It’s a mixed session so far, with the Nasdaq lagging as big tech earnings weigh. Small caps outperform as yields ease, after this morning’s inflation and growth data, and oil prices drift lower.

Under the hood, eight of eleven sectors are in the green, led by Health Care (XLV) with Eli Lilly (LLY) rallying after beating estimates and raising its sales outlook, while Merck (MRK) climbs following a beat and raised guidance. Real Estate (XLRE) and Utilities (XLU) are also outperforming as Treasury yields pull back, with Equinix (EQIX) higher after raising its full-year guidance. Mastercard (MA) is lifting Financials (XLF) after topping estimates.

On the other hand, Communication Services (XLC) is the biggest laggard as Alphabet (GOOGL) tumbles on slowing search growth and negative free cash flow. Information Technology (XLK) is also lower as ServiceNow (NOW) and Fortinet (FTNT) plunge on disappointing outlooks and Marvell Technology (MRVL) slides on reports it is in talks to acquire Lumentum Holdings (LITE).

Notably, the S&P 500’s forward P/E relative to its operating margin has dropped to about 0.85x, its lowest level in more than a decade and down from roughly 1.25x late last year. In other words, relative to how profitable companies are, investors are paying less for each dollar of earnings than usual.

Hassett on the Fed

White House economic adviser Kevin Hassett called this morning’s inflation data broadly in line with expectations and said growth is headed toward 4%, but he sees the Fed acting if October inflation data come in high. That comes a day after the central bank held rates steady with two officials dissenting in favor of a hike. This morning's September PCE showed headline inflation rising to 3.6% from a year ago and core to 3.1%, both in line with expectations, while third-quarter GDP grew at a 3.4% annualized pace, ahead of estimates.

Mega Cap Earnings

Amazon (AMZN) results are on deck after the bell.

Artificial intelligence spending will be in focus as investors look for Amazon Web Services (AWS) growth to hold up after rising 37% last quarter, along with any update to the company’s roughly $220 billion capital spending plan for 2026. Investors will also be watching fourth-quarter guidance heading into the holiday season, after the third-quarter outlook called for 9% to 12% sales growth, held back by Prime Day shifting into the second quarter.

Historically, the stock has moved higher the day after in three of the last five earnings reports, and the company has topped EPS consensus in six of the last seven.