Short-term ‘exhaustion’ – aptly describes this market; especially bigger-caps more so than the broad market, which hasn’t rallied all that much. Doubtless a very extended value proposition prevails for big-cap techs particularly.Meanwhile it is also a case that (as often noted) the only way to meaningfully increase S&P levels would be to ramp-up the majority of non-performers. That by the way is difficult, due to many of them under-performing due to their real earnings or fundamentals generally, not justifying a particularly higher price. Short-term ‘exhaustion’ – aptly describes this market; especially bigger-caps more so than the broad market, which hasn’t rallied all that much. Doubtless a very extended value proposition prevails for big-cap techs particularly.Meanwhile it is also a case that (as often noted) the only way to meaningfully increase S&P levels would be to ramp-up the majority of non-performers. That by the way is difficult, due to many of them under-performing due to their real earnings or fundamentals generally, not justifying a particularly higher price.
So at-minimum we expect ‘chop’; and possibly more. The overcrowded sector list is pretty considerable but primarily in the bigger-cap realm. Plus as you all know I’m worried about October; but not expecting as bad shakeout risk as at least the ‘actual crashes’ of the past. Too many pundits throw-out the word too casually; because ‘actual crashes’ are extremely rare.Shakeouts are common and that’s pending.. with some prospect of indecision being the dominant case (may already be) ahead of Elections ‘and’ whatever’s going to happen with ‘both’ wars the world is grappling with currently.
Market X-ray: one Fed Governor (Kugler) talked of economic ‘cooling’ as pretty broad-based; so that’s the most dovish comment yet with respect to the likelihood of another (or even significant) rate cut in their plan (we don’t see as weak an economic environment as she described; but it does fall into the ‘bad news is good news’ category.There’s not a lot new in the economy; but a ‘port’ strike on-top of Boeing and minor skirmishes such as Hilton Hotels is having with leisure/hotel unions; or Starbucks… taken altogether they reflect the underlying inflationary tone to cost structures as well as citizens less able to cope without wage increases.This evening the most pertinent story (and that might weigh on Oil prices for now); is a report that Israel’s Prime Minister Benjamin Netanyahu has given the “green light” to pursue a possible deal with Hezbollah/Lebanon, but only if it includes the return of Israeli civilians to their homes in Northern Israel with a degree of security and confidence of not further attacks. (An official spoke on condition of anonymity as this is purported behind-the-scenes diplomacy. I do understand that France and USA are trying to cobble this deal together.)
Many are overly focused on domestic concerns, which while always pertinent, almost are dwarfed by existential influences; at least until the Election. There is probably emotional obsession about the Election, while I respect opinions like Leon Cooperman’s (who this morning opined that neither is truly qualified to be President of the United States). However one of them likely will be that.I don’t believe 2025 will be hurt by whichever one wins. Tax policy changes for sure could get attention; so would a wider war in the Middle East or Europe. It might be that one or both of these quiet down before Elections; but .. dubious. So it’s hard to price-in more to the Index now that what we already have.
Let’s wrap-up for tonight… nothing significant changes the market exhaustion and it could rally if we get a ceasefire; or decline if all hell breaks loose well beyond what’s already transpired (in the Middle East ‘or’ regarding Belarus). For now I’m planning to stay put in-event the core of the coming storm turns to a more inland course; as all of Florida is under ‘tropical storm/hurricane’ alerts while the ‘eye’ is expected to remain in the Gulf and hit near Perry and flood a lot of the ‘Big Bend’ region (Tallahassee for-instance) then move toward what nobody’s talking about…. Macon and Atlanta Georgia; possibly still as a Cat 1. That’s a big deal for those areas; whereas now the Hurricane Center says Cat 4 likely as Helene churns toward Florida. I have a neighbor with two-stories so that’s where I’ll go in-case of flooding. There is no expectation of more severe conditions than tropical storm (bad enough) here; but if power is out, I’ll do my best to provide basic needed comments either here or via ‘X’ posts if needed.
Bottom-line: there is no change in overall market status, condition, or of Fed expectations beyond what’s been discussed (more lower rates); and concern for October shakeouts, but nothing catastrophic based on everything known. Stay safe, and if you’re in metro-Atlanta etc., take great care. Also flying thru Atlanta is not going to happen after some point tomorrow; so if traveling we’d suggest rerouting way north while you can, and absolutely avoid Atlanta. Finally, ‘not’ evacuating Tampa / St. Pete is very risky. While the ‘eye’ likely is not going to hit Tampa, it’s on the right side of the storm and will get incredible ‘surge’ right up Tampa Bay (as I’ve mentioned before insanely flood-prone). If this storm happens to wiggle to the right; it hits directly; to the left well..careful.
Prior highlights follow:Bad news was absorbed – essentially as good news; given labor market not falling off a cliff; but Consumer Confidence shrinking considerably. That’s just impetus for the Fed to make the 50 basis point rate cut the start of an easing cycle, not a ‘one and done’ more; and this action is inline with our forecasts.Even a (meritless?) DoJ lawsuit against VISA failed to ruffle big-cap feathers, so S&P managed to cull-out yet another record, in an up-down-grind higher (a pattern suggested in my morning ‘tweet/post’ on ‘X’) continuing the reluctant surge even higher, expected this week; although on a bit of a short leash.
