Jeff Kilburg
Founder, CEO & CIO of KKM Financial, Contributor to CNBC
US large-cap stocks are rising because inflation is cooling, which lets Fed Chair Warsh hold steady if Friday's jobs data cooperates. Per @wallstengine, core PCE rose 3.0% year over year versus 3.3% expected and headline PCE 3.4% versus 3.7%, while Q2 GDP came in at 2.2% versus 1.5%. x.comÂ
Faster-than-expected US growth is encouraging for stocks, though inflation remains elevated. Q3 GDP rose 3.4% versus 3.2% expected, while the GDP price index rose 2.2% versus 3.2% forecast; PCE inflation matched expectations. x.comÂ
Nasdaq-100 stocks and NVIDIA look like a dip to buy because a 1%-plus gap down over a tweet doesn't add up given how resilient the market has been to data. Hotter-than-expected payrolls, slightly warm PPI and an 80% chance of a rate hike did not bring the market down, though yields did on Thursday, and stocks rose on in-line CPI. This is an initial read ahead of Wednesday's FOMC decision. x.comÂ
Renewed inflation raises the risk of a December rate hike and downside for the Nasdaq 100. Per Wall St Engine, core PCE reached 3.1% year over year, up from 3.0%, and rose 0.3% month over month, up from 0.2% previously. CPI, PPI and PCE are all rising again; a December hike is the bet. x.comÂ
Softer CPI and PPI could raise expectations of a Fed cut on October 28 and set up a SPY gamma squeeze. If both inflation reports surprise to the downside, easing inflation fears and lower bond yields could combine with short covering and call-gamma flows to push SPY toward $785. x.comÂ
S&P 500 earnings are keeping pace with prices, so this does not look like a bubble. Quarterly earnings are on track to grow 29.5%, more than twice the 10-year average of 12.6%, while the 18.7 forward P/E is just below its 19.1 decade average. x.comÂ
US stocks face a potentially bigger selloff as rising inflation compounds concerns about AI spending. PCE inflation reached a four-month high of 3.6%, increasing pressure on the Fed to raise rates; Alphabet shares fell after disappointing earnings, slowing ad growth and more than $51 billion of quarterly capital investment. x.comÂ
US stocks benefit when rates rise with growth because earnings outpace the drag from higher discount rates. Such periods have historically been very bullish, unlike inflation-led rate rises amid slowing growth. Since fall 2025 the 10-year yield rose from 4.1% to 5.1% while nominal GDP growth accelerated to 6.6%, faster than rates. Being long offers better risk/reward; high oil prices due to the war are the remaining inflation pressure, and an end to the war would improve the setup further. x.comÂ
US stocks look set to keep grinding toward new highs because CPI, not payrolls, will decide the Fed's next move. Fed governor Waller said he favors holding rates unless inflation data surprise, cutting CME FedWatch hike odds from 63.2% to 50.4%, and stocks, gold and bitcoin rallied. August payrolls rose 162,000 versus 55,000 expected, lifting hike bets, but if next Friday's CPI keeps falling clearly, markets will still trade future rate cuts. x.com x.com x.comÂ
QQQ's remaining earnings, macro and election hurdles set up one more dip to punish late chasers. The index looks good and is pricing in some good news today, but Amazon, Intel and SanDisk earnings plus PCE and GDP arrive tomorrow, followed by AMD earnings and elections Tuesday. Expect one more, probably modest, dip Wednesday or Thursday next week before November's upward seasonality takes effect. x.comÂ
The S&P 500 remains very strong, up 11.7% this year and just 2.27% off its all-time high, despite a war, 10-year yields at 19-year highs, AI fears, a Fed rate hike and September's weak seasonality. The next week or two will be key to whether it breaks out to the upside. Whether the 10-year yield stays below 5.00% is a key factor, and tech leadership into week's end was a strong initial sign. x.comÂ
