Morning Call 9/30/26

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0:43You give it a project, close your laptop, and when you come back, the job's finished. No matter your industry or role, your agent has the skills to help every team stay in their flow. Seriously, make work less work with Gemini on Google Cloud. Check response, subscription required. End of the line for Q3. I'm Dominic Chu and this is your morning call.

1:18Good Wednesday morning. I'm Dominic Chu in for Morgan Brennan today. U.S. equity futures this morning on the final trading day of the month and the quarter are showing some signs of life here, but relatively so. You can see here the Dow's implied higher by just about 113 points, the S &P up by 12, and that tech-heavier NASDAQ 100 trade down by just about eight points. Not much there. But the big story remains bond yields, the two-year note yield sitting at a 28-month high at this point, but we're actually ticking down a little bit in terms of yield up in price. The 10-year, by the way, its highest levels going back to 19 years, back to 2007.

1:56The 30 year, the highest level going all the way back to 2002. And this is all ahead of a very busy day for data with ADP private payrolls for September out before the opening bell, expecting 68 ,000 net new jobs there. We're also going to get personal income and August PCE as well. We're expected to say elevated year on year north of 3 % in terms of those inflation levels. Also, with energy prices and oil sitting at its lowest level since late August, you can see right now U.S. benchmark West Texas Intermediate is currently up by just about a percent or so,$90.25. Ice Brent crude futures,$103.57, up about a percent as well.

2:38Now let's see how Europe and Asia are wrapping things up in their third quarter. Our Steve Sedgwick is in London with the trade from across the pond. Good morning, Steve.

2:49Good morning, Mr. Chou. Yeah, absolutely fascinating here looking at what you had to say and comparing that to Asia and Europe as well. And it's a similar story. A little bit of window dressing perhaps on the last day of the trading quarter with the Nikkei up 1.9 % and the S &P ASX 200 over in Australia up 0.9 % as well. But if we have a look at the quarter to date moves as well, well, as you say, rising bond yields so far, not putting a lot of pressure on stocks. And that is interesting around the world. The bond market's falling, but stocks relative safe haven. There's the world on its head, isn't it?

3:21Anyway, but quarter to date, many of the indices have been hit by wider concerns around AI safety as well as elevated oil prices. South Korea's KOSPI was actually the world's worst performing major stock market in the third quarter following a sell off in memory chip stocks in July. Now, let's take a look at the European session. Very, very interesting. By and large, it's a positive move for the FTSE and the Italian paper as well. A little bit of a downtick over on the cat current. European shares were set for their first monthly decline in six as rising bond yields put pressure on the wider sentiment.

3:56If I go through some of those bond yields, France, UK, Germany, all seeing some of the biggest rise in yields and the sell off in the underlying that we've seen since the outbreak of the war back in February as well. In fact, the French-German spread, German seen as very safe, French slightly less so. That has gone wider than we've seen since 2012, about 50 basis points wider as well. Anyway, stocks were broadly high this quarter, but concerns around AI have dented gains. But hang on a second. The eagle-eyed viewers will be looking at France, the Cacarante as well, down 4.65 % in that quarter.

4:32Is that because you, Dominic and Morgan and others were just not buying your luxury goods? Quite possibly. Listen to this. In the last three months, LVMH down 39%, Hermes down 36%, and Kering, which owns Gucci, down around about 26%. Back to you, my friend. All I can say, Steve, is this tie is not Hermes. Thank you very much, Steve Sedgwick, for the action out of London over there. It is the final trading day of September and the third quarter, and it's been a mixed bag for the markets on both fronts. For the month, the Dow is down more than 3 percent, on track to break a five-month winning streak.

5:06The S &P is down fractionally, while the Russell 2000 small cap index is on pace for its worst month since March, down roughly 5 percent. So the Nasdaq, though, is the one bucking the trend, set for its second straight positive month. So for the quarter now, all of this means the S &P and the Nasdaq are both up more than 2 percent and on pace for their fifth positive quarter out of the past six. The Dow is negative for the second quarter in the past three, while the Russell 2000 is set to snap a five quarter winning streak down more than 7 percent. Joining me now to dig deeper into all of this in the market trends is Frank Capillary, founder and president of Cap Thesis.

5:47He's also a CNBC Pro contributor. So, Frank, thank you very much. This is the setup. I gave the kind of quarter to date numbers. Some of the monthly numbers didn't turn out as bad as we thought they would, given this seasonally weak month of September. So what is the setup like entering the fourth quarter, given what we've seen so far this month to date and this quarter to date? Thanks for having me, Dom. Well, I think if you look at the S &P 500, they expect that this type of trend we've been seeing to continue. Two main reasons. One, rotation we just talked about. And two here, because we have the S &P again percolating near its highs after breaking out earlier this summer and potentially again.

