Good morning investors,
Stock futures surge with the S&P up 1% and Nasdaq jumping 1.4% as the Senate moves toward ending the longest government shutdown in history. After last week's 3% Nasdaq selloff driven by AI valuation fears, perspective is needed: we're just 2.4% off all-time highs despite 40 days of shutdown chaos. Pfizer's $10 billion Metsera acquisition and continued strong earnings prove the fundamentals remain intact. The bubble talk is overdone - created more by media headlines than market reality.
Opening Bell: Relief Rally Building
S&P 500 ($SPY ( ▲ 0.23% )) futures gain nearly 1% with Dow ($DIA ( ▲ 1.36% )) futures up 182 points and Nasdaq ($QQQ ( ▼ 0.32% )) futures surging 1.4% as Senate lawmakers advance a funding deal to reopen government through January. The procedural vote passed with eight Democrats breaking ranks, setting up final votes that could end the 40-day shutdown by Tuesday.
Consumer sentiment plunged to a three-year low as shutdown fears peaked, yet markets held remarkably well. The S&P 500 down just 1.6% last week despite no economic data, massive flight cancellations (2,800 Sunday alone), and warnings from Transportation Secretary Duffy that Thanksgiving travel could become "a trickle." This resilience speaks volumes about underlying market strength.
Pfizer's $10B Obesity Play
Pfizer won the bidding war for obesity drug developer Metsera, paying $86.25 per share including $65.60 cash plus contingent payments up to $20.65. The $10 billion deal beats Novo Nordisk's offer and gives Pfizer critical entry into the GLP-1 gold rush.
This isn't desperation - it's strategic positioning in a $150 billion market growing 30% annually. Metsera's once-monthly GLP-1 injectable could differentiate from weekly shots like Wegovy and Zepbound. With Eli Lilly and Novo dominating today, Pfizer needed a bold move. At 10x potential peak sales, the price seems reasonable for instant credibility in obesity.
AI Rotation, Not Bubble
While everyone panics about Magnificent Seven valuations, the real AI winners this year have been elsewhere. Palantir up 135% year-to-date, Micron up 183%, Intel up 90%, CoreWeave up 94%. None of the Mag Seven matches these gains, even Alphabet's 47% looks pedestrian by comparison.
October's Bank of America fund manager survey found 43% viewing long gold as most crowded versus 39% for Magnificent Seven, a reversal from September. Institutions are trimming but not fleeing. Michael Burry buying puts on Nvidia and Palantir makes headlines, but he's been wrong on tech for years.
The Mag Seven's Q3 profits are rising 23% versus 13% for the other 493 S&P companies. Alphabet, Amazon, Microsoft, and Apple drove the index's entire earnings improvement since September. These aren't dotcom vapor companies, they're profit machines.
Travel Chaos Accelerates
Sunday's 2,800 flight cancellations marked the worst day since shutdown began, with 10,200 delays as air traffic controller shortages cascade. Airlines including American, Delta, Southwest, and United face mandatory flight cuts with Thanksgiving approaching. Duffy's warning that travel could slow to "a trickle" by late November creates a deadline for Congressional action.
The travel disruption adds urgency to shutdown resolution but also shows economic resilience. Despite chaos at airports and no government data, markets barely budged. When sentiment hits three-year lows while stocks stay near highs, that's maximum pessimism creating opportunity.
Tesla's Cybertruck Departure
Cybertruck program head Siddhant Awasthi departed after eight years, following disappointing China sales of just 26,006 vehicles in October - the lowest in three years. Yet CEO Musk floated partnering with Intel for AI chip manufacturing after the government took a 10% Intel stake.
Tesla's China struggles reflect local competition more than demand weakness. The Cybertruck departure is noise - Tesla has always had executive turnover. Musk considering Intel partnership shows pragmatism about vertical integration limits. With the stock holding support despite these headlines, the trend remains intact.
This Week's Calendar
Monday brings CoreWeave, Rocket Lab, and Occidental earnings. Disney reports Thursday alongside Applied Materials and Brookfield. Alibaba closes the week Friday. With CPI and PPI delayed by the shutdown, earnings become even more critical for market direction.
Nvidia reports November 19 - the most important earnings of the year. CEO Jensen Huang's weekend comments about "very strong demand" for Blackwell chips while requesting more TSMC wafers suggests another blowout coming. That report could reignite or extinguish AI momentum for year-end.
Final Thought
Last week's selloff was the pause that refreshes, not the start of something sinister. The S&P 500 down just 2.4% from all-time highs during a 40-day government shutdown with no economic data proves this market's resilience. When Goldman's Solomon and Morgan Stanley's Pick call for 10% corrections, they're talking their book, not market reality. Even if they are talking about overall markets, corrections are a lot more common than the media lets you believe.
The bubble narrative is media-driven. Corporate earnings remain stellar with margins expanding in seven of eleven sectors despite tariffs. The Magnificent Seven growing profits at 23% while trading at reasonable multiples relative to growth isn't bubble behavior, it's rational pricing of dominant franchises. Maybe we have a bubble in media pieces about the AI bubble that will soon burst and turn back to pumping the market when they are wrong.
Yes, Palantir at 135% year-to-date looks stretched. But rotation from winners to laggards is healthy, not bearish. The technical picture in Nvidia, Apple, Alphabet, and Tesla remains constructive. Without deterioration in these generals, no broad correction is coming.
The shutdown resolution will unleash pent-up demand across multiple sectors. Travel stocks should surge as booking clarity returns. Government contractors get paid. Economic data releases resume, likely showing continued growth. This creates a powerful cocktail for a year-end rally.
I called weakness an opportunity to add quality names last week, and this morning shows why taking advantage of pullbacks can be rewarding. Listening to everyone talking negatively about the markets, should set off a light in your brain to look at buying stocks. The setup into year-end remains bullish once this wall of worry crumbles.
As always, feel free to reach out with questions about positioning for the weeks ahead.
Best regards,
Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.