9:25 on 8/11/25 – Offsides and Earnings

Charts and Links

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Week Ahead

Transcript

I can’t believe I’m about to bet the over for the Raiders win total this season at 6.5. Well, it’s a good thing we’re not here to talk about that, nor do we have the time. ’cause it’s 925 for August 11th, 2025.

Week Behind: Earnings v Payrolls

Now, in my opinion, the story of last week was that corporate earnings were so strong.

They encouraged analysts to challenge the pessimistic picture painted by the results and revisions of July’s payrolls. And I must say it is hard to knock their confidence. Palantir came out and reminded U.S. that AI spending among governments and corporations isn’t slowing. In fact, based on their quarter, you could argue a whole quarter of stocks beyond the Magnificent 7 or the AI 5 are starting to find ways to implement AI by outsourcing the infrastructure. As for the consumer economy, robust results from Uber and DoorDash showed that many consumer pockets remain resilient and aren’t exhibiting any alarming behavior.

New Consensus

These forces created a new consensus. We are at equilibrium on hiring and firing, which isn’t great – we’d rather have more hiring than firing – but it isn’t dire because it’s yet to [00:01:00] enter the psyche of the general consumer. If it had, they would’ve tightened their belts.

They would’ve tightened their budget to the point where we see earnings start to decay. In other words, we would’ve seen Uber and DoorDash have weaker quarters. Now, let’s play bear’s advocate and say the consumer economy really falls off a cliff. Well, it’s a good thing that we can rely on the enterprise economy – fueled by AI activity – to more than make up for any ugliness there.

The result is a pretty comfortable environment for investors to hold onto what they have and look for opportunities elsewhere. This isn’t to say that the consumer doesn’t matter. Markets will have an easier time if we avoid a worsening backdrop there, which makes Friday’s retail sales an important report to watch.

The headline is expected to print 0.5%, which is slightly below last month’s 0.6%. Retail sales minus auto, which is more indicative of the activity we’re actually interested in, has a consensus up to 0.3%, again weaker than last month’s 0.5%.

New Earnings Paradigm

If retail sales ends up disappointing. Don’t be surprised if the stock market holds up. Beyond the, let’s say, questionable quality of survey based data, the end-all-be-all for stocks is earnings. It’s not retail sales. It’s not GDP. It’s not inflation. It’s certainly not whatever your favorite macro gauge is. The reason macro factors have historically correlated with stock returns is because of those factor’s influence on earnings.

The stock market isn’t the economy, and that statement is truer today… Maybe than it ever has been; certainly in the past couple of decades.

Today’s earnings are more tied to the global, AI-fueled enterprise economy than the U.S.-domestic, services economy. As a consequence, the U.S. consumer has less sway over the overall earnings picture now than they have in past times. Just look at the S&P 500.

A 57% block is comprised of technology, telecoms, and financials. Only 10% is consumer discretionary. If you strip out Amazon and Tesla from that sector, it’s even smaller. And if we look at the U.S. economy, it’s about 70% [00:03:00] services, 30% goods. The S&P and the economy are just not as tied together as they used to be.

Retail sales and the consumer economy still matter, and I expect valuations will compress in anticipation of a second derivative earnings impact if we do see that consumer weaken more materially. I am simply making the case that the market’s resilience may be reflective of a new paradigm where the markets account for the fact that S&P 500 earnings will be less tied to typical economic indicators during the AI era.

Inflation and the Fed

And speaking of typical economic reports, we’ll get our first look at July inflation via CPI and PPI. They released prior to the start of trade on Tuesday and Thursday. Core CPI is expected to come in 1/10th hotter than the prior month at 0.3%. Consensus on core PPI is also 0.3%, but this is coming off of a flat base.

So we’re looking for a, we’re expecting a bigger jump in PPI than CPI. [00:04:00] The key word for this is July, meaning we shouldn’t expect to see much of a divergence from June’s results that reflect in an economy operating under a tariff pause, which is much the same of what we saw in July. If these tariffs that have gone into effect at the beginning of August last the entirety of the month, then it would make sense for us to see a more modest uptick in the August CPI, which will release in September.