The short leash recognizes that Oil advancing (also expected) relates more to China than the Middle East, as Beijing pulled-out a lot of stops to stimulate so many of their economic sectors, that it probably enhances optimism slightly (it matters for Oil demand or of course many other local factors to their market).In the Middle East there’s a delicate chess match underway. Notably reports of Hezbollah asking Tehran for intervention (specifically asking them to attack Israel) was apparently deflected by the explanation that Iran’s President is in New York for the UN gathering; so not an appropriate time. That new leader is believed not ‘as radical’ as his predecessor or peers, so we’ll see. Obviously it matters. ‘If’ Iran is only days or weeks away from a nuclear bomb, then it sure matters if they contemplate waiting for that, versus inaction now; versus what is probably wistful thinking.. that they’d really don’t want to engage Israel.While Israel is stronger than their enemies in several ways; they’re tired too of course. However, whether planned or not it’s brave militarily and politically just tightrope walking (for Netanyahu).. which might work well if Hezbollah stands down. The IDF has fortunately taken-out large portions of the armamentarium of rockets and missiles with the ferocious pinpoint airstrikes; while also largely decapitating (figuratively speaking) the leadership structure of the terrorists.If nothing else this should allow a long period of time for ensuing stabilization; at the same time that would require Iran remaining quiescent. Quite an if we’d say. If Iran does ignore the pleas of their wounded terrorist militias, there may be a window for something different as far as a ‘process’; but it’s narrow and if Iran moves heavily, you would see Lebanon suffer; and maybe Tehran as well plus the wild card.A ‘wild card’ would be dragging the United States into this, and in which case while eliminating Iran’s brewing nuclear capability, take-out the Houthi rebels as well, which is probably something that would also please Saudi Arabia. For sure we don’t care so much about pleasing the Saudi’s, but they care and with an eye on realigned regional security interests, there’s unfinished business. In addition there are thousands of Lebanese-Americans in Beirut that may need to be evacuated, and that would be a task of U.S. Marines in the Med. In the meantime shame on Turkey’s Erdogan for his support of wrong causes again.
Market X-ray: the focus is on ‘National Security’ now; whether Middle East or even European (Russo / Ukraine war) concerns; plus again Chinese chips or software embedded in devices (including drones) being flown or operated in the United States. This is not only about the initiatives to make more here; but also to prevent these devices being ‘Trojan horses’ for Chinese espionage. It’s a shade of the Huawei issue, and even some in Europe are cognizant of this.S&P is really more of the same … grinding in record territory but not much and also not reflecting interest in fairly-valued or under-valued stocks, yet. Over a period of time this should evolve, but this is an odd time of year to expect that.Meanwhile the UK is moving about 700 troops to Cyprus to support their RAF and RN operations; purportedly if they need to evacuate Brits from Lebanon. I noted two of their aircraft carriers in-port in Portsmouth so no urgency there it seemed. Of course they might have been prepared to depart by now.. mostly it’s Iran’s unwillingness (and or inability) to aid their terrorists, that’s notable.Economic data reflects the bifurcated consumer; as much as bifurcated stock segments; perhaps even more so. However the data basically ensures a Fed remaining on the ‘easier’ side for now; and that’s holding up the S&P; even at the same time as it makes the pricing level for big-cap stocks even more of an extended valuation than before (to wit; if earnings should slow).Today you saw a taste of that with the Housing sector; despite higher prices, and of course allowing for mortgage rates that have more recently resumed a retreat that began a year ago. Too many creative (like tiny houses for rent and other gimmicks) or make-work ideas (for construction crews) reflect an unreal disparity between what home prices are at, and what younger buyers (more so than older of course) can afford. And yes, some younger buyers now see 200k a year as a baseline income (vs. 100k for my generation); but they are a small percentage of the overall potential clientele, which are probably lucky to make 100k between two income households (or just a bit more than that sure seems to be the ‘average’).And certainly those of my era with paid-for homes or younger with 2-3% mortgages from a few years ago; are unlikely to move. (I don’t know if KB Homes results are representative of the industry; since the overall home deliveries are up; but the CEO talked of softer demand now on the upswing. We don’t follow the shares.)Meanwhile . . . minor developments. BigBear.ai is one of two companies with a new US Air Force contract related to training Air Force cadets.. not huge but sort of affirming some of their relationships with the Defense Dept.Little LightPath Technologies got a 3.5 million dollar follow-on contract (with Lockheed) for optics related to the F35 fighter program. This merely means that Lockheed continues to use certain (lenses I presume) for the F35 and of course it’s important to keep continuing contracts. This is ‘not’ the much noted and awaited new missile contract, which the CEO is eager to participate on as a subcontractor. (Lockheed has to win the DoD award over Raytheon first.)After the Close, there were more filings by insiders at SoundHound; a couple of which were telegraphed as ‘intent’ yesterday; and mostly 10b5’s or sales of stock as prior options were executed. None of this is having much effect, but it does restrain SOUN as it tries to work towards a consecutive close over 5.Bottom-line: not much tension on the tape; just S&P grinding higher. Not so much else happening either; aside building to a crescendo of some sort in the Middle East; possibly just after the UN General Assembly meets end. Higher Oil is indicative of that; this time more so than Gulf of Mexico Oil platforms in evacuation mode (Hurricane Helene is to the East of the production fields). More By This Author:Market Briefing For Wednesday, Sept 25Market Briefing For Tuesday, Sept 24Market Briefing For Monday, Sept 23
Market Briefing For – Thursday, September 26
