5 big analyst AI moves: Apple lifted to Buy, AI chip bets reassessed
In the first government economic data in weeks, CPI for September was reported as it was needed to calculate the 2026 Social Security payments adjustment. Core CPI was down from +0.3% in August to +0.2%, forecast to be flat. Headline CPI was also +0.3% vs August’s +0.4%, which was also forecast to be flat. This lack of tariff-fueled inflation was very encouraging to the market, and stocks responded immediately, with all the major indexes vaulting to new all-time highs. Also hitting new highs were the Magnificent 7, the even-weighted S&P, and semiconductors. The VIX plummeted to almost 16 before rebounding to 16.5. All this while the government is shut down with no near-term end in sight.
US Treasuries had less of a reaction, with the 2-year down 1bp, and the 10-year is flat. Bets for Fed cuts are largely unchanged, with both October and December fully expecting quarter-point cuts, and a further cut in January currently at 57%. The US dollar index remains flat at 98.75.
There was surprise tariff news today. Trump ended all tariff negotiations with Canada after they broadcast an edited video of Ronald Reagan speaking about tariffs while he was President in the ’80s. In the broadcast, they included the part where Reagan described the damage tariffs can cause but edited out the part where he said sometimes tariffs are necessary to achieve fair trade. Reagan had just but a tariff on Japan at the time and was explaining why he did it. This will likely not end well for Canada.
On the commodity front, precious metals are more or less flat on the day. Crude oil is up modestly, and natural gas is flat. Crypto is modestly higher with Bitcoin at $110K.
Earnings continue to come in strong. P&G (PG) had beats top and bottom and reported no real problems with tariffs so far. The shares opened up +4.1% but cooled off to up less than 1% (-8.9% YTD). HCA Healthcare (HCA) had major beats top and bottom. The shares are up 3.1% (+51.4% YTD). General Dynamics (GD) has beats top and bottom helped by strong business jet deliveries. The shares are up 2.5% (+32.8% YTD). Next week is the most important of the earnings season, including Microsoft (MSFT), Alphabet (GOOG), and Meta (META) on Wednesday, and Apple (AAPL) and Amazon (AMZN) on Thursday.
New highs being hit in October are very encouraging for what to expect going into the seasonally strong year-end, with a strong list of potential positive catalysts: The end of the government shutdown, Fed cuts, and negotiations with China and Russia.