Market Broadening & Economic Improvement - Piper Sandler anticipates a broadening market, driven by improvements in both macro and microeconomic factors, rather than a significant surge [2][3] - The market broadening is expected to be more about breadth than magnitude, indicating wider participation across sectors [2] - Stabilized interest rates and subsequent rate cuts by the Federal Reserve are seen as catalysts for economic improvement, positively impacting smaller businesses, lower-end consumers, housing, and manufacturing [5][6] - The anticipation of improved economic conditions is leading to anticipatory indicators showing positive signs [6] Labor Market & Monetary Policy - A soft labor market has alleviated inflation fears, allowing interest rates to decline and the Federal Reserve to implement rate cuts [8] - The current economic backdrop is described as "Goldilocks" in a post-inflation shock world, characterized by a simultaneous increase in the unemployment rate and the stock market [11] - The Federal Reserve's data-dependent approach, particularly concerning the unemployment rate, has influenced market perceptions and expectations regarding potential rate cuts [9][10] Tariffs & Market Uncertainty - The market exhibits a diminishing sensitivity to fear and uncertainty, including potential tariffs, as investors have become accustomed to navigating a "wall of worry" [13] - Investors are adopting a "show me first" approach, reacting to concrete events rather than preemptively fearing potential negative impacts from tariffs or other uncertainties [13]

Market Overview - The current market is characterized as a "hated bull market," with concerns about high valuations despite strong earnings growth [2][4][5] - The S&P 500 is projected to gain approximately 7% in the third quarter, indicating resilience despite skepticism [10][11] Federal Reserve and Economic Indicators - The Federal Reserve's potential easing of monetary policy is seen as a catalyst for further market growth, with discussions around its impact on inflation and earnings [1][3][12] - Global central banks are also engaging in rate cuts, with 86% of them having recently lowered rates, which supports a bullish outlook for global equities [13] Earnings and Valuations - Earnings growth is expected to drive market performance, with a focus on upcoming earnings reports and labor market data [11][12] - Despite high valuations, companies with lower multiples are still showing decent earnings growth, which is a positive sign for the market [6][7] AI and Job Market Concerns - The impact of AI on the job market is a growing concern, with expectations of a gradual increase in unemployment rates as companies navigate the integration of AI [15][17][20] - The market currently appears indifferent to long-term job loss concerns, focusing instead on immediate earnings performance [15][16][21] Sector Performance - Technology stocks, particularly in the semiconductor space, are leading market gains, with companies like Nvidia, Micron, and AMD showing strong performance [22][23] - The ongoing investment in AI technologies is expected to continue driving growth in tech stocks, despite concerns over high valuations [21][25]

Core Viewpoint - The upcoming earnings season is critical for sustaining the current bull market, with a focus on commentary regarding 2026 and structural opportunities rather than just Q3 numbers [2][3][5] Earnings Outlook - Q3 reports will emphasize commentary on future earnings potential, particularly for 2026, rather than just current performance [3][4] - There is a possibility of reaching $300 in earnings as the season progresses [4] Productivity and Margins - Margin expansion is expected to continue into next year, driven by productivity improvements and efficiency measures [5] - Companies need to achieve high return on equity (ROE) to maintain above-average valuations [5] Market Dynamics - A healthier bull market is anticipated, characterized by broad participation rather than speculation [6] - Earnings growth could reach 10-12%, with a mix of high-growth companies and others contributing positively [7] Sector Performance - Consumer discretionary sectors may see upgrades, particularly if lower rates provide tailwinds [8] - Small-cap stocks could benefit from a cyclical upturn, reducing reliance on Fed rate cuts [9] Investment Strategy - A suggested strategy includes pairing NASDAQ investments with small-cap stocks while potentially overlooking large-cap value [10] - The current macro backdrop is favorable for risk assets, including equities and credit [11][12]

Joining us this morning, City research director of US equity strategy, Drew Credits with us. Drew, welcome back. Good to see you. >> Hey, good to see you, Carl.>> I got to say, um, making your way through September with no major hiccups on the headline uh, indexes kind of has the desks today saying maybe we averted weak seasonality and we can look forward to an up Q4. What do you think. >> Yeah, it's funny.It's going to be very dependent on the earning season. to us the the pressure's actually grown with a ...

