September 27th Market Overview

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Happy Friday, everyone.

So much for September being a doom and gloom month for the markets?

Strong 3 week performance so far and the momentum is looking strong into Friday’ close. Sure we are red on the QQQ’s but nothing to volatile.

A personal ask from me - each time someone checks out today’s sponsor it buys me a sip of coffee. I promise to keep this brief free and rolling every market session!

Lets dig in…

Executive Summary

• Dow ▲ 202 points (0.4%), reaching a fresh record; S&P 500 ▼ 0.03%; Nasdaq ▼ 0.3%

• August PCE index ▲ 0.1%, matching expectations; annualized rate at 2.2%, below 2.3% forecast

• Materials sector leads S&P 500, ▲ 3.4% for the week, best performance of 2024

• China-focused ETFs poised for record weekly gains on new economic support measures

Market Overview

A mixed but generally positive market today. The Dow climbed 202 points (0.4%) to a new record, while the S&P 500 dipped slightly by 0.03% and the Nasdaq Composite fell 0.3%.

All three major indexes are on track for their third consecutive week of gains, with the S&P 500 up nearly 1% and the Dow set to rise 0.7% for the week.

Key Market Drivers

1. Inflation Data: August’s PCE price index increased 0.1%, aligning with economists’ expectations. The annualized rate of 2.2% came in below the 2.3% forecast, signaling progress in the Fed’s inflation-fighting efforts.

2. Economic Strength: Recent data, including lower-than-expected jobless claims and robust Q2 GDP growth of 3%, continues to reassure investors about the U.S. economy’s resilience.

3. Yield Curve Steepening: The yield curve has moved back into positive territory, potentially signaling increased lending activity, especially to consumers. This development could benefit financial stocks in the coming months.

4. Consumer Sentiment: The University of Michigan’s consumer sentiment index rose to 70.1 in September from 67.9 in August, beating expectations and showing improved outlook across various demographics.

Stock Spotlight

1. $BMY: Bristol-Myers Squibb surged 5.3% after FDA approval of Cobenfy for schizophrenia treatment, marking a significant milestone in decades.

2. $WYNN: Wynn Resorts climbed about 6% following Morgan Stanley’s upgrade to overweight, citing strong fundamentals relative to competitors.

3. $BBY: Best Buy added to JPMorgan’s “analyst focus list” as a value idea, with potential for a multiyear cycle driven by new computing technology and rising replacement demand.

4. $COST: Costco dipped about 1% after missing expectations for fiscal Q4 revenue, reporting $79.70 billion against an estimated $79.97 billion.

5. $CASS: Cassava Sciences tumbled 11.5% after agreeing to pay $40 million to settle SEC case over “misleading claims” in an Alzheimer’s clinical trial.

Other Magnificent 7 Updates

$NVDA: Nvidia declined 4%, limiting gains in the tech-heavy Nasdaq that seems to only be influence by NVDA now (lol).

Other Notable Company News

• $SMCI: Super Micro Computer slipped 2% amid reports of a U.S. Justice Department probe, adding to a 12% loss from the previous session.

• $DG: Dollar General fell 2% after Citi’s downgrade to sell, citing Walmart’s increasing retail dominance.

• $BMBL: Bumble shares dropped 2% following KeyBanc’s downgrade to sector weight, citing weak app store data.

• $HPQ: HP Inc. fell about 2% after Bank of America’s downgrade to neutral, citing reliance on stock buybacks for EPS growth.

Sector Watch

Bond Market

The steepening yield curve suggests potential increases in lending activity. Closely monitoring Treasury yields as the implications of possible Fed rate cuts in the near future.

Policy Watch

Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, suggests that controlled inflation allows the Fed to focus on the labor market, maintaining a rate-cutting bias. This environment could provide tailwinds for both stock and bond markets, potentially easing financial pressure on consumers.

The upcoming Senior Loan Officer Survey, set for early November release, is anticipated to show banks more willing to lend to consumers, aligning with the recent economic trends.

What to Watch

1. November Elections: Market volatility is expected to increase as we approach the Presidential election. Watch for day-to-day news flow impacting both upside and downside risks. Post-election, focus on emerging policy implications that could shape market directions.

2. China’s Economic Measures: Keep an eye on the performance of China-focused ETFs like iShares MSCI China ETF ($MCHI) and iShares China Large-Cap ETF ($FXI), which are headed for their best weeks ever following new support measures from China’s central bank. These moves could have broader implications for global markets and specific sectors with exposure to China.

3. Fed’s Next Moves: With inflation showing signs of cooling, watch for signals from the Fed about potential rate cuts. The market is pricing in a rate-cutting cycle, which could significantly impact various sectors, particularly rate-sensitive ones like financials and real estate.

4. Consumer Spending Trends: Given Costco’s recent revenue miss and concerns about consumer spending on pricier items, monitor upcoming retail earnings and consumer confidence data for insights into holiday season expectations and overall economic health.

P.S. 
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- JB

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Note: This newsletter is intended for informational purposes only.