However, if we see a more notable increase in July inflation – the CPI comes in hot; the PPI comes in hot – right ahead of when the market and analysts expect to see a real reckoning in the CPI and the PPI that will introduce material fear and uncertainty into the market, it would put the Fed in a really hard place, right in between the 2% inflation mandate and the maximum employment mandate, it could be what catalyzes a move back to the 50d SMA on the S&P 500.

S&P 500 Technical Chart

And if we take a quick look at the chart right here, you’ll see that it’s really only about 3% away. So that’s not [00:05:00] crazy. But I do feel as though if we get data that suggests the Fed is really in a bad position, we gotta retest the 50d and it’s only 3% away. So, I view it as more likely than not, but let’s just assume we don’t see a surprise on Tuesday.

The next day we’re gonna get a barrage of Fed speak, and given what we know about payrolls, I anticipate these Fed members are going to try to balance out what now looks like a terribly offsides position on interest rates. While associated headlines coming out of these speaking obligations could move into the markets, the effects tend to be to steal one of the Fed’s words, transitory.

The real value is how comments coming out of these speaking obligations update our understanding of the Fed’s response function given the new data we have since the Fed meeting: primarily payrolls, and maybe even a little bit of CPI if they’ll, if they’d be willing to comment on that.

Earnings Previews

We started by talking a little bit about earnings. Let’s end that way by going over three names reporting this week. I wanted to cover six, but for the sake of brevity, I narrowed down to three. I think you’re gonna be interested in these [00:06:00] three: Circle, Cisco and  CoreWeave. A trifecta of C’s. But that said, if you’re interested in hearing about Brinker, Cava, and Applied Materials, I’ll have something up for you Tuesday morning, right around the time that Circle reports.

Circle (CRCL)

For those of you that are not familiar with the company, or maybe you just heard of the ticker CRCL, these are the hit makers behind the stablecoin USDC. To oversimplify their business, they take fiat currencies from customers and give them stablecoin USDC in return. The fiat currency they collect is then invested in short term treasuries to track the value of the dollar, which earns Circle their return.

Therefore, holding the amount of assets invested in USDC equal, a rate cut will actually negatively affect their revenue. In other words, there’s a world where a rate cut – which would generally be good for longer duration, higher risk, technology stocks – hurts [00:07:00] Circle’s revenue. I am open to the idea that if volume outpaces the declining treasury returns, you won’t notice anything from the top line.

To put it another way, if the adoption of USDC, there’s enough assets going into that stable coin, that it overwhelms or outpaces the gradual decrease in short term rates – ’cause if the Fed cuts right now, it’s gonna be 25 bips once, maybe twice- there might not really be an impact on their P&L or their earnings outlook.

And to be fair, as of now, there are no other publicly traded pure place stablecoin issuers, so we can’t really make an analog. It’s going to be impossible to know which story will stick adoption of USDC outpacing declining treasury yields or declining yields outpacing- or maybe even undermining – growth.

Personally, I would stay away. I would stay away from this one. Let’s just take a quick look at their chart.

This is Circle since, their IPO. It’s below the 5d, 13d EMAs and the 21d SMA. It looks like it has support at 150; that’s a good sign, but again, just not something I would get in.

I think there’s probably better things to do with your time and your money.

Coreweave (CRWV)

Next, we’re gonna take a look at CoreWeave; they’re gonna report Tuesday after the close. So, we’ll hear from Circle in the morning and  CoreWeave in the afternoon. They provide cloud-based Nvidia, GPU.

Infrastructure to AI developers and enterprises. There are companies that are finding ways to outsource the AI infrastructure.  CoreWeave is one of those companies providing it. I’m not in this one, but this is a very, very tempting lottery ticket pick.

