Futuristic cloud data transfer displays. --chaos 5 --ar 4:3 --stylize 1000 --v 6.1 Job ID: e8ce4ad0-2ede-4469-9aa6-eda7f4ce1fff
The Federal Reserve announced a quarter point rate cut last Wednesday… It sparked the markets, with the indexes hitting new record highs for four consecutive days. The hope is that the Fed will continue with possibly 2 more cuts before year’s end. The indexes were all positive. The smaller cap value index, the Russell 2000 had strong up-moves, closing Friday cresting a new record, the highest in 4 years. The index outperformed the S&P and Dow Jones as investors looked to the value stock index with companies with ‘shorter term debt.’ “The story today and this week is that we got our cut and we are going to get a few more cuts,” said Liz Thomas, head of investment strategy at SoFi. “The market is pretty happy about that and we’re back on the rate cut bandwagon.” The 10-year Treasury yield edged higher to 4.138%, as volumes were a bit stronger. (“Treasury yields, which rise when bond prices fall, were little changed”) “Is this the start of a cutting cycle or just a one-off cut?” said Michael Antonelli, a managing director at Baird. “The market is landing on that it’s not likely a one-off cut.” According to a FedEx corporate comment, an early tariff related hit of $1 billion to yearly earnings is very probable.
Monday stocks opened higher, extending the record setting stretch, kicked off by the Fed release of the long awaited ‘rate cut.’ As usual the heavy tech Nasdaq Composite blazed the way as the index was up 0.7%, while the Dow Jones added 0.1%, and the S&P 500 gained 0.5%. All three indexes were in record territory for the third day in a row. “The Real Deal,” an alliance between two ‘mammoth’ AI players, Nvidia and ChatGPT maker OpenAI, is with Nvidia investing near $100 billion. The deal will fund a huge information center with limitless data reserves, storage and unlimited development capabilities. The indexes were wildly higher, as the announcement carried nearly every sector upward, not just the high techs. At close on Monday the 10-year Treasury was steady at 4.141%.
Stocks stalled Tuesday again, unable to re-ignite the ‘last week’ rally. Heavy techs weighted the market Tuesday. Even the Mag 7 participants were quiet, unable to generate heavy buying interest. Steady-eddy Gold finished up 1.1% to close at $3,777.10 a troy ounce, up 40% this year. Gold continues to garner much attention with investors socking away large amounts of gold securities and gold bullion. Its ‘sister metal’ has also ‘kicked-up-its-heels’ with heavier buying, along with Gold. Silver has appreciated 55% this year, and has not appreciated this high since 1979. Precious metals, gold and silver have proven to be havens of stability in times of market turmoil and confusion, with investors socking away hefty amounts of the metals. Thursday the indexes were weak, not able to put a rally together as investors and traders were timid about the AI market rapid appreciation. Many portfolio managers are getting concerned about AI, and high tech stock prices, and lofty PE’s, as clients are beginning to show some resistance in buying habits. “Most technology, as it progresses, becomes more cost effective,” said Julie Biel, chief market strategist at Kayne Andersion Rudnik. “That’s not really happening with AI.” Thursday stocks slid most of the day, marking the 3rd day of a declining market as all three indexes were unable to ‘get started.’
RUMBLINGS ON THE STREET
Blair Shwedo, head of fixed income sales and trading at U.S.Bank – WSJ – “The bond market is signifying that the Fed has everything under control right now. Personally, I’m still vigilant that inflation readings are coming in a bit hot and I don’t think we’ve seen the full impact of tariffs.”
Lou Liberatore, director of research at Alexandria Capital, – WSJ – “It’s kind of a tale of two markets.” said Mr. Liberatore. “You have AI beneficiaries driving the market and the rest of the market treading water.”
Marta Norton, chief investment strategist at Empower, a wealth manager, – WSJ – “We’re getting a little bit of adjustment on rates and we’re seeing this AI train just full speed ahead. The Labor market isn’t collapsing, it’s cooling.”
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