6:29And so we have here, again, technology has been leading here, which is important because it also led there. During this time, the rest of the sectors did. So we have this rolling rotation, but we have to respect the trend. So this is the broadening out trade right here. And this is the tech led trade and the tech led trade yet again. Once more. OK, exactly. And so what's been happening is kind of a baton of leadership being passed along, all along with these consolidation levels leading to uptrends. Now, that's important because a lot of times we can also look at this as, you know, potential top information just hasn't happened.

7:03We have to respect that as long as it continues. What about those folks out there who say that the underlying health in the market is being masked by that mega cap hyperscaler type trade? That technology maybe shouldn't be the healthy leadership here because the broadening out trade was something that we wanted to see. And that beneath the surface, many more stocks are making lower levels than they are higher ones. Right. Exactly. It has been happening. But the opposite was occurring from late May to July. And so, again, now technology is taking the lead, and I think it can continue higher after this.

7:37Okay. So let's take us through the technology trade here. You're showing us right now what's happening with the tech sex collector spider. What exactly is this chart showing you? To me, it looks like a bullish pattern. Now, I'll give you the bearish take. Bearish take is that XLK is up about 20 % and hitting resistance, right? But to me, looking at this a different way, where we can put a box around this trading range, right? And this looks a lot different here compared to there, right? This was like a huge historic rally over two months. So at this point, it was just not a good risk reward scenario.

8:08Now, if you were to told me, four months later, we're at the same spot again. After digestion, I would take it, and that's exactly where we are right now. So that's the consolidation and maybe a setup for a move higher. Now that we've taken through the bigger S &P 500 and that sector leadership, let's talk about what you think is going to be maybe your favorite setup, regardless of asset class, going into the fourth quarter. Right. So I'm looking at Bitcoin. Bitcoin. OK. So we have a chart of that, I believe. And so what we show there, here we go. So as you know, it's come back. And so we can see this part right here.

8:42This looks also like a bullish pattern to me after, what, 54 percent decline. Looks very similar to what happened here, 2022, 2023, about down 70 percent. But the interesting part is that the same type of scenario happened. And when we got that finally breakout, this is a big move. And, Dom, as you know, Bitcoin can really rally. It's a 400 % gain. I'm not calling for that, but I am calling for a very similar foundation to be leveraged and potentially get back to new highs, again, maybe in early 2027. So you think with this move, it's not necessarily the move that we saw from 2023 through 2025, but it could be one that takes us past the old record level.

9:19Yes. So we've seen it before. We know when momentum takes hold in Bitcoin, what can happen. And also, Bitcoin really does well with technicals. We have to respect that through its history, both on a downside and upside. All right. Frank Capillari, Cap Thesis, thank you so much for joining us and showing us the charts here. Bitcoin, your favorite trade going into the fourth quarter. And by the way, to read more of Frank's work, just head over to CNBC.com slash pro. Subscribers get all that context and detail around some of these big technical charts. We've got a lot more to come here on Morning Call, including why Aura's IPO postponement may not be an isolated incident.

9:52plus a major milestone for the energy market since the Iran war began. And then later on, Big Tech's big presidential luncheon from yesterday. We're talking key investor takeaways. We've got a very busy hour still ahead when Morning Call returns after this commercial break.

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11:32All right, welcome back to Morning Call. Turning now to Wall Street's IPO pipeline in the wake of biometric ringmaker Aura's decision to postpone its initial public offerings due to market uncertainty. Aura's delay appears to be anything but an isolated event. According to Renaissance Capital, over the past week, we've seen four companies in four different sectors, all aiming to raise $50 million or more and then announce IPO postponements, some even pulling their offering outright, including nuclear power component maker Holtec last Friday, materials company Amero last Wednesday and Bamboo Insurance back on the 22nd.

12:12So that's the state of play. Let's see what's going on here and bring in Avery Marquez, the director of investment strategies over at Renaissance Capital. They specialize in IPO investing. Avery, I laid out the case recently for some of the companies that have decided to either postpone or withdraw their IPOs, but the ones that have already come to market so far this year have actually been doing pretty well. So how is that disconnect going to reconcile itself for the fourth quarter? Yeah, with these four deals, they all had some interesting elements, some specific issues. Pointing at ORA specifically, as well as Bamboo, there was heavy insider selling.