Core Insights - Intensifying geopolitical tensions have led to a significant increase in global defense budgets, benefiting Defense ETFs which have outperformed the broader market [1][4] Drivers Behind the Outperformance - Global defense spending is surging due to geopolitical fragmentation, with NATO members targeting 5% of GDP for defense by 2035, up from 2% in 2014 [2] - Non-NATO countries like India and China are also increasing their defense budgets, with India seeing a 9.5% year-over-year increase and China a 7.2% rise [3] Market Dynamics - Major defense contractors are securing long-term government contracts across various defense technologies, providing stable revenue streams that are less affected by economic downturns [4] - The upcoming third-quarter earnings cycle is expected to show strong performance for Defense ETFs, driven by these favorable conditions [5] Earnings Expectations - The Aerospace sector, which includes defense stocks, is projected to report earnings growth of 249%, compared to a 5.2% increase for the S&P 500 [6] Notable Defense ETFs - **Global X Defense Tech ETF (SHLD)**: Year-to-date gain of 82.3%, top holdings include Palantir and Lockheed Martin [7][8] - **SPDR S&P Aerospace & Defense ETF (XAR)**: Year-to-date gain of 38.9%, top holdings include Kratos Defense and AeroVironment [9] - **iShares U.S. Aerospace & Defense ETF (ITA)**: Year-to-date gain of 41.5%, top holdings include GE Aerospace and Boeing [10][11] - **Invesco Aerospace & Defense ETF (PPA)**: Year-to-date gain of 33%, top holdings include RTX Corp. and Lockheed Martin [12] - **Themes Transatlantic Defense ETF (NATO)**: Year-to-date gain of 51.6%, top holdings include GE Aerospace and Airbus Group [13]

Group 1: Earnings Expectations - Q3 earnings for the S&P 500 index are expected to increase by +5.3% year-over-year, with revenues up by +6.1% [2][9] - This anticipated growth would mark the lowest earnings growth pace since Q3 2023, which had a growth rate of +4.4% [2] - Positive revisions in earnings estimates have been noted for Q3, contrasting with the trends observed in the first two quarters of the year [3][5] Group 2: Sector Performance - Since July, Q4 estimates have increased for 7 out of 16 Zacks sectors, including Tech, Finance, and Energy [7] - The Tech sector is expected to continue as a growth driver, with earnings projected to increase by +12% in Q3 2025 and +8.7% in Q4 2025 [10] - Despite positive revisions in some sectors, 8 out of 16 sectors are experiencing pressure on Q4 estimates, particularly in Consumer Discretionary and Medical sectors [10] Group 3: Company-Specific Reports - Nike is expected to report earnings of $0.28 per share on revenues of $11 billion, reflecting year-over-year declines of -60% and -5% respectively [11] - Carnival is projected to report earnings of $1.32 per share on revenues of $8.07 billion, with year-over-year increases of +3.9% and +2.3% respectively [12] - Nike's stock has decreased by -8.4% year-to-date, while Carnival's shares have increased by +23.1% in the same period [11][12]

Market Volatility & Seasonal Trends - October is historically the most volatile month, with 33% more volatility than the average of the other 11 months [2] - The market hasn't experienced a pullback of 3% or greater in the S&P 500 since April [4] Index Performance & Technical Analysis - Major indices, including the S&P 500, Russell 2000, S&P developed international, communication services, and tech, were more than one standard deviation above their 200-day moving averages [2] - Most of the mentioned indices, except the Russell 2000, were trading at an RSI above 70, suggesting a potential near-term digestion of gains [3] - The S&P 500 and Russell 2000 matched their all-time highs on the same day, and the S&P developed international index also set an all-time high [4] Small Cap Outlook - Small caps are expected to play catch-up, having set their first new all-time high in four years, while the S&P 500 set 89 new highs in the same period [7] - Small caps are trading at a 35% discount to their 20-year average relative PE on forward estimates [8] - Earnings growth for small caps is projected to be 20%+ in 2026, compared to 13% for the S&P 500 [7] Bull Market & Future Expectations - Historically, when there's an in-concert move to the upside, the market has seen two to three times the average performance over the next 90 days [5] - If the bull market passes its third anniversary on October 12th, the fourth year average gain is 13% with a greater frequency of continuation [9] - The market needs to see an acceleration in earnings expectations to improve from current levels [10]

