Market Bulls Charge on Dealmaking Strength & Tech Rally

Good Morning Investors,

Markets are rising this morning as Bank of America's 43% investment banking surge caps extraordinary bank earnings week demonstrating dealmaking boom strength. Small caps continue outperforming with IWM up 1.43% Tuesday and another 1% pre-market. Moves like this start to show a potential broadening to a bull market that's been dominated by tech. Lets dive in.

Dow ($DIA ( ▼ 0.53% )) futures gain 196 points (0.4%), S&P 500 ($SPY ( ▼ 0.26% )) futures advance 0.6%, and Nasdaq ($QQQ ( ▼ 0.38% )) futures surge 0.8% following Bank of America's ($BAC ( ▼ 1.11% )) 4% pre-market jump on crushing earnings expectations. Morgan Stanley and PNC reporting before bell complete major bank earnings, with results validating fundamental strength despite trade tensions creating tactical volatility.

ASML ($ASML ( ▼ 0.67% )) rising 4% on strong 2026 sales guidance provides semiconductor sector boost, while Tuesday's small-cap outperformance demonstrates healthy market breadth as eight of eleven sectors closed higher despite tech lagging.

Bank of America delivered powerful Q3 results with EPS of $1.06 versus $0.95 expected (12% beat) and revenue of $28.24 billion versus $27.5 billion consensus (3% beat). Net income surged 23% to $8.5 billion while revenue advanced 10.8% year-over-year.

The standout metric: investment banking fees jumped 43% to $2.0 billion, beating by approximately $380 million. BAC secured lead role on Union Pacific's $71 billion Norfolk Southern acquisition, the largest deal of 2025, demonstrating franchise positioning in mega-deal market.

Wall Street businesses drove results with equities trading of $2.3 billion (up 14%, beat by $200 million) and fixed income trading of $3.1 billion (up 5%, met expectations). Total trading revenue of $5.3 billion advanced 8% year-over-year.

Main Street also delivered with net interest income hitting record $15.39 billion (up 9%, beat by $150 million). CEO Brian Moynihan cited "strong loan and deposit growth, coupled with effective balance sheet positioning" while noting "every line of business reported top and bottom-line improvements."

Credit quality improving with provision for credit losses falling 13% to $1.3 billion versus $1.58 billion expected signals better loan performance. The 5% pre-market surge brings year-to-date gains to 14%.

Bank of America caps extraordinary week demonstrating industrywide dealmaking strength:

The pattern is clear: Trump administration regulators approving M&A faster combined with loosening capital requirements creates sweet spot for biggest banks with scale and diversification. This validates my thesis that financials represent primary beneficiaries of current policy environment.

Morgan Stanley ($MS ( ▼ 1.26% )) posting EPS of $2.80 versus $2.10 expected represents largest beat margin in nearly five years. Revenue of $18.22 billion versus $16.70 billion consensus demonstrates Wall Street-centric banks thriving in ideal environment.

Profit surged 45% to $4.61 billion while revenue advanced 18% to $18.22 billion. The combination of booming trading activity, investment banking resurgence, and wealth management benefiting from record stock prices creates multiple favorable catalysts.

Shares climbing 24% year-to-date reflect market recognition of franchise strength during dealmaking cycle.

Navitas Semiconductor ($NVTS ( ▼ 0.12% )) continuing higher to $12.57 Tuesday and currently trading $13.30 pre-market validates the breakout I called last week hitting $10 target. The 33% advance from my initial call demonstrates power infrastructure opportunity gaining market recognition.

I continue favoring Navitas in semiconductor space given May 2025 Nvidia partnership for next-generation 800-volt HVDC data center architecture rolling out 2027. While recent gains substantial, the fundamental opportunity positioning Navitas centrally in power infrastructure buildout supports continued strength.

I believe SoundHound AI ($SOUN ( ▲ 3.85% )) is heading back to $25 all-time high over the next couple weeks. The voice AI platform benefiting from conversational commerce adoption demonstrated by Walmart-OpenAI partnership announced today positions SoundHound advantageously as retailers integrate voice shopping experiences.

The company's automotive and restaurant partnerships provide diversified revenue streams while voice interface adoption accelerates across industries. Technical setup combined with fundamental positioning supports move toward prior highs.

OpenAI's Walmart ($WMT ( ▼ 1.38% )) partnership enabling customers to shop conversationally via ChatGPT on Walmart and Sam's Club websites represents critical client-side validation AI investors have sought. Rather than another infrastructure deal, this demonstrates consumer-facing AI adoption through major retail platform.

The partnership testing whether customers want conversational shopping, how well it works, and comparing approaches versus Shopify and Etsy integrations provides real-world data about AI application viability beyond infrastructure buildout.

IWM's ($IWM ( ▲ 0.23% )) 1.43% Tuesday advance and 1% pre-market gain demonstrates small and mid-cap catch-up I've consistently anticipated. Tuesday's eight of eleven sectors closing higher despite tech lagging validates broadening participation creating sustainable foundation for continued advance.

Consumer staples surging 1.72% in best daily performance since August 6 alongside utilities hitting fresh records demonstrates defensive sectors participating, not just growth and cyclicals. This breadth supports conviction in market resilience despite trade tensions.

Fed Chair Powell's Tuesday remarks that "downside risks to employment appear to have risen" using available data including state unemployment claims and elevated ADP reinforces accommodation bias. While CME FedWatch maintains over 95% probability of October 29 quarter-point cut, Powell's dovish tone adds anticipation for delayed September jobs report.

Consumer Price Index initially scheduled Wednesday now delayed to October 24 despite shutdown as it's needed for Social Security payment calculations. The data vacuum continues elevating corporate earnings as primary fundamental catalyst.

Five consecutive days of major banks crushing expectations with investment banking driving beats validates fundamental strength I've emphasized as critical for supporting current valuations. The dealmaking cycle benefiting biggest banks with scale and diversification demonstrates policy environment advantages.

I maintain view that pullbacks should be bought despite near-term choppiness, with bank earnings providing fundamental validation supporting year-end strength toward targets.

Bank of America's 43% investment banking surge caps extraordinary week with five major banks crushing expectations on dealmaking boom. The industrywide pattern demonstrates Trump administration's faster M&A approvals and loosening capital requirements creating sweet spot for biggest banks.

My Navitas Semiconductor call continuing higher to $13.30 validates power infrastructure opportunity, while SoundHound AI positioning for $25 target reflects voice AI adoption accelerating. Small-cap outperformance with IWM up 1.43% Tuesday plus 1% pre-market demonstrates healthy breadth supporting sustainable advance.

Trade tensions creating tactical volatility as Trump's rhetoric whipsaws markets, but bank earnings provide fundamental validation for buying pullbacks toward year-end strength.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered investment advice. Please consult with your financial advisor regarding your specific situation.