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Mill Street Research

@millstreetresearch.com

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Mill Street Research strategist Sam Burns, CFA, provides proprietary institutional research & tools on asset allocation, stock selection and the economy.

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Mill Street Research @millstreetresearch.com · Dec 3

What does Mill Street Research do? A short thread.

Mill Street Research is an independent boutique investment research firm, founded near Boston in 2016 by Chief Strategist Sam Burns, CFA. The research covers asset allocation and global quantitative stock selection. 1/8

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Mill Street Research @millstreetresearch.com · 4d

The news may be more "TACO" but brings the policy threat back into play at a time when valuations are very high.

Parts of the economy are already being damaged by tariffs, immigration, etc., but much of the key AI-related areas have been exempted so far, so it's a risk if that were to change.

Mill Street Research @millstreetresearch.com · 4d

Tech is leading the way down, given its potential exposure to China and tariffs. The Semiconductor index is down over 4%.
Defensive sectors are outperforming, with Consumer Staples and Utilities the only sectors in the green.

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Mill Street Research @millstreetresearch.com · 4d

Stocks having one their worst days in a while after Trump announced potential new tariffs on China and possibly cancelling a meeting with Xi over rare earth restrictions.

Crude oil also plunged, down about 4%, while bond prices are up (yields down) and the dollar is moderately weaker.

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Mill Street Research @millstreetresearch.com · 7d

The outlook for AI and its capex remains central to the US market outlook, outweighing most macro concerns and capturing the importance of investor risk appetite over all else in recent months.

There is a growing consensus that AI spending is unsustainable, but no one knows how long . . .

Mill Street Research @millstreetresearch.com · 7d

Stocks under a bit of pressure today as Tech stocks pull back, led by a decline in Oracle on news that its margins on cloud work may be smaller than thought.

Most semis and big Tech are down while defensive sectors are up.
The Russell 2000 is lagging the S&P 500 as well.

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Mill Street Research @millstreetresearch.com · 8d

Also today is the biggest bank deal of the year: Fifth Third agreed to buy Comerica for about $11B, now the ninth largest bank in the US.

Could be more mergers as banks take advantage of reduced regulatory oversight under the Trump administration.
Big banks are down but regional banks up today.

Mill Street Research @millstreetresearch.com · 8d

While NVIDIA is still the king of AI chips, the growing competition from AMD is notable.

Also notable is that OpenAI appears to be signing deals for amounts far exceeding its current or likely near-term projected revenues. And many of the deals involve contingencies and shares changing hands.

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Mill Street Research @millstreetresearch.com · 8d

Another up day for large-cap Tech, driven this time by news from AMD that OpenAI will buy a lot of their chips, and also take a bunch of AMD stock if the project hits certain milestones.

The news was clearly a shock as AMD is up a massive 25%, putting the market cap at $336B.

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Mill Street Research @millstreetresearch.com · 8d

The stock market is up on expectations that the new PM will increase fiscal stimulus and push for easier monetary policy, i.e. reflationary policies.

The yen has fallen sharply today as a result hitting 150/dollar, and long-term Japanese bond yields have jumped, steepening the yield curve.

Mill Street Research @millstreetresearch.com · 8d

Japan having a big day today after the victory of Sanae Takaichi as the leader of the Liberal Democratic Party and thus the likely next prime minister of Japan.

The likely first female prime minister, she is viewed as right-leaning with nationalist views.

The TOPIX index rose 3.1% to a new high.

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Mill Street Research @millstreetresearch.com · 11d

The combination of a short-term rally without analyst estimate support and higher valuations has pushed AMAT into the bottom quintile of our proprietary MAER ranking for S&P 500 stocks.

A much higher-ranked stock in that space would be Lam Research (LRCX), where estimates are rising broadly.

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Mill Street Research @millstreetresearch.com · 11d

Our work shows that the big rally has occurred despite analysts remaining net negative on their earnings estimate revisions: of the 31 analysts, 44% net are (still) lowering EPS forecasts.

So the rally has mostly just pushed the P/E up sharply after a year of relative multiple contraction.

