Market Snapshot

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📉 Banana Bits

• Headline PCE came in at 3.4%, while core PCE cooled to 3.0%, both below forecasts

• Micron posted record $54.2B quarterly revenue and guided even higher as AI memory demand surged

• Boeing won the Navy’s $20B+ F/A-XX fighter contract after beating rival Northrop Grumman

• Citi downgraded Moderna to Sell after a 222% rally, while raising its target to $80

• HPE landed a $1.2B Vultr AI order while raising its long-term networking growth outlook

Market News

Soft Inflation Data Can't Outrun a 5.3% Treasury Yield

Happy October! Stocks ended the third quarter in mixed fashion on Wednesday. The S&P 500 went down 0.25% and the Dow lost 443.87 points to 50,906.05. The Nasdaq was the only major index in the green, rising 0.24% to 26,861.06, while the Russell 2000 dipped 0.39%.

Wednesday morning actually started off pretty well. Headline PCE, the Fed’s preferred inflation gauge, rose 3.4% from a year ago in August, below the 3.7% economists expected. Core PCE, which strips out food and energy, rose 0.2% on the month and 3.0% on the year, also below forecasts of 0.3% and 3.3%.

There was one wrinkle in the numbers. The Bureau of Economic Analysis also made annual revisions to how it measures categories including portfolio-management services, software, and legal fees, which lowered previously reported core inflation readings.

That was enough for traders to sharply pull back on rate-hike bets. The Fed already raised rates a quarter point to 3.75% to 4.00% on Sept. 16, and the odds of another hike in October fell to around 37%, down from roughly 70% a week earlier, according to CME FedWatch. New York Fed President John Williams said he sees "no need for urgency." Fed Governor Michael Barr sounded less relaxed, saying further hikes may still be needed to bring inflation back toward 2%.

That’s when the early gains started giving back. Treasury yields kept climbing, with the 10-year hitting about 5.29% and the 30-year at roughly 5.63%. Mortgage-related names took a beating, with NMI Holdings falling more than 8% and MGIC and Essent each dropping around 7% as 30-year mortgage rates sat around 7.3%. Tech was the only sector to finish higher, while consumer staples was the weakest, down about 1.5%.

Closing out September, the S&P 500 and Dow both finished lower for the month, while the Nasdaq gained roughly 1.9%. On a happier note, Micron reported a record $54.2 billion in quarterly revenue after the bell, more than quadrupling from a year ago as AI-driven memory demand continued to surge. The company also guided to about $61.5 billion in revenue for the current quarter, well above Wall Street expectations.

Up next today are jobless claims at 8:30 a.m. ET and ISM manufacturing at 10:00 a.m. ET, followed by Friday’s September jobs report, where Barclays is looking for around 50,000 new jobs.

Peel Take: To wrap up, inflation came in way softer than expected, hike odds basically got cut in half this week, and the Dow still dropped more than 440 points. Make it make sense. Our read is that softer inflation wasn't enough to outweigh the pressure from long-term yields still sitting near multi-decade highs. The market leaned heavily on AI stocks to carry it through Q3, and it’s worked so far. Friday’s jobs report is the next real test.

What's Ripe

United Therapeutics (UTHR) 12.55% 

• A federal court in Delaware ruled Wednesday that Liquidia's inhaled drug Yutrepia infringes two claims of UTHR's '327 patent, which covers inhaled treprostinil for PH-ILD.

• The ruling strengthens Tyvaso's position against its closest competitor. Liquidia (LQDA) plunged 57.2% to $30.26 and plans to appeal the decision.

• Peel Take: There’s some funny timing on this one. Goldman started covering UTHR with a Sell rating less than a week ago, and the stock dropped about 3.5% that day. Then, a judge came to the rescue for UTHR holders. Liquidia is going to appeal, so this isn’t completely over, but for now Tyvaso’s competition just got a lot thinner.