12:52ORA had that right on the heels of those major pre-IPO buybacks. So where is the disconnect? It really comes down to, I guess, these deal structures and a bit of the price and how it will reconcile is, I think, in this wobbling macro backdrop, we're going to see companies that still decide to pull the trigger. And those are the ones that are going to tell us what's working when the market conditions aren't perfect. Avery, we just had a segment just maybe five minutes ago with Frank Capillari talking about the maybe setup for the S &P 500 going into the fourth quarter. It seems constructive. And we talk about the underlying kind of market uncertainty, but it's still a market that is within a stone's throw away from record highs in the S &P 500.

13:41So how much uncertainty really does it take for a company to want to postpone or pull its IPO? A lot of the uncertainty really comes down to the volatility. So when we see the VIX higher, or even in the IPO market, more volatility in those trades, you don't really see that always reflected in things like the VIX. That's really where that uncertainty in the IPO market comes from. So when we see a lot of movement, and when we see factors that could create future uncertainty, like with the rising yields, with expectations of rate hikes. Things like that can really turn off new issuers. How much is that setup going to affect this fall kind of IPO pipeline?

14:27We've mentioned a handful of the names that are postponing or delaying or withdrawing, but this is usually a decent time for the IPO market in terms of issuance, in terms of some of the performance out there. What can the first three quarters of the year tell us about what it will take for that IPO pipeline to kind of ramp up again? At this point, it really comes down to stability in the market. We need to see conditions at least stabilize, if not improve. I think issuers really took the last six months of rally to heart. And then the deterioration in August, especially coming out of August into September.

15:08Yeah, as you mentioned, that really put a damper on this pretty highly anticipated pickup through the fall. So really, yeah, what we need to see is the market stabilize. We need to see things like the IPO index start to stabilize. But as you mentioned, we are just really a stone's throw away from what could be a really strong setup through the end of the year and into early 2027. And then from a sector or industry perspective, are there certain places in the market that seem to be maybe more at risk or have relative safety to some of these uncertainties and volatile environments with regard to investor sentiment around their possible IPOs?

15:46Based on what we've seen so far this year, biotech has been a really strong theme. We've seen a pretty strong outperformance there relative to other sectors. And I think that really comes down to the renewed interest and growth we saw earlier in the year, as well as the large M &A activity that we've seen pick up. Things that are more at risk, it really is the AI infrastructure space, AI in general, kind of these mini cycles in this broader AI investment super cycle. So each kind of individual subsector within that theme lends itself to more volatility. All right. An interesting conversation right now because of what's happening with the market volatility.

16:26Avery Marquez at Renaissance Capital. Thank you very much. We'll see you soon. Thank you. All right. Well, speaking of staying private, we're keeping our eye on Blue Origin in the wake of its decision to seek outside investors for the first time in its history. Our Morgan Brennan caught up with the company's CEO, David Limp, on what exactly went into that decision and what's coming up next. If you compare a very large rocket, and that's both in mass and volume, with very large satellites like data centers, then you can start penciling out how they're going to be affordable. And affordable against best-in-class that are terrestrial, too.

17:05And so the idea is to have many, many metric-ton data centers. You put them into sun-synchronous orbit. So this is kind of a little special orbit that's just off-polar. that you're in the sun 97 % of the time, roughly, and then we run inference workloads up in these constellations, and they don't have to have a lot of communications capability because they'll beam down into these mega constellations. So in our case, we'll ground them into TerraWave, which is our constellation, and they'll come down to the ground. And this gives us access to effectively infinite compute. And this will be, you know, our FCC filing here is for 56 ,000 of these satellites.

17:50So this is what's going to move us from hundreds of launches a year to thousands of launches a year, because you're going to want as much intelligence as you can possibly get. All right. Interesting commentary on what it's going to take to scale up that space race. Well, straight ahead on this show, a dual boost for what would have been a struggling corner of the global smartphone market. But first, to check on mortgage rates, the 30-year fixed rate mortgage is now at 7.58%. That's the highest level since November of 2023, when it was also at 7.58%. The 30-year rising eight basis points from Monday, tracking the rise in Treasury yields here as well.

18:27Mortgage rates aren't that far off from the peak in late 2023 at around 7.8%. That's the watermark we're watching for the 30-year fixed rate. Morning call is back after this. If identity isn't secure, nothing is. You need identity specialists who understand your environment and protect it across the entire attack lifecycle. Detecting threats fast, stopping attacks early, recovering cleanly, and staying in control. Sempris helps stop identity attacks before they become a business crisis. Achieve identity resilience. Visit Sempris.com to learn how. Ever notice how every new AI tool asks you to explain your business to it all over again?

