S&P 500 & Nasdaq Surge, Powell Speaks Amid Earnings Focus

Good Morning Investors,

Markets extended their winning streak Wednesday with the S&P 500 advancing 0.6% and Nasdaq surging 1.1% to fresh records, marking the eighth winning day in the last nine sessions. The Nasdaq closed above 23,000 for the first time ever while gold established another all-time high above $4,000, demonstrating the unusual coexistence of equity strength and safe-haven demand.

Futures trade flat Thursday following Wednesday's surge, with S&P 500 and Nasdaq futures near flatline while Dow futures edge up 0.1%. Today's calendar features multiple Fed speakers including Chair Powell at a community bank conference following Wednesday's FOMC minutes revealing policy divisions. With government shutdown canceling all economic data, earnings from Delta and PepsiCo provide the primary catalysts.

Delta surges 5%+ pre-market on strong Q3 beat and optimistic guidance, while PepsiCo rises nearly 2% despite North American volume challenges.

September's FOMC meeting minutes revealed "most judged that it likely would be appropriate to ease policy further over the remainder of this year," though considerable member anxiety about stubborn inflation suggests potential divisions at October's meeting. The tension between inflation concerns and labor market weakness creates complexity, though government shutdown data blackout likely keeps Fed on charted course through year-end.

Delta's Q3 results crushed expectations with adjusted EPS of $1.71 versus $1.53 consensus (12% beat) and revenue of $15.2 billion versus $15.06 billion. The critical insight: premium travel revenue surged 9% to $5.8 billion while main cabin revenue declined 4% to $6.0 billion, reinforcing the consumer spending bifurcation I've highlighted.

CEO Ed Bastian noted "cash sales picked up starting in July," suggesting consumer confidence stabilizing. Q4 guidance for up to 4% revenue growth versus 1.7% expected indicates improving fundamentals as domestic capacity surplus eases. The 5%+ pre-market surge positions aviation positively into earnings season.

PepsiCo beat Q3 expectations with revenue of $23.94 billion versus $23.83 billion and adjusted EPS of $2.29 versus $2.26, though international growth masked North American struggles. Domestic volume fell 4% in foods and 3% in beverages, prompting management to emphasize cost reduction and innovation as "top priority."

Strategic responses include Doritos Protein capitalizing on protein trends, new Lay's packaging highlighting natural ingredients, and upcoming Doritos/Cheetos "NKD" without synthetic dyes responding to Trump administration pressure. Naming Walmart CFO Steve Schmitt as new finance chief signals enhanced value focus.

Gold's sustained advance above $4,000 represents fundamental shift beyond safe-haven demand, it reflects the "debasement trade" as investors hedge government debt sustainability concerns. The 53% year-to-date surge coinciding with dollar index declining 9% demonstrates eroding confidence in fiat currency stability.

The unusual dynamic: gold, equities, and Bitcoin all at records suggests portfolio hedging rather than risk-off positioning. If Fed policy increasingly prioritizes debt service costs over mandates, gold acceleration continues as monetary policy independence concerns intensify.

Wednesday's advance marks the S&P 500's eighth winning day in nine sessions, with Nasdaq closing above 23,000 for the first time. Nvidia's 2%+ gain after CEO Jensen Huang noted computing demand "gone up substantially" reinforces AI infrastructure sustainability.

Kevin Mahn of Hennion & Walsh captured positioning: "There are reasons to be optimistic ahead, but I wouldn't be surprised to see some more volatility. When that volatility comes, money will come off the sidelines." This aligns with my expectation for brief October uncertainty creating opportunities.

Q3 earnings season beginning with strong Delta and PepsiCo results provides fundamental validation for current valuations. The combination of premium travel strength and consumer staples navigating volume challenges suggests corporate resilience despite economic uncertainty.

Major bank earnings next week provide the critical test. I maintain my 6,800 year-end target while expecting brief October volatility creating tactical opportunities before year-end strength.

Markets established fresh records Wednesday with the eighth winning day in nine sessions, demonstrating sustained momentum toward my 6,800 target. Delta's impressive beat signals consumer spending resilience in premium segments, while PepsiCo navigates North American challenges through strategic innovation.

Gold above $4,000 reflects debasement trade intensifying as investors hedge debt concerns rather than flee equities. The coexistence of record equities, gold, and Bitcoin suggests diversification not panic. Q3 earnings acceleration with strong consumer discretionary and staples starts sets positive tone for bank earnings next week.

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.