Cboe Global Markets (CBOE) 5.17% 

• Cboe extended its rally Wednesday after announcing a 25-year licensing extension with S&P Dow Jones Indices that keeps its exclusive right to list S&P 500 Index (SPX) options through 2051.

• SPX options volume hit a record 970.6 million contracts in 2025. Royalty fees stay unchanged in 2026, while updated 2027 terms are expected to have a “de minimis” effect on net revenue growth.

• Peel Take: If you’ve ever bought a same-day SPX call on your lunch break (no judgment, okay maybe just a little), Cboe got a cut of that. Now they get to keep collecting until 2051. By then, a lot of today’s 0DTE traders will either be retired or broke, and we truthfully can’t tell you which is more likely. The most important phrase today? “De minimis.”

What's Rotten

Jabil (JBL) 10.03%

• Fiscal Q4 revenue came in at $10.6 billion versus roughly $9.7 billion expected, while adjusted EPS of $4.40 beat estimates by 34 cents. For fiscal 2027, Jabil guided to $44.5 billion in revenue and $17.55 in core EPS, both ahead of consensus.

• Even Q1 guidance came in above expectations, with core EPS of $3.80 to $4.20 versus roughly $3.64 expected. But shares had already gained about 34% this year heading into earnings, and investors sold the stock despite another beat-and-raise.

• Peel Take: So Jabil beat estimates, raised guidance, and still dropped 10%. Sometimes “good” just isn’t good enough when expectations are already sky-high. Nothing in the numbers suggests the business suddenly got worse, but after a huge run this year, investors clearly wanted even more from an AI infrastructure favorite.

Cerebras Systems (CBRS) 8.87%

• Shares fell below their $185 IPO price as up to roughly 19.4 million previously locked-up shares became eligible for sale Wednesday. Another two tranches of about 19.4 million shares each are scheduled for Oct. 14 and Oct. 28, before the remaining lockup expires no later than Nov. 9.

• Adding to the pressure, SemiAnalysis reported that OpenAI is using Nvidia GPUs rather than Cerebras hardware for the Ultrafast mode of GPT-6.1 Sol. Separately, filings disclosed roughly $84 million of planned stock sales by Cerebras’ COO and CFO under trading plans adopted June 30.

• Peel Take: Cerebras makes some of the biggest chips in the world, and right now it’s dealing with a pretty big overhang too. The stock closed its first day of trading at $311.07 and is now roughly 43% below that level and below its $185 IPO price. With another 38.8 million shares scheduled to unlock across October, investors still have plenty of potential new supply to digest.

🧠 Technical Trip

Interview Q&A from Deutsche Bank

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🦈 Deal Dispatch

M&A, IPOs, And Other Notable Transactions

• Paramount’s $110 billion Warner Bros. Discovery deal cleared another hurdle after a federal judge approved its settlement with California and 11 other states

• Lynas Rare Earths agreed to buy Meteoric Resources for $672 million to expand its heavy rare-earth supply

• Varda Space raised $250 million at a $1.6 billion valuation to scale its orbital drug-manufacturing business

• Anthropic’s IPO filing shows nearly $4.6 billion in 2025 revenue, more than $8 billion in operating losses, and a potential valuation above $2 trillion

• Hormel is buying Brakebush Brothers for $1.055 billion, adding a chicken processor with nearly $1.2 billion in annual sales

Student Success Corner

Banana Brain Teaser

Previous

A company has a 60% chance of beating earnings. If it beats earnings, its stock has an 80% chance of rising. If it misses earnings, its stock has only a 25% chance of rising. What is the overall probability the stock rises?

Answer: 58%

Today

A and B were each paid the same amount, x dollars, in advance to complete a project together. A worked 12 hours, while B worked 4 hours less. If B gave A y dollars so that they would have earned the same hourly wage, what was the original amount x, in terms of y?

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Happy Investing,
Elie, Mitchell, Fernanda, Nick, & Patrick

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