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19:54So why let a rain delay slow you down? Play now at ChumbaCasino.com. Let's Chumba! No purchase necessary. VGW Group. Void where prohibited by law. See TNC's 21 Plus, sponsored by Jumbo Casino. All right, welcome back to Morning Call. Checking some of this morning's latest headlines. Oil flows from the Middle East are returning to levels not seen since before the Iran war began. According to new estimates from Goldman Sachs and JPMorgan Chase, the banks noting shipments of crude have rebounded to 17.5 million barrels a day. That's 98 % of pre-war levels. adding that diesel and gasoline are at 3 million barrels a day or 58 percent of their previous levels.

20:36We've got more on this big story coming up. More details emerging from Anthropics leaked IPO perspectives and how much it depends on a small group of customers and tech jitans. The filings seen by Reuters, according to them, the company routed nearly half of its sales to customers last year through cloud partners, Amazon and Google. So big deal there. The report also highlighting how those two companies are also big anthropic investors and critical suppliers of computing power. Checking shares of Apple, Counterpoint Research is projecting the company will sell about six million iPhone duos this year, and that's contingent on how well Apple ramps up production of its first foldable device.

21:17The iPhone duo starts at just under$2 ,000 a piece and goes on sale next month. Robinhood debuting new offerings for investors, announcing plans to allow users to trade some U.S. stocks and ETFs around the clock during weekends. Robinhood has allowed round-the-clock trading during the weekdays since 2023. The brokerage is also launching earnings-related event contracts and perpetual futures as well. And New York City Mayor Zoran Mamdani's office is appealing a local judge's ruling on his administration's push to raise taxes on the wealthy. The judge yesterday ruling the city mishandled the rollout of a tax on high-end second homes and must start over again.

21:58The mayor's office says under New York law, the appeal triggers an auto-stay, allowing the city to continue with its implementation of that tax. Well, we got a news alert here. Citadel founder Ken Griffin is donating$3 billion to Carnegie Mellon University in an effort to help it establish a new campus in Miami. Griffin's gift is the largest single donation committed to a U.S. university in history. We're going to hear more when Griffin joins Squawk on the street at 10 a.m. Eastern Time later on this morning. So a big deal, especially when it comes to funding of higher education. Well, still on deck for the show, what to watch when Micron reports after the close today and why passive and active investors alike may want to pay some attention.

22:43Morning Call continues next. Welcome back. I'm Dominic Chewin from Morgan Brennan. This is Morning Call, U.S. final trading day of the month and quarter are actually slightly bid. The Dow's implied higher by roughly 75 points, the S &P higher by about 10, and that tech-heavier Nasdaq trade just down very marginally by about seven points implied at the open. A look at how the markets stack up for the quarter. The Dow and Russell 2000 are in negative territory. The S &P and Nasdaq both up over 2%. The big story right now remains yields. The two-year note yield sitting at right around a 28-month high.

23:18You can see right there 4.874%. That's, by the way, the 10-year, we're highlighting the highest in 19 years going back to 2007. The current 10-year is at 5.226%. The 30-year is at its highest level going all the way back to 2002. Now, this is ahead of a very busy day for data with ADP private payrolls for September out before the opening bell. We're expecting 68 ,000 net new jobs there. We're also going to get data on personal income and the August PCE price index expected to stay elevated year on year north of three percent. A check on global markets, a mixed session so far in Asia. Taking a look at that early trade here, you can see the Nikkei 225 closing up about one and a half or almost two percent.

24:04The Kaspi in South Korea down one half of one percent. But the FTSE 100 in the UK is actually up a quarter and the Cat Courant down about one half of 1 % in European action. Now turning to that big meeting at the White House yesterday between President Trump and tech leaders on growing concerns around artificial intelligence. The president announcing the industry leaders from the likes of NVIDIA, Meta Platforms, Google, Anthropic and OpenAI agreed to a morally binding agreement to establish voluntary standards around safety for that technology. The president and the execs speaking outside the White House on the back of their meeting about that safety push, including NVIDIA CEO Jensen Huang.

24:47We are going to have to create new technologies to advance the capabilities of AI, but we're also creating new technologies to advance the safety of AI. All of this technology is being developed by the industry today. And you see behind me just an incredible number of leaders in our industry moving together as one. And we're going to we're going to advance this technology that is so consequential to humanity, so consequential to the future prosperity of our nation. And we're going to do it responsibly and safely. All right. That was a lot of folks out there. But one CEO not at that White House meeting was OpenAI Sam Altman, who was in San Francisco for the company's developer day, announcing a flurry of new products and features.

