Micron, PCE and the jobs report that decides October | Week-Ahead Brief #8

The week in one minute

Last week:

The 10-year Treasury yield hit 5.18% on Thursday, its highest since 2007, with the 30-year mortgage crossing 7%. Stocks rose anyway: the S&P 500 gained 1.2% on the week.
The most interesting thing to watch this week may be bond and oil market. Will bond rates keep rising and oil keep falling?
Markets price about a two-thirds chance the Fed raises rates again on October 28. Friday's jobs report is the last one before that vote.

Wednesday

8:30am ET: August PCE inflation, the Fed's preferred gauge. Last months reading ran hot at 3.7% headline and 3.3% core.
After the close: Micron earnings, guided to a record $50 billion quarter. Could move the entire chips/AI sector depending on guidance.

Thursday

After the close: Nike earnings while it sits close to its 52-week low after a Bank of America downgrade on Friday.

Friday

8:30am ET: the September jobs report. Economists expect 90,000 to 100,000 new jobs, against 162,000 in August.

The week, day by day

Every confirmed report with its session is on the earnings calendar. Each morning's running timetable is on /today.

Monday, Sep 28

No major US data.
10:05am ET: Fed Governor Barr on the economic outlook and housing.
10:30am: the Dallas Fed survey.
After the close: Vail Resorts (implied move 10.0%), Jefferies (9.1%).

Tuesday, Sep 29

Before the open earnings: Carnival (call 10:00am ET), CarMax (implied 12.9%).
10:00am ET: August JOLTS job openings and September consumer confidence.
Fed speakers: Barr at 12:40pm, Cook at 1:25pm, Waller at 3:00pm.
After the close: Concentrix (implied 20.2%), AAR (11.5%).

Wednesday, Sep 30

8:15am ET: ADP private payrolls for September.
8:30am ET: August PCE inflation, and the third estimate of Q2 GDP. The second estimate was 1.5%. This release also starts the BEA's annual revision, so earlier quarters can move too.
Before the open: Jabil (implied 9.1%), FactSet (11.0%), Conagra (5.4%).
After the close: Micron (call 4:30pm ET). Wednesday is also the last day of the third quarter.

Thursday, Oct 1

8:30am ET: weekly jobless claims. 10:00am: ISM manufacturing for September.
Fed speakers: Waller at 10:00am, Vice Chair Jefferson on the economy and monetary policy at 1:30pm, Cook at 3:30pm.
Before the open: McCormick (implied 8.6%), Acuity (9.5%).
After the close: Nike, results around 4:15pm ET and the call at 5:00pm.

Friday, Oct 2

8:30am ET: the September jobs report. 10:00am: August factory orders.
No earnings of note.

Implied moves are the options market's priced reaction as of Friday's close, from the earnings calendar. The full macro list is on the economic calendar.

A 5% ten-year, a 7% mortgage, and stocks went up

The bond market kept selling last week. The 10-year yield reached 5.18% and held that price into the close on Friday. Governor Barr said on Wednesday that further policy adjustments should be expected. Freddie Mac's 30-year mortgage rate moved to 7.03%, up from 6.95% a week earlier and 6.30% a year ago.

Housing took it better than I expected. New-built home sales jumped 6.4% in August to a 684,000 annual rate, against a 650,000 forecast. KB Home beat on both lines and held its delivery guide for the year. The stock still slipped after hours once the chairman called conditions weakening.

Stocks…just kept going up. The S&P 500 closed at 7,743.41, up 1.2% on the week, and the Dow ended a three-week losing streak. AMD in particular did well, breaking a technical resistance by crossing 600$ and joining the 1T market-cap club. My read: equities are treating a 5% ten-year as the price of a strong economy. Friday's jobs report tests whether the economy is still strong enough to pay it - a poor report might dampen the optimism.

Friday decides October or December

The Fed's September projections pencilled in one more hike this year, at either the October 28 or the December 9 meeting. Roughly two-thirds of the market now expects an October hike, per CME FedWatch.

