Well, let's get to the big story breakdown wall. Wall Street is keeping a close eye on Treasury yields, as investors brace for a slew of high stakes macro data as well as corporate catalysts. This week, tomorrow's August PC inflation print will be monitored ahead of Friday's critical September jobs report.
At the same time, earnings results from micron, Nike as well as Accenture along with open AI's Dev Day, will test whether the broader market rally will withstand elevated Treasury yields amid some of the rate uncertainty from the fed. Joining us live this morning from the New York Stock Exchange is Michael Reinking, senior market strategist at the New York Stock Exchange.
Michael, good morning. Thank you so much for joining me.
Good morning. Thanks for having me back.
Well, here we are. We are counting down to the final quarter of 2026. And it has been quite a year. But we're keeping a close eye on many things, including the Treasury market right now. And given the fact that we have macro coming down the pike this week, what's important to keep our eyes on?
Yeah, I mean, I think, you know, right now, you know, markets are clearly focused on kind of yields and oil prices. Right. And then kind of flip side of that on the offsetting side of that has really been kind of the continuation of the AI trade and kind of just kind of the manic moves that we've seen. You know, as you you start to see kind of sentiment shifting it kind of very positively and negatively, kind of even within that, kind of within that trade.
You know, most recently that's evolved into kind of the discussion around authentic AI and how that's going to potentially kind of, you know, impact companies and, you know, kind of just broader, uh, kind of commerce and things of that nature going forward. Um, so but right now, I'd say if you put everything at the top, you know, kind of yields are kind of at the top of that list.
We have some pretty key data this week that's going to potentially move that around.
Yeah. And speaking of which, of course we'll be paying attention to all those data points coming out this week as well as some of the fed officials speaking as well. And we do have micron set to report. And this does come on the heels of the results we got from CarMax this morning, as well as Nike later this week.
So how important are the earnings.
Yeah I mean look earnings have been the primary driver of kind of market performance. You know kind of this year as we've seen kind of earnings estimates at the start of the year, we're calling for kind of S&P earnings around 12%. You know that's kind of north of 30% for this year right. And we still have pretty kind of solid expectations for earnings growth going out into next year.
You're looking at kind of mid double digits for the S&P 500. So I mean that is clearly you know been the primary driver for markets which has helped uh on the valuation side of things as you've seen kind of multiples compressing as as you know those earnings are outpacing kind of some of the equity gains. Um, you know, we'll we'll see if kind of the earnings, um, season that's upcoming and really kicks into gear in a couple of weeks is kind of that catalyst to kind of help markets kind of break out of the range that we've really been in, you know, kind of since, since June.
So pretty much the entire third quarter.
Yeah. And we are counting down to the official start of earnings season. And of course we'll be watching out for the results coming out from financials as well as other sectors. But of course you mentioned artificial intelligence. That is what all of us are watching. And especially given some of the concerns surrounding the regulatory outlook, as well as some of the meetings that are taking place in the nation's capital.
What do you make of where we stand and what do you make of some of the spending?
Yeah, I mean, it's, you know, we're at a, you know, an interesting kind of point where you have like, clear concerns around, you know, kind of the potential of regulation and kind of, you know, kind of just security concerns around kind of the technology. And then you're going to obviously have kind of you're seeing kind of more and more adoption.
Um, you know, so
from a spending perspective. Right. There's no suggestion that, um, any of that spending is slowing down. You are, though, really starting to see kind of a pickup in the political pushback, you know, kind of against, uh, you know, because, you know, the continuation of building of data centers. So you are seeing some strains.
You know, kind of some some strains in some of the funding markets. Um, you know, from an earnings perspective, I wouldn't expect to see any sort of slowdown. Um, I would actually, you know, I think if you look at kind of the hyperscalers and kind of the mega cap tech names and their earnings from last quarter.
You know, you can you're starting to really see kind of the payoff in some of that, uh, you know, kind of some of that investment, particularly in kind of their cloud businesses. Right. So I would expect if their, um, you know, their earnings to continue to be, you know, kind of very, very strong as we look forward.
And of course, as we head into the final quarter of 2026, a lot to keep our eyes on. But given the fact that equity markets remain, well, elevated and so do Treasury yields, what are some of the risks out there?
Yeah. Look, I mean, you know, um,
clearly the geopolitical, um, you know, kind of risk is, is, is very much at the forefront. Um, you know, kind of where things kind of go and whether we see any sort of movement before the midterm election or after. Right. You can make a case in either direction that, um, you know, there are incentives for theoretically both sides to potentially come to a deal before the midterms.
Um, and you can also make the case that, you know, if this extends past midterms, that that kind of takes the handcuffs off and we could really see, um, you know, kind of an escalation at that point. You know, midterm elections are kind of clearly something to also pay attention to. Um, you know, historically markets have been choppy leading into, uh, midterm elections.
But the return profile following midterms has been kind of pretty. Uh, you know, it's been very strong. It's the best three quarters within the four year presidential cycle, Q4 of this year and Q1 and two of next year. Um, if you get kind of a blue suite that does kind of, you know, put, um, you know, kind of raise some concern around kind of the AI trade.
Uh, a little bit in that, you know, you're going to potentially see kind of more of a political push back against, uh, you know, kind of AI. So and you then very much kind of open the door for the administration to get a little more aggressive. And you're you look at an administration that's going to be very much hand tied, and we're going to just be looking at impeachment trials for, you know, as far as the eye can see.
Um, so those are kind of some of the big things out there.
Yeah. And Michael just feels as though you and I were talking about seasonality for the autumn months as we enter the month of September. But here we are about to head into a new month. And of course, when it comes to seasonality, that is something we'll continue to monitor, especially with midterms right around the corner.
But when we take a look at the sectors that are laggards as well as leaders, there's a lot to keep our eye on. And when it comes to the American consumer out there, especially in this k shaped economy, there is so much that they have to contend with. So what would you say to the American consumer that is out there as we head into the holiday season.
Yeah. Look, I mean, I think everybody's kind of felt the impacts of kind of higher pricing, right? So that's, you know, kind of been, you know, something that we've all been contending with and, you know, kind of particularly kind of at the low end of kind of the income scale. Um, you know, I think from like if you take it back and look at the economy, um, I think the economy or kind of consumer spending is now much more leveraged to, uh, you know, kind of the financial market performance.
Right. And so as we've seen kind of financial markets and assets kind of moving higher broadly. Right. That's helped kind of buoy some of that consumer spending. Uh, you know, which kind of leaves you in a difficult spot. If we were to see kind of a, uh, you know, kind of a more of a pullback now kind of within the markets, right.
So I think there'd be much more leverage, you know, kind of to that consumer spending side of things, you know, obviously kind of higher interest rates are going to kind of continue to weigh on housing. It's going to continue to weigh on kind of auto markets. Um. Right. So, you know, I mean, it's it's it's a hard time if you're you're kind of in need of.
You know, to be a borrower right at this point. But you know, if you are a saver, right? If you look at kind of where yields are, you know, kind of an interesting setup, you know, for the first time in a long time when you're looking at kind of longer dated Treasury yields that are over 5% and just, you know, take it back to the very short term, we are kind of in quarter end today, given the move that we've seen in Treasury markets relative to equities and just how well funded the pension funds are, you could start to see kind of a little bit of, you know, kind of just of a rotation rebalancing, you know, by some of those funds into quarter end and into the kind of the start of the next quarter, maybe stopping some of this upward move in Treasury markets.
Well, a lot of moving parts here. So thank you so much for breaking all of it down for us today Michael. Thank you. Appreciate your time.