25:27Altman sitting down with our own Kate Rooney to discuss the ongoing debate around safety and AI. We are now in a period where the models are getting so good so fast that we think it is prudent and wise to make more progress on, since we were talking about safety, alignment, monitoring, so that we can continue with progress. But I think this idea of pacing is really important. It's not just like stop it because, you know, we don't want smarter models. Of course we want better models. It is make sure that we improve the areas we need to confidently and safely continue with progress. By the way, Alban also adding that he did not have a particular timeline for the company's upcoming IPO.

26:05Meanwhile, CNBC confirming that OpenAI is aiming to raise at least 30 billion dollars from investors in a new round of funding, with the company seeking a one point four trillion dollar valuation at that fundraise level. Turning back now to the energy markets and prices with oil sitting at its lowest level since late last month. And as we told you just in the last few moments here, oil flows from the Middle East are returning to levels not seen since going back before the Iran war began. That's according to new estimates from both Goldman Sachs and JPMorgan Chase. For more on that, let's bring in John Kilduff, founding partner of Again Capital.

26:41He is also a CNBC contributor. John, I'm wondering why. If we are, the estimates are that we are pretty much back to levels. I think it was 98 percent was the kind of flow out, you know, from the Middle East. And that's pretty good. I'm curious why oil prices are not lower on that bit of news. Oh, well, and good morning to you, Dom. Look, I think the market is being generous as it is with with the price reaction to this, these developments that we're seeing. Look, I'd like to say desperation is the mother of invention. That's what we're seeing here. We're finally seeing a recovery in Saudi barrels, but it's through a mechanism where it's the ship-to-ship transfers that everyone's learning about.

27:27We've learned so many things over the past months here. So the Saudi volumes are still about maybe 70 % to 80 % of what they were with this new mechanism, but it is proving effective. The Iraqis are getting in on it as well. So this market is hopefully is countering two things, this increased volumes and also the hopes for this to persist. But also, you know, the Iranians are getting squeezed really hard here finally. And over the years that I've been doing this, nothing brings the Iranians to the table except financial pressure. And that's what we're seeing. And that's what's getting at least some talks going here.

28:07And so this market has been quick to, I think, this market has been quick to price that in, Dom, and reduce prices. The fact that we were below 90 for a time yesterday as everyone was starting to count up these new transit barrels and plus the east-west pipeline reopening by the Saudis is a bit of sigh of relief. But when you think about all the damage that's been done over the course of this war now and the lost barrels and the depletion of SPRs around the world, the United States in particular, it's really almost surprising to old-timers like me that prices don't remain even considerably higher.

28:44So this relief is being priced in immediately. Hope has been priced into this market to the downside on a repeated basis. So that's what you're seeing here. All right. It makes sense because to your point, we've been kind of in a deficit situation for a while. This war has gone on for way longer than a lot of folks thought it would. And oil supplies out of the Middle East have now been curtailed for quite some time. I guess, given what you know right now, John, how long does it take us? I mentioned the 98 percent estimates from JPMorgan Chase and Goldman Sachs about flows out of the Middle East.

29:19How long does it take for that whole market, I guess, globally to normalize, given what we've gone through over the course of the past seven months? It'll take several months. And look, the winter season, the northern hemisphere winter that we're coming into now, unfortunately, is the peak demand season for petroleum, heating fuels, diesel fuels, the whole gambit. So it's going to be supportive by that. The deficit that you talked about, it needs to be worked off. And the curve has sort of – the back of the crude curve has been creeping up, approaching almost$80 a barrel, call it$78 change. So that's telling you as well that, you know, folks are capitulating here and locking in higher and higher prices for now.

30:08Now, look, that could turn around. But I think what would be the next big leg lower would be some resolution with the Iranians where the street gets opened full stop, unimpeded. That would I think would bring prices back down rapidly to at least 80, maybe a little lower. But we're going to sit there for a while, in my view, because of the supply situation, because of the inventory situation globally. All right. So then how let's talk about oil per barrel pre-war. How long does it take for us to get back down there? If ever, we've heard a lot of folks talking about structurally higher prices, even if they are lower, but they would be higher than they were pre-war.