And the best way I can contextualize that is by saying I would if I had to be forced to bet on my favorite NFL team- on DraftKings – or buy an out of the money options flyer on  CoreWeave, I’d probably take the flyer. That said, I was born into the Browns Misery Club… So, [00:09:00] that’s certainly impacting the return profile on the sports bet side of the equation.

But I digress and I’ll simply just tell you why I like the setup. Let’s pull it up here. So when they IPO’d, Microsoft was 62% of the business. Given their strength in Azure – growing at 39% versus the expectation of say 34-35% – it would make a lot of sense if  CoreWeave has a great quarter.  CoreWeave gets a lot of their business from Microsoft.

Based on some of these recent developments on  CoreWeave charts, we got the bulls retaking, the 5d and the 13d exponentials; 21d simple has also been taken. Looks like we have a 5d-13d EMA (bullish) crossover. You had a $100 support.

I think the market is sniffing out a positive Azure-assisted quarter, and if that’s the case, I don’t think the shares, which closed on Friday around $130, have that priced-in. All kidding aside, seriously, you should never gamble on the stock market.

That’s what DraftKings is for.

But, I do admit to being tempted to take an options flyer on this because the technical indicators are suggesting that money is piling into this name in anticipation of a good quarter. The market is not stupid. This is not just dumb money piling into a name on a technical rebounded 100. There’s nothing important about that level.

If I do move forward with it, you’ll hear it from me, but I will be using money that I’m completely okay losing and do not need or plan on using in the future.

Cisco (CSCO)

We will finish up with Cisco who reports Wednesday after the bell. Friday, it actually closed at a new multi-year high. Here’s just a quick 10Y monthly, to give you an idea of what this thing has done over the past decade… I think to most people’s surprise.

Now, some of you may remember that before IBM’s quarter, which despite the stocks poor reaction, I consider to have been good. I had mentioned that eventually AI penetration into the tech economy would find its way into the P&Ls of legacy tech companies. There was gonna be no way around it.

Cisco is synonymous with the legacy tech stack. They were the Nvidia of the 2000 bubble, and now for the first time in 25 years – new chart: 35Y, monthly – the stock is on a clear path to revisit the highs made during that bubble. I didn’t realize until I started digging into their AI strategy that the optimism that we see in these charts is based in reality.

Their approach to AI is as similar an approach that Cisco could have to a Meg-Cap. When taking into account that Cisco’s primary business isn’t software. You’ll understand with some examples:

They have an a $1B AI investment fund that gives them a direct line to key startups like Mistral and Scale AI. And by the way, Scale AI is the company that Meta just dropped $14 billion in to get a 49% interest of.

They have acquired AI security platforms like Splunk- they paid $28 billion for that – but it got Cisco into the rapidly growing market for data resilience for AI workloads.

On the infrastructure front, they’re doing all the right things: partnering with Nvidia to offer customized and optimize solutions for customers. They’ve also aligned themselves with other hyperscalers to co-develop data centers. For their troubles, they’ve been rewarded by growing a book of business, uh, for orders related AI infrastructure to $1B. Now, it isn’t IBM’s, I think it was five or $6 billion book of business solely on Gen AI.

But it’s certainly something, and it’s definitely something for those who don’t realize that Cisco’s even a player in this game. Now, last chart here, and, and we’ll talk about how I might play it:

With the stock in a multi-year high, it’s really hard to argue the bar isn’t equally as high, but it should be noted the stock’s trading and only 18x FWD, which is lower than the, I think it was 23 or 24x FWD IBM went into their quarter trading at. I’ll have my eyes on this one. Regardless of the result, I want to see 70 become support.

It was resistance these past couple of months. You want to see resistance become support. That’s a sign that there’s real demand for the stock there. But if that doesn’t work out, I’ll be looking at the 50d.

So as I consider Cisco stock, please consider subscribing to my work. I wish you all the very best of luck on the markets out there. Thank you for stopping by.

Hope you learn something. I look forward to seeing you all again next week. Goodbye.

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