Cooler PCE Print Won’t Offer Long-Term Relief, MU “Priced for Perfection”

and we did obviously see a reaction late in the session erdo Morning Trade Live. It's time now for the big picture. Let's welcome in. Joeazzola, director Trading Services over at Charles Schwab. Joe good morning. We turn a fresh page here. New month new quarter. sur month than the previous, but obviously October is getting its first test here with this hot ISM prices index and rising yields. What do you make of it? Well, I mean it started off pretty good for the first 30 minutes or so. We got the prices paid, came out and shocked the market a little bit. You know, high 75, 77%s trending in the wrong direction. And I think you and your guests did a nice job of, of really detailing why that's so important. Because even though you g a lower PCE data point that came out a couple days ago, the problem i some of these new data points that that that will feed into the PPI producer price index, eventually feeds into the PCE. You know, we're getting a little bit of a look ahead, right. I think that's probably a better way toa It's a look ahead as, as to what maybe start wstart to come out in the October data. And, and it's still pointing to manufacturers paying higher prices. And at the same time, that's going to trickle down to consumers. So it doesn't really we might not see impact in the next couple of weeks. But I think as we loohe next couple of months, there's likely to be atle bit of slowdown in that cr spend if prices continue to rise, if we continue to see pain at the pump and interest rates continue to go up. I mean, you you know, Sam, it doesn't ha hit stocks right away. But at some point it does have a material effect on the consumer. Yeah, absolutely. I mean, sng to think about, as you mentioned, I mean with the prices paid, you just wonder exactlyow much the wholesalers are having to cough up what they're going to start charging then. Yes, absolutely. And so that's som to think about with this data. Just moving on to the other big story that we've beenracking. We kick off the fresh quarter, obviously with a nice micron report. Crushed it stock down 3%. I don't knowhat the expectations were as far as a reaction today. All memory players are down, which is interestingse that kind of flies in the face of the relief rally we saw in Asia withof the South Korean counterparts actually rallying. The only subsector that I see that's reacting positively are those that aree business of actually making the equipment behind the chips. Ju walk us through what seeing as far as the reaction here. Yeah. So t really interesting in terms of that turnaround that you're talking about. We had a N futures up about 1.5% or just just shy maybe 1.4% before turning around. Nowe're down about 32 basis points or about 30 basisi, look, the Micron's results 54 billion in revenue, 3333.42 in terms of earnings per share day, data center revenue increased 11 fold. And then you als had a beat on the guidance. I think the one maybe other data point that that that investors might be concerning themselves with is the, the pullback in the gross margins to 86.25% from 87%. otherwise, I mean, you look, look, these are a plus results. What it tls me is th this is becoming a little bit priced for perfection. We've had tty decent rally in that in that name over the last couple of months. G back to the late July b that we saw in the seven hundreds. So, you know, just to see the stock rally as much as it has and have a little bit of give up after the ff you look at options market going into earnings, straddle prices, which basically the call on the put at the at the money was, was pricing in about a 7.5% move. Sore well within that. And you know, youdu have results like this and the stock doesn't ghat that further additional push up. You know, it's just it just kind of screams to the fact that a lot of this stuff was probably priced in. And we'll have to see if it consolidates over the next couple of days or so. Yeah, we'll certainly be watching. All right. So we kick off a fresh quarter here with a of expectations no doubt some volatility which will be around the midterms. S you've got the political stuff. You've also of course got as I mentioned, the pricing in of another fed ratekn expectations that we're going to be getting a b IPO. In you've just had some news about Broadcom. And you know more circularity of financing around anthropic today. How are you thinking about things as we move into the back end o year we stage being set by bad breath. Obviously rising yields as well. It all comes down to earnings. Sam. I really believe that that's the case. And in this example, if we're pricing in about a 30% year over year ear growth for the S&P 500, which is kind of what 26ooks like, it's the bar is set pretty high. Now, did we crush it in the last quarter? We absolutely did. You can attribute a lot of that to alphabet to meta in terms of their growth over expectations. You know I think 26 is g to be fine in terms of earnings picture. I think where it gets a little bit more difficult, it's going to be 27 because the bar is going to be set that much higher. And what is interesting is as earnings have continued to expand, you haven't seen multiples at all in the market. If anything they've come in. So we're we're trading about a d multiple of about 19 on the S&P 500, which is actually come down quite a bit from the 21 that it was at the beginning of the year. Now all that seems great, but think about what's had to happen in order for us to get to that point. We've had multiple profit and earnings expansions without really a movement in the overall market. We've kind of been stagnant the last couple of months, so that's provided ater base case in terms of the multiples. But as you mtioned, Sam, the thing that I'm a bit more concerned about is the the lack of brbelow the surface bec this rally, or at least the, the move that we've seen in the last couple of weeks as we're kind of treadingn 1 or 2% of theall timy been led by a very small number of stocks, maybe 15 stocks, basically the mega caps, basically the mag seven, basically, you know, t the, the chip names that that h been powering us forward but haven't provided a lot of su below the surface with theer names. And if there, if there is any type of misstep, maybe in terms of the earnings cycle ts coming up in the next cof weeks, my concern is that there's. There's not enough below the surface to, to keep that propped up. Now, we could very well get a very s earnings cycle again, which which I think is what most people are ting it. Just what's the follow through going to look like? Yeah. Yeah, absolutely. I mean, we're jondering with the bar set so high, I mean, how sustainable this is. It's been sort of nothing short of spectacular. I mean, something we see coming out of a recession. So we'll have to wait and see. You always appreciate it. Thanks s