30:50So if you wait long enough in the commodity markets, you know, you'll be right, no matter what your position is almost. And if you recall, coming into this year, we were all worried about a glut in this market. Tremendous oversupply and whether or not the Saudis were going to even be able to hold OPEC together and all in this rash of bearish news, which was, I think, well placed given the supply situation. You know, this could be a revisited that those talks that that that introspection about a glut, I think, as soon as next, you know, mid next year. And prices will be coming down fairly rapidly here, Dom, below that$80 a barrel for sure into into the January, February time period.

31:31If the El Nino effect that we're experiencing right now, which is severe, produces a very mild winter in the northern hemisphere, which I think it will, that will also help to press these prices lower and get us to a much better place at the pump. We're already 50 cents off of the high price on the board on the NYMEX trading from mid-month last month. That's partly because of the change in formulation for the gasoline. But you should start seeing relief at the pump as well here in the United States over the next couple of weeks. So but but this this that glut narrative, I think, comes back into the market by mid year next year.

32:09There's nothing structural here. You see how quickly the Saudis got their east west pipeline back online. The Iraqis are raring to go. Look, these folks are desperate for these petrodollars and they will move heaven and earth to get there. All right. I also noticed, by the way, filling up on my way to work this morning, that diesel prices are notably lower than they were just about a week and a half, two weeks ago. John Kilduff, thank you very much. We appreciate it, sir. Thank you, Tom. All right. A lot more to come here on Morning Call, including the tech trade's next big test, what you need to watch for when Micron's big earnings results cross after the closing bell today.

32:41And as we head out to break, a check on Boeing shares, the Pentagon announcing that the company has been selected to build the Navy's next generation stealth fighter. Boeing beating out rival Northrop Grumman for that contract worth$20 billion to produce the aircraft. The program could grow to hundreds of billions of dollars over its lifetime as production ramps up and potentially as international customers place some of their orders. Sticking with the defense and aerospace trade industries and turning to Lockheed Martin, what's old is apparently new again. Our Morgan Brennan talking to NASA Administrator Jared Isaacman in Washington, D.C.

33:17yesterday about the agency plans to bring one of its retired SR-71A Blackbird spy planes back into the skies after more than 25 years out of service. Before we wrap this up, SR-17, are you refurbishing it? Are we going to see it fly again? Are you going to fly it again? So we are rebuilding our X-plane portfolio at NASA. We have X-59 right now, our quiet supersonic transport aircraft or demonstrator. We're hoping to bring it to Max Power in November. If you want to get out to an amazing air show, Kennedy Space Center's normally restricted airspace and runway is going to be opened up for everyone.

33:53It'll be very exciting. And we are committed to flying as high and as fast as we once did in decades past. All right. Welcome back to Morning Call. Micron is reporting fiscal fourth quarter earnings results after the closing bell today. And expectations are running, as you might suspect, relatively high. The stock is up about 2 percent since its last report and about 15 percent below its June 25th high. Ahead of the report, analysts surveyed by LSEG Group anticipate Micron will earn$31.61 per share on revenue of$51.07 billion. But what management says about its margins, its new long-term customer agreements, and the outlook for fiscal 2027 could matter way more for the stock than some of those top-line metrics.

34:40And Wall Street remains overwhelmingly bullish. 94 % of analysts covering Micron have a buy or equivalent rating, with Bernstein holding the street-high target price at just around$2 ,200 per share. And despite shares already up 274 % this year, Micron trades at just seven times forward earnings, with an average analyst target of$1 ,580 per share. And the company is on quite the run, beating earnings estimates eight straight quarters in a row, But even after those beats, the stock has averaged a 3.4 percent drop over the course of the following week. Buy the rumors, sell the news. And the stakes are growing for active investors and index investors alike.

35:25Micron has now the highest earnings weighting in the S &P 500 with NVIDIA, Meta and Broadcom close behind it. So tonight, the question may not just be can Micron beat expectations, but how big of a beat does it take for the stock to actually move significantly one way or the other? For more on what to watch when Micron reports, head over to CNBC.com backslash pro. Subscribers get a lot more context and detail around Micron's big earnings report coming up. Well, straight ahead on this show, the Morning Call crew assembles, teeing up the trading day ahead. And some of the key levels one member says are a must watch heading into the final quarter of this year.

36:03We're back in just a moment. All right. Welcome back to Morning Call. Here's what to watch today. A busy morning of economic data, including the latest reads on PCE, ADP, private payrolls, GDP, personal income and consumer spending figures. We're going to hear from four Fed officials across the afternoon. And then, of course, earnings from Micron, Jabil, Calmain Foods and ConAgra as well. Well, it's time for your call sheet where we look at the topics driving the trading day ahead. The crew members assembled today are Jeff Klingelhofer of Aristotle Pacific Capital, Jay Woods of Freedom Capital Markets.