Core Insights - Atmos Energy Corporation (ATO) is positioned as a strong investment option in the utility sector due to strategic acquisitions, the addition of industrial customers, and favorable rate outcomes contributing to revenue and profitability growth [1] Growth Projections - The Zacks Consensus Estimate for fiscal 2025 earnings per share (EPS) has increased by 1.2% to $7.33 over the past 90 days [2] - The estimated sales for fiscal 2025 are projected at $4.81 billion, reflecting a year-over-year increase of 15.6% [2] - ATO's long-term earnings growth rate is forecasted at 7.32%, with an average earnings surprise of 1.7% over the last four quarters [2] Liquidity Position - Atmos Energy's current ratio stands at 1.37, significantly higher than the industry average of 0.54, indicating sufficient short-term assets to cover liabilities [3] Debt Management - ATO's total debt to capital ratio is 40.21%, which is better than the industry average of 51.09% [4] - The time-to-interest earned ratio is 8.6, demonstrating the company's capability to meet future interest obligations comfortably [4] Capital Investments - Atmos Energy has a robust capital expenditure plan, with $3.7 billion earmarked for fiscal 2025 and a total of $24 billion planned over the next five years to enhance pipeline safety and reliability [5][6] - This investment strategy is expected to yield annual earnings growth of 6-8% during the same period [6] Dividend Policy - ATO currently pays a quarterly dividend of 87 cents per share, resulting in an annualized dividend of $3.48, up from $3.22 the previous year [7] - The company aims to increase its dividend by 6-8% annually through fiscal 2026, subject to board approval, with a current dividend yield of 2.09% [7] Stock Performance - Over the past year, Atmos Energy's shares have appreciated by 20.8%, outperforming the industry's growth of 8.2% [9]

Market Overview - U.S. stock futures are showing slight increases after a decline on Thursday, indicating a lack of significant momentum in the market [1] - The markets are calm ahead of key economic data releases, including the Personal Consumption Expenditures index, which is influential for Federal Reserve monetary policy [1] Economic Indicators - The 10-year Treasury bond yield is at 4.183%, while the two-year bond yield is at 3.659% [2] - The likelihood of the Federal Reserve cutting interest rates in October is now at 87.8%, down from 91.1% [2] - Jobless claims reported at 218,000, below the forecast of 235,000, and existing home sales at 4.0 million, exceeding the forecast of 3.96 million [4] Sector Performance - Almost all S&P 500 sectors were down on Thursday, with health care, consumer discretionary, and materials leading the declines, while energy was the only sector to gain [3] - The Nasdaq Composite fell by 113.16 points, the S&P 500 decreased by 33.25 points, and the Dow Jones Industrial Average dropped by 173.96 points [3] Company Insights - Intel Corp. was the top gainer on Thursday, rising 8.87% after reports of seeking investments from Apple and Taiwan Semiconductor Manufacturing Co. as part of a turnaround initiative [4] Analyst Insights - Analyst Ryan Detrick noted that the S&P 500 has increased by 125% since 2019, with 76% of this growth attributed to earnings and 19% from dividends, asserting that the rally is justified by strong earnings growth [6] - Detrick also mentioned that historical data suggests November tends to perform well following strong performance in the preceding months [7]

Investment Strategy & Market Overview - The market is making record highs, prompting a search for safe investment opportunities [1] - A screen was run to identify S&P 500 stocks with above-average growth and below-average price multiples [2] - The S&P 500 is expected to have 125% earnings growth next year and sells for just under 22 times next year's numbers [2] - The analysis initially identified 104 stocks, which was then narrowed down to 86 after excluding energy and materials names [3] - The report favors growth stocks as they are believed to generate significant returns [26] Stock Recommendations & Analysis - T-Mobile is expected to have 194% earnings growth next year and is selling for just over 18 times next year's numbers [4] - Expedia is projected to have 18% earnings growth next year and sells for 13 times next year's numbers, making it cheaper than Booking Holdings at 21 times earnings [5] - Dollar Tree is considered a buy, selling for less than 15 times next year's earnings with a 15% growth rate [6] - Capital One Financial (COF) is projected to have nearly 14% earnings growth next year and sells for roughly 11 times next year's numbers [8] - Citigroup is expected to grow at a 28% clip next year and trades at just 105% times 2026 earnings estimates [10] - Keycorp is expected to grow at a 22% clip next year and trades at just under 11 times next year's numbers [11] - Insight, a biopharmaceutical company, is expected to have 19% earnings growth and trades at just under 12 times next year's numbers [14] - Caterpillar is on track to put up 18% earnings growth and sells for 22 times next year's numbers [15] - Jacobs Solutions should have 16% earnings growth next year and the stock sells for 215% times uh 2020 successments [17] - BXP has a 37% yield even after trimming its dividend [19] Sector Analysis - Financials are highlighted as a strong sector, with 34 out of 86 companies on the initial list coming from this sector [7] - Healthcare has been mostly a wasteland this year, with only four stocks passing the screen [14] - The report expresses a lack of confidence in energy stocks due to limited growth prospects [26]