by Jason Norris, CFA
Director
Equity Research and Portfolio Management
Coming into this week, investors were focused on two items: the release of delayed employment data and Nvidia’s earnings announcement.
The released September employment data was mixed. Job gains were 119,000 for the month and August data was revised to reflect more job losses. Goldman Sachs estimates there will be 50,000 in losses in October, driven primarily by severance packages for federal employees rolling off. The chart below highlights the trend is showing a weakening labor market—and includes Goldman’s October estimate.
October and November data will come in mid-December, after the next Fed meeting scheduled for December 9 and 10.
New York Fed President John Williams recently stated a cut at the December meeting may be warranted. Investors are factoring a 75% chance of a December cut of 0.25%. With the weakening labor market, we would agree that a cut should occur. To reiterate, this does not mean we will see a decline in longer-term interest rates, such as mortgages. We believe at current levels for the 10-year Treasury yield of 4.1%, any meaningful decline in yields would signal an upcoming recession, which is not our forecast.
The Future is Not Set
The world’s largest company, Nvidia, reported its earnings on Wednesday. While results were strong, investors were more inclined to “sell the news” Thursday, taking the stock down from $195 at the open to $180 at the close of trading. We did see some stabilization on Friday but overall, the stock remains highly volatile.
The Nvidia fundamentals continue to remain strong, and its valuation is attractive. For instance, 12 months ago, Nvidia’s January 2027 earnings estimate was $5.30/share. Today, that estimate is up 40% to $7.40/share. The stock is trading at a price-to-earnings multiple of 24x, in comparison to the S&P 500 trading at 22x.
Trading on Thursday highlighted skepticism in the market, particularly in the AI space. Chatter comparing a potential AI bubble to one driven by the internet in the late 1990s continues to capture headlines. Tech investors in the ‘90s did not carry the same skepticism we are seeing today. No doubt there are pockets of “froth” in the market, and investors today are conveying their cynicism. To highlight this point—Oracle announced a $300 billion deal with OpenAI in September, which resulted in a 30% gain, as seen in the chart below. The stock dropped as investors took a step back and waited for the dollars to come. Oracle then announced a $18 billion debt issuance to fund the buildout of their AI infrastructure. This resulted in a potential downgrade in their credit rating since their total debt has now eclipsed $100 billion, prompting an accelerated sell-off. We highlight this to show how investors may trade on headlines rather than allowing the fundamentals to play out.
Takeaways for the Week
The release of economic data has started and it is going to take several weeks before the data is “current”
Third-quarter earnings are close to wrapping up with Nvidia reporting this week
With one quarter remaining in 2025, earnings growth estimates are over 12% gains for the year and current 2026 forecasted growth is 14%