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Mill Street Research @millstreetresearch.com · 11d

Applied Materials in the news saying that US limits on exports of its semiconductor manufacturing equipment to China will hurt revenue more than previously thought.

After a massive 43% rally in just the last month, the stock having one of its first detectable down days (so far), off -2.6%.

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Mill Street Research @millstreetresearch.com · 11d

Notable that amid concerns about the AI bubble, Jeff Bezos said today that AI spending is likely a bubble that will produce losses at some point, but will leave society better off.

www.cnbc.com/2025/10/03/j...

Maybe . . .
But apparently the "dance while the music is playing" theme continues.

Jeff Bezos says AI is in an industrial bubble but society will get 'gigantic' benefits from the tech

Amazon founder Jeff Bezos said that artificial intelligence is showing signs of being in an "industrial bubble."

www.cnbc.com

Mill Street Research @millstreetresearch.com · 11d

As for the S&P 500, in early trading Apple, Microsoft, and Broadcom are helping along with Health Care continuing to rally.

The weak spots hampering the SPX and NDX are Meta, Alphabet, Tesla, and Palantir.

Day-to-day rotation between NASDAQ and Russell 2000 continues.

Mill Street Research @millstreetresearch.com · 11d

ISM Services showed a drop from 52.0 to 50.0, the lowest reading since COVID and well below typical readings pre-COVID.

New Orders dropped from 56.0 to 50.4 and Business Activity fell from 55.0 to 49.9. Employment ticked up but still negative at 47.2.
Prices Paid stayed very high at 69.4.

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Mill Street Research @millstreetresearch.com · 11d

The ISM Services report was weak, and below expectations, but also showed continued high inflation readings, so bond yields have risen somewhat.

Stocks don't care much, as usual. Small-caps are the leaders today while NASDAQ-100 takes a breather.

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Mill Street Research @millstreetresearch.com · 11d

TSLA stock price reaction yesterday to seemingly "good" news of better-than-expected vehicle deliveries is notable.

It highlights the impact of "pull-forward" buying ahead of policy changes (EV tax credits going away) and how true consensus expectations are hard to measure.

Mill Street Research @millstreetresearch.com · 11d

Otherwise we are back to being driven by AI-related news and random policy news, like the recent arrangements made for big Pharma to avoid the worst-case tariff/regulatory outcomes.

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Mill Street Research @millstreetresearch.com · 11d

Lots of sad economists as there is no jobs report this morning due to the shutdown, leaving everyone hanging about the state of the labor market.

This is particularly important since it was cited as the key reason why the Fed cut last month and might do so again this year.

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Mill Street Research @millstreetresearch.com · 12d

Going to be quiet for macro data with the government shut down, won't see the jobs report tomorrow.

Private sector reports from ISM, ADP, Challenger, etc. will continue but are less reliable and may also be distorted by the shutdown.

Hard to see the Fed making any big moves without proper data.

Mill Street Research @millstreetresearch.com · 12d

Interesting day in stocks.
S&P 500 ending roughly flat, Russell 2000 up 0.6%, and NASDAQ-100 up 0.4% despite a plunge in TSLA.

Semi stocks up 2%, but Tech overall only up 0.5% as Software is down on the day.

Materials sector is best performer up 1%, even while Energy is worst performer down -0.9%.

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Mill Street Research @millstreetresearch.com · 13d

The S&P 1500 Pharmaceuticals index is now up 9% in two days, a big move for that industry.

It is finally back to pre-Liberation Day levels, recovering part of its stark underperformance since April.

An ongoing reminder that Trump policy chaos remains a significant market driver for some areas.

Mill Street Research @millstreetresearch.com · 13d

Stocks very mixed today as the US government shuts down.

Health Care is the leader again thanks to relief that drugmakers will avoid worst-case tariff/regulation scenarios after a deal Pfizer reached this week.

Tech, Utilities, and Consumer Discretionary are up, the remaining sectors are down.

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Mill Street Research @millstreetresearch.com · 14d

With the S&P 500 Equal-weight index (ETF ticker RSP) down somewhat today and unchanged on the month, a reminder that it closed at $187.62 on December 2nd (post election bounce) and is currently trading at $188.47 about 10 months later.