutoZone plans to open 325-330 stores in FY2026. Starbucks, meanwhile, is closing hundreds of underperforming cafes as part of its turnaround plan, pressured by high rents, rising labor costs, and market saturation in densely populated areas. The contrast highlights how essential, maintenance-driven retail can still scale while discretionary, experience-driven retail faces pruning.

For the week:

• The S&P 500 is down 0.31%, the Nasdaq is down 0.65%, and the Dow 30 is down 0.15%.

  

  Barchart

CNN's Fear & Greed Index now stands at 53 (Neutral) out of 100, down 9 points from last week. Details here

The top five trending stocks on Reddit are Dragonfly Energy, SPY, Tesla, Intel, and Nvidia. Read More

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

Target Rate Probabilities for October 29th FOMC Meeting:

CME FedWatch

NVIDIA-OpenAI Investment: Nvidia will invest up to $100B in OpenAI, which aims to build massive data centers powered by Nvidia’s AI chips. OpenAI plans to deploy systems that require 10 gigawatts of power, the company said on Monday. Read

Easier Day Trading: Regulators are set to scrap the $25,000 minimum equity rule for pattern day trading. FINRA has approved amendments to lower the threshold, making day trading more accessible to smaller accounts, pending approval by the SEC. Read

Starbucks Restructuring: Starbucks unveiled a $1B restructuring plan, closing some North American stores and cutting about 900 non-retail jobs. This marks the second round of layoffs under Niccol, after 1,100 corporate cuts earlier this year. Read

Corporate Debt Surge: US corporate bond sales have surged to record levels this month, driven by lower borrowing costs and strong investor demand. Investment-grade issuance has topped $190B, while junk-bond sales are on track for their highest since Sept 2021 at $43B. Falling yields and callable 2022–23 junk bonds are fueling refinancing. Read

TikTok Deal: Trump signed an executive order approving a deal to keep TikTok in the U.S. A new joint venture will oversee U.S. operations, with ByteDance holding a stake of under 20%. VP JD Vance said the deal values TikTok at $14B, though no purchase price was disclosed. Read

Autozone Miss: Same-store sales rose 4.5% vs. 4.4% consensus, with domestic up 4.8% vs. 4.3% and international up 2.1% vs. -1.3%. Gross margin fell 98 bps to 51.5%, driven by a 128 bps non-cash LIFO impact ($80m charge), partly offset by stronger merchandise margins. Operating expenses rose to 32.4% of sales from 31.6%, reflecting growth investments. Non-GAAP EPS was $48.71, below $50.72 consensus and $51.58 last year.

Micron Beat: AI data center demand drove revenue past estimates, with quarterly sales at $11.32B versus $11.16B expected. Adjusted EPS was $3.03 against $2.86 consensus, while GAAP EPS came in at $2.83 versus $2.69. For the current quarter, the company guides EPS of $3.60–$3.90 (vs. $3.10 consensus) and revenue of $12.2B–$12.8B (vs. $11.91B).

Cintas Beat: The company reported Q4 revenue of $2.72 billion, up 8.7% from last year and in line with expectations, with 7.8% organic growth and 0.9% from acquisitions. Net income rose 8.7% to $491.1 million, while EPS increased 9.1% to $1.20, matching estimates. Operating income grew 10% to $617.9 million, with margins expanding 30 bps to 22.7%.

Accenture Mixed: Non-GAAP EPS came in at $3.03, beating estimates by $0.04. Revenue rose 7.3% Y/Y to $17.6B, ahead by $240M. Quarterly bookings reached $21.3B, bringing the annual total to $80.6B. Generative AI bookings were $1.8B for the quarter and $5.9B for the year. Adjusted operating margin improved 10 bps to 15.1%. Free cash flow was $3.8B for the quarter and $10.9B for the year.

Costco Beat: Costco posted Q4 profit of $5.87 per share, up 11% and above estimates. Membership fees rose 14% to $1.72B, driving total sales up 8.1% to $86.16B, also ahead of forecasts. U.S. comps ex-gas rose 6.0%, below last quarter and estimates, while Canada comps gained 8.3%, topping both. Company-wide comps ex-fuel increased 6.4%, above expectations but slowing from 8.0%. E-commerce sales grew 13.5%, down from 15.7%.