Friday's number decides which month we get the hike. Economists expect 90,000 to 100,000 jobs and unemployment near 4.1%. August came in at 162,000 against a 53,000 forecast, with 55,000 added back to the prior two months. A second strong month makes an October hike hard to skip. A print near 50,000, which Capital Economics has, puts a December hike more likely. There is no shutdown risk this time: Congress funded the government through December 11 at the start of the month.

Wednesday's PCE feeds the same question. July ran hot with a 3.7% headline and 3.3% core, per the BEA. After those hot CPI and PPI readings, forecasters lifted August's core estimate to 0.3% for the month, which annualises near 3.7%. A 0.3% core print plus 100,000 jobs is a hike. A 0.2% print plus 50,000 jobs is a real debate.

Eight Fed speeches are scheduled this week and none is Warsh. The Fed hub tracks the odds, and the Fed calendar has the dates.

Micron: $50 billion guided, in a 14-week quarter

Micron reports earnings after Wednesday's close. The company guided to $50 billion of revenue, give or take $1 billion, and adjusted earnings of $31.00 a share, give or take $1.00. Gross margin was guided near 86%. Analysts want roughly $31.50 on $51 billion, the top of Micron's own range.

One adjustment to the headline. Guided revenue is ~21% above last quarter's $41.46 billion, but this quarter also has 14 weeks against the usual 13. So the weekly increase is about 12%. Still enormous, especially if it continues.

The stock closed Friday near $1,080. On September 16 this site logged a pass on selling Micron options into this print, with the stock at $929 and a 10.9% move priced. The reasoning: memory companies keep beating their own guides by huge margins, and their stocks have often swung past what options price - and not always in the direction beats would suggest. Since that call, Micron has already risen about 16% without reporting anything. That call gets graded on Thursday.

My read: the revenue beat is close to a given. What I'd watch is the margin guide for next quarter. An 86% gross margin is the highest Micron has ever guided to, and any sign it has peaked matters more than a revenue miss. Micron has beaten and sold off before: it fell 22% from its highs after a record quarter in July.

Nike at a 52-week low, with a fresh sell rating

Nike reports Thursday after the close. Analysts want about $0.45 a share on $11.3 billion rev, against $0.49 on $11.7 billion a year ago. Both lines shrink. Nike's own guide has revenue down to low single digits for the first half of Nikes fiscal year, with Greater China the weakest region. Tariffs cost it $1.5 billion a year before offsets.

Bank of America cut the stock to Underperform on Friday with a $30 target, down from $47, saying the turnaround is taking longer than expected. Nike also left the S&P 100 on September 21 after nearly 18 years, replaced by Palo Alto Networks.

The one number that could change the story is gross margin guidence. Nike said it turns slightly positive this quarter, a quarter earlier than it had signalled. This site's August call, written at $41.70, was that the stock had not found a bottom. It is $35.75 now. I'd want China to stop shrinking before changing that view, and Thursday is the report that tests it.

Scorecard

The Costco pass held. Costco beat, with $0.15 of its $6.75 EPS coming from a tariff refund, and the stock settled up 2.93% against the 3.6% options priced. Would have lost money playing options in either direction.

SpaceX's day-105 tranche passed without incident. The stock fell 4.11% on Wednesday with the wider market, then moved 0.22% on the day the 319 million shares became eligible. The next tranche is Friday, October 9, on the lock-up calendar.

The Micron pass above is the one open call with a checkpoint this week. Every entry and outcome is public in the track record.

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Read this week

The full week-ahead piece, every figure sourced
The Fed hub: the hike, the dot plot and the October odds
Why Micron sold off after a record quarter in July
Sector heatmap, for where Friday's jobs reaction shows up first

Last thing

Next week is a quiet one before earnings season. The minutes of the Fed's 12-0 September vote publish Wednesday, October 7th. PepsiCo reports Thursday and Delta on Friday, along side SpaceX's day-120 tranche. September CPI follows on October 14.

Next Sunday's issue will cover it.

Know someone waiting on Micron? Forward this. New readers can subscribe at regardsofwallstreet.com, free, one email every Sunday.

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