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We're starting to see signs of technical weakening, says Edward Jones' Mona Mahajan
11/5/2025, 12:00:51 PM
Economic Summary
- Market technicals show narrowing leadership: the S&P is up ~35% since April lows and the NASDAQ ~55%, but breadth indicators (percent above 50-day MA) are deteriorating, implying higher vulnerability to a pullback.
- Fundamentals from the AI/tech sector remain solid with companies reiterating earnings guidance and CapEx plans; Palantir (PLTR) reported strong results but sold off on valuation concerns, highlighting sentiment sensitivity.
- Technology has driven a disproportionate share of earnings growth this year (tech driving over half of S&P earnings growth), while next year's S&P earnings are forecast to rise ~13%, supported by both tech and cyclical sectors.
- Policy and macro risks include new tariff implementations and a government shutdown, which could temporarily weigh on activity; softer labor market signals and these fiscal factors may influence Fed decisions toward easing in 2025–2026.
Bullish
- AI is a multi-year secular theme with 3–5 years of momentum remaining.
- Earnings growth is being driven by both tech and non-tech, supporting broader market gains.
- Expectations for Fed rate cuts and tax incentives for CapEx/R&D could boost earnings and cyclicals.
Bearish
- Valuation-led selloffs among AI/tech leaders (e.g., PLTR) can trigger sharp short-term declines.
- Narrow leadership (heavy tech concentration) leaves the market vulnerable if big tech falters.
- Near-term risks from tariffs and a government shutdown could soften growth and corporate activity.
Bearish tickers
PLTR
PLTR
Bullish
Reported strong earnings and guidance and reiterated CapEx, reflecting durable AI-related fundamentals.
Bearish
Sold off despite strong earnings due to valuation concerns, indicating sensitivity to sentiment and profit-taking.
People mentioned
Mona MahajanTom LeeJay PowellEd Yardeni