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Woods: Valuations were extreme, but that’s just the headline for this selloff
11/5/2025, 12:20:03 PM
Economic Summary
- The government shutdown is materially affecting economic readings; CBO estimates each week trims GDP by roughly 0.1–0.2%, which could alter Fed policy timing and perceptions of growth.
- Fed decision-making is data-dependent but hampered by missing official releases (e.g., delayed unemployment numbers), making private indicators like ADP and the Beige Book more influential for December rate expectations.
- Corporate layoffs at IBM, UPS, and Amazon are widespread; while cuts could aid margins for some companies, they also risk reducing spending from middle- and lower-income consumers, with McDonald's (MCD) seen as a bellwether for that cohort.
Bullish
- Palantir dip around $185–$175 as a buying opportunity.
- UPS mean-reversion play; buy on dip to $90–$92.
- Transport ETF strength (IYT) supports recovery in lagging names.
Bearish
- Extremely elevated valuations (e.g., Palantir ~250x forward earnings) create downside risk.
- Government shutdown reducing GDP by ~0.1-0.2% per week and disrupting Fed data.
- Layoffs at IBM, UPS, Amazon could presage consumer weakness and slower spending.
Bullish tickers
PLTRUPSIYT
Bearish tickers
PLTRIBMAMZN
PLTR
2 price targets
185175
Bullish
Viewed as a buy opportunity around $185–$175 after the sell-off despite high multiples.
Bearish
Extremely elevated valuation (~250x forward earnings) raises downside risk if growth disappoints.
UPS
3 price targets
1039092
Bullish
Contrarian mean-reversion pick; expected to rally back toward analyst target after dipping to $90–$92.
Bearish
Trading below key moving averages; layoffs and operational issues could weigh on near-term performance.
IBM
Bullish
Workforce reductions could help margins over time, although near-term uncertainty remains.
Bearish
Announced layoffs, signaling potential weakness and downside pressure on revenue or consumer demand.
AMZN
Bullish
Restructuring and layoffs may improve margins and support longer-term growth resilience.
Bearish
Layoffs and broader consumer strain could reduce demand, pressuring sales growth.
MCD
Bullish
McDonald's results act as a bellwether for consumer spending; solid results would support consumer-driven names.
Bearish
A weak McDonald's print would signal broader consumer weakness among lower/middle-income groups.
IYT
Bullish
Transports holding relatively well, supporting a mean-reversion thesis for lagging stocks.
Bearish
ETF strength may mask underperformance in specific components like UPS.
ADP
Bullish
ADP jobs data has become a market mover in the absence of official government employment releases.
Bearish
ADP is a survey that can be 'wonky' and less reliable than official jobless claims.
People mentioned
Jerome Powell