36:39He's also a CNBC contributor and Veronica Clark from Citigroup. Let's start with our first topic. First of all, thank you all for being here. Our first topic has to be kind of from a micro economic perspective, Micron earnings. They are such a big part of the market right now. They are not NVIDIA, but they are kind of getting close in terms of narrative size, semiconductors and memory specifically. So let's talk first, Jeff, to you about what your expectations are as a portfolio manager for what these micron results could do and could signal for the rest of the industry. Yeah, look, I think all eyes are on AI.

37:14All eyes are on chips. All eyes are on the broad industry that is powering the U.S. economy forward. And so it is systemically important. But what I would focus on is how they talk about future capital raises, right? Because we've seen yields rise tremendously. The narrative is that these companies are immune to these rising yields. It's not going to disrupt all of the future CapEx that they have planned. And I don't think that's the case. So I would really be focusing not just on the earnings that they're bringing, the demand behind that. Obviously, that's incredibly important. But really, my eyes will be on what they are planning to do as they go forward with CapEx and how that impacts.

37:48Could I follow up? are you a micron shareholder currently? I'm not. What would get you to be a micron shareholder? I think what I would be watching for mostly is to make sure that the demand that we have penciled in continues to come through on the market with a high degree of confidence, because we continue to see this disconnect between what companies on one side are saying and what the entirety of the rest of the markets are actually planning on their future CapEx and their future consumption of all these technologies. Expectations, I mentioned, Jay, are high for the stock going into it. And I've mentioned that oftentimes in near history, it sells off in the week after those results come out.

38:26So from your perspective, you watch a lot of charts, you see the fundamentals. When you marry those two together, what is the setup for Micron like for those shares? It's right in the middle of a very wide neutral range going back to when it's last earnings. What did they do? They beat, they raised, they guided. Everything was phenomenal. I expect this quarter to do the same. That guide is going to be interesting, especially on the CapEx side. But we want to watch price action. It's going to be under the microscope, not just because it's a top 10 stock in the world market cap wise, but there's nothing else to watch.

38:56If they can break out to make new highs, we haven't seen it in a lot of these tech names. Apple, the only one. Then this could be the catalyst to get the technology stocks and technology sector to take us to new highs in the S &P 500. So it's not just a technology story, but it's what will lead the S &P 500 to that next leg higher. Technology is keeping us at these heights, but what will get us there? It could be Micron. Watching 1250, very interesting. It breaks that 1500, very possible over the coming months. Veronica, the economist's perspective, the tech spending numbers are just mind boggling, especially when it comes to CapEx and future CapEx, expectations.

39:38How much do the economic narratives in this country and maybe by extension globally change because of the I mean, I'm going to say it's a technical term gazillions of dollars that tech companies are going to spend or expected to spend in the coming decade? Yeah, it's just a massive driver of growth, whether that's the direct investment in all the AI bailed out. But we are also are seeing a lot of resilience to consumer spending. And a lot of that probably has to do with the wealth effect. Right. So, yeah, it's just a massive driver of economic growth. The economy is very exposed to that story.

40:09So let's talk about that economic growth because we're going to get more signs of it. That brings us to our next topic here, because we are going to get a rash of data, stuff that could shape the narrative in the fourth quarter, especially for central bankers. So let's talk about the expectations. And I'll stick with you for this. What the expectations are for those inflation numbers that are going to come out later on today, the private payrolls number, the two things that underpin Fed policy and what that consumer spending picture looks like going forward. Yeah, I'm a little less focused on the ADP, the employment data.

40:38Labor market data has just been very stable. But this inflation data this morning is very interesting. Normally, when PCE inflation comes out, we know maybe 95 percent of it. It's not terribly surprising. But this August data, we're going to get revisions to the last five years of PCE. I'm expecting that those revisions are going to lower core PCE by about 30 basis points. So I'm expecting to see 3.1 percent year on year. It seems like the Fed is maybe expecting something like 3.2. That's what Chair Warsh mentioned in his opening remarks a couple weeks ago. But interestingly, it doesn't seem like maybe other Fed officials are incorporating those revisions.

41:12The SEP forecasts were a lot higher. So I wonder if that could shift the narrative for some Fed officials. Maybe we wait and see more data. That's kind of what we heard from John Williams yesterday. I believe the consensus line was plus 3.3 percent year over year. So you're taking the under on that, so to speak. Jeff, from your perspective, the economic narrative story, is it enough to support the markets going forward? Because things are still growing in America. They're not growing by nearly as fast as they have been in the past. But inflation vis-a-vis jobs, vis-a-vis everything that's happening with growth is something that a lot of investors are going to focus on because it affects rates.

