Even as inflation numbers continue to come in, and new sticky tariffs cloud the economy, stocks turned around on Friday, snapping a 3 day downward streak. The Dow Jones Industrial Average charged up 300 points, with the S&P 500 and Nasdaq Composite up 0.6% and 0.4% respectively, finishing a good day, salvaging the week for investors and traders. The release of the PCE index, (Personal Consumption Expenditures Index), was not relenting, revealing that “price pressures are still above the Central Banks preferred 2% level. Market ‘gurus’ are still looking for two more rate cuts before the year’s end, hopefully in October and December. Even after Friday’s positive market the indexes still finished the week lower. The 10 year Treasury note yield edged higher settling at 4.185% (“Treasury yields rise when bond prices fall”). “The market is treading water at this stage. It’s looking for a reason to move higher or lower,” said Stephen Kylander, senior portfolio manager at Pallas Capital Advisors. “The data that’s been released suggests that we’re not going to get rate cuts that are in excess of where the current expectations are.”
The annual September market, historically the “worst market of the year,” is this year “notching new highs,” with indexes setting new lofty records every few days, dispute good and negative news releases. The University of Michigan’s Consumer Survey just released, showed continued consumer spending weakness even as equity markets are busy with buying activity.
“I think we’re headed for a showdown,” Vice President JD Vance said after the meeting with both parties regarding the government shutdown. That negative statement set the stage for ‘discord to come’ as progress has been non-existent so far. The indexes traded near flatline all day Monday finishing just in the positive with the Dow Jones up 0.2%, while the S&P 500 and Nasdaq were up 0.3% and 0.5% respectively. Gold continued in demand hitting daily records, settling at $3.874.40, up another $19.00 on Tuesday. Buy orders continue to flood brokers, with the bullion demand staying strong. Silver, the sometimes forgotten sister metal, is trading in the $47.00 range. Silver is up a whopping 60% this year as safe haven investors are jumping on the ‘bandwagon.’ Bitcoin hit $120,500 late Thursday, up another $3.000.00. Pharmaceuticals were in demand as President Trump announced a “direct-to-consumer website.” Drug stocks were immediately pounced on by investors and traders, driving stock higher. The S&P 500 finished with another record, its 29th of the year. “In this environment where we’re uber-focused on the Fed and what the trajectory of their policies is going to be, not having key employment data puts investors on their back foot,” said Liz Ann Sonders at Charles Schwab.
Stocks crept higher Thursday as the indexes were flexed with strong demand for pharmaceuticals, driving the sector higher again and igniting the general market. High techs, artificial intelligence and many of the Magnificent 7 stocks again led the parade to lofty highs and records for the indexes. “Shutdowns tend to raise noise more than change trend,” said Latty Adam, chief investment officer at Raymond James. According to Dow Jones Market Data “the S&P 500 has averaged a roughly 0.05% gain during shutdowns.”
RUMBLINGS ON THE STREET
Dylan Bell, chief investment officer at CalBay Investments, WSJ – “Investors have been largely desensitized throughout this year with the countless tariff talks. We’ve seen the administration be able to make deals and come down from those high levels of tariffs. Investors are used to these being started at negotiating talks.”
Stephen Searl, Co-Head of corporate and municipal teams at Conning, WSJ – “It’s hard to predict what’s going to flip it into a downturn, but that’s one of our big concerns. With spreads tight and equity markets pretty stretched on high valuations, it feels like the market is pretty complacent here.”
Jason Pride, chief of investment strategy and research at Glenmede, WSJ – “A shutdown is unlikely to roil investors. They may be looking over their shoulder at it , but I don’t think market action suggests a lot of concern as of yet.”
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