Good morning and Happy Birthday Devon!
 
Yesterday the S&P started the week with a slight decline and traded in a very tight range, despite 8/11 sectors higher as Tech came under fire. News that China memory developer CXMT made substantial technical breakthroughs, along with comments from AVGO CEO comments on AI investors “gambling” with little understanding of what they’re betting on”, were key contributors to the weakness. The DRAM ETF fell 4% and NYSE Semis index almost 3%. Oil continued to climb, with Dec Brent approaching $108 but Treasury yields were largely flat.
 
S&P futures are trading around unchanged this morning as Q3 earnings season kicks off with the major money centers reporting. Hostilities in the Middle East continue. Iran is reportedly preparing for renewed conflict and US strikes, while the Houthis warned that employees and civilians around Aramco’s oil facilities are legitimate targets if they remain. Questions around the Russian diesel news and energy “ceasefire” remain.  However, the start of earnings news flow could push aside those topics from the forefront.
 

 
Looking at a few of the reports:

• JPM +1%, despite missing estimates. FICC trading activity moderated during the quarter but equities was strong at +49% and loss provisions were about as expected. CEO Dimon noted “The US economy continued to be fueled by strong business investment and ongoing consumer spending. He then laid out the Wall of Worry: “Large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates and geopolitical conditions continue to shift under the surface.” The company pulled back on repurchase activity as well to focus more on investments, and both 2026 NII and expense guidance were nudged up.
• GS +3% with top and bottom beats. FICC trading was flat and equities trading jumped 72% (directionally inline with JPM).
• C is flat after beating estimates. FICC rose 4% while equities rose 14% and NII guidance was raised.
• WFC is down ~3% after a modest bottom line beat. Softness in FICC trading weighed on results. Management commented that “our data shows that our consumer and business customers are doing well. Consumers are spending more, loan delinquencies are low.”
• JNJ is down 2%, with the company “leaning towards” selling its hip and knee business.
• UNH is up 4% with a better than expected MCR.

The treasury curve is flattening with 10/30y down 3bp while the short end is flat. Fed governor Waller spoke at a conference in India earlier this morning, saying long-term yields are doing some of the work to tighten monetary policy for the Fed while soaring AI spending could fuel upside price pressures over the medium term. He also called President Trump a threat to Fed independence. Atlanta Fed President Goolsbee spoke this morning as well, also noting that AI is pushing up prices and the Fed needs to start showing some progress (on inflation) before entertaining thoughts on rate cuts returning. The US Dollar Index is pulling back, reversing much of yesterday’s gains.
 

• US 2yr +0bps to 4.80%, 5yr -1bps to 5.01%, 10yr -3bps to 5.21%, 30yr -3bps to 5.56%
• USD index: -$0.34 to $102.04

Japan returned from a holiday yesterday and the Nikkei fell 1.8% as major tech stocks got hit hard, following US peer weakness on Monday (Kioxia, Softbank, Tokyo Electron down ~10% each). Most of the other sectors saw decent gains however. South Korea was under substantial pressure overnight, falling over 5% as memory names continued to react to the CXMT technological advancements that hit US names yesterday. Samsung fell another 7% after dropping 4% on Monday. SK Hynix fell 10% locally. In China, Shanghai and Hong Kong were up modestly. Tencent reportedly drew strong demand for its $4.5B dollar and yuan bond funding AI investment. Singaporean data center operator AirTrunk is delaying its IPO until next year, joining Australian Firmus as the latest data center to do so. European stocks are trading modestly higher, led by Chemicals, Healthcare and Real Estate, with tech weak as major semi names fall 1-2%. The IMF’s 2027 growth estimates were unchanged and urged the UK to continue cutting its fiscal spending. LVMH is down 1-2% after reporting results, with China sales particularly weak.
 

 
Brent crude is trading down about 1%, near its lows of the day. Saudi Arabia said output has recovered from a three-decade low, hitting 8.4MBpd in September versus 6.2M in August. European gas is up about 3%. Metals are flat to modestly higher, along with agriculture. Bitcoin and Ether are up modestly. BTC bounced from earlier weakness as it hit its 50d ma, however most of the other major coins are trading lower.
 

 
Earnings:
Pre-Market: ACI, C, DPZ, FBK, GS, JNJ, JPM, UNH, WFC
After-Market: AZZ
 
Economic Data:
US:

• NFIB Business Optimism Index: 97.9 vs 98.0 cons, prior 98.7
• 10:00am Existing Home Sales
• 1:00pm Fed Barkin speech
• 2:00pm Monthly Budget Statement
• 4:00pm Fed Collins speech

Global:

• Japan PPI m.m: -0.3% vs 0.5% cons, prior -0.3%
• UK Retail Sales monitor: 1.0% vs 0.7% cons, prior 0.5%