41:48I think that's exactly right. And look, I would look forward, right? It's not just about what we're going to get today. It's also as we look forward to Q3 and all of the data that will be coming out there. And what we are seeing is that growth may be actually picking up. We have Atlanta Fed now that's talking about a 5 percent growth rate. So I'd say let's not focus too much on the rearview mirror. The economy is incredibly strong. The consumer is strong. We're seeing jobs remain relatively broad. We saw a little bit of weak data yesterday. But as we look at the actual inflation picture, the underlying consumption story, it is strong.

42:18And this Fed continues to have an inflation challenge. And I think that they will rise to meet that challenge. I mean, it's interesting, right, Jay? The way that things are kind of set up because of the data, there's a lot of concern about what the future Fed hike trajectory could look like. Does this data kind of really shift things around a little bit in your mind? The Fed's preferred inflationary number. I'm looking to see if that headline number actually seeps into the core because everyone still is in this. Well, oil and gas is transitory. Well, we're six months into this war. Prices continue to slowly and stabilize at$90,$100 oil.

42:54It's going to eventually have an impact. We're seeing it have an impact in certain sectors of the market, the transports, the industrials, those things that make and take the Dow theorists out there a little concerned. So let's see if headline seeps into the core. I'm hoping that you're spot on with 3.1. That would be great, and that could put the Fed on hold for now. So it's going to be very fascinating to see what comes up and if headlines starts to have an impact on the court. OK, so that brings us to our last topic, because all of this is setting up what could be an interesting narrative in the fourth quarter, one that is seasonally strong, at least for the last couple of months, and maybe even more so with the dynamic of a midterm election year.

43:34So let's talk, Jay, with you first. What do you think that setup looks like? Are we due for more gains or is it time to maybe kind of consolidate, given the fact that we've gotten and some pretty healthy returns in September. As a technician, we are at a very interesting level. There are so many factors in the bull and the bear camp, but the bearish camp is starting to win out. But we talk seasonality. Midterm elections, yes, October, most volatile month, but it's done well in the midterm cycle. I think there's an X factor. We don't know where the president's going to go, and I try to separate the political side from the market side, but, you know, unforeseen tariffs, trade wars, and then Iran continuing to escalate, that will have more of an impact in the fourth quarter than what we tend to see where, you know, hey, we're up over 10 percent.

44:21We're going to rally into the end of the year. So there are a lot of X factors in this market. It's just technology. We need to see a broad based rally to get us to finish, you know, 7 ,800, 8000, the S &P 500. I don't see it. Veronica, a lot of eyes on Fed expectations because of what's happening with the markets and what's happening with the economic data. So what do you think for the balance of the year? Yeah, for now, it's all about watching the inflation data and seeing what we get there. Yeah, definitely watching to see if there's any signs of pass-through of higher energy costs into core inflation.

44:51You see it in things like airfares, but it's not very broad-based yet. Yeah, all watching the inflation data. I think that the Fed is going to be on hold. I think that inflation data will look better. And as we get into the next couple months, really four or six months or so, So, you know, we have had a big move higher in yields. That is not costless. So I am also watching for any effects on sectors like housing or even the labor market starting to slow down again. All right. And Jeff, as an investor, how much do you feel comfortable with kind of putting new money to work right now? Do you feel as though there's still a constructive backdrop for the markets?

45:26There's absolutely a constructive backdrop. But I think what we're highlighting across all of us here is the risks are very real. The rise in yields is going to have an impact, not just on the consumer, but on the government side as well. And I personally think what we will see today and what we will see in future inflation readings is that the pastor of oil is is a challenge. And this Fed is a different Fed. We need to start thinking about two percent, not as a floor, but as actually a ceiling, right? Actually getting back to price stability and under two percent. And until we get that, I think this Fed is in motion and I think that's a pressure for markets.

45:58So I'm a little bit cautious here. All right. So the cautious setup here. Jeff Klingelhofer, thank you so much for Jay Woods and Veronica Clark for being part of the morning call sheet. We appreciate it. Thanks and have a great week, guys. Hi, I'm Roman Mars, host of 99 % Invisible. It's a podcast about all the thought that goes into things most people don't even think about. You're going to see stories everywhere. Follow and listen to 99 % Invisible wherever you get your podcasts.