Hello, I'm Eric Criscuolo, Market Strategist at the New York Stock Exchange, and this is Market Storylines. Every week, we’re here to keep you up to date on the key trends and events driving global markets. As we record on Thursday afternoon, let’s dive into this week’s Market Storylines.
The week started with Sunday Football as the NFL season got under way, bringing with it happiness, elation, sorrow and anger, often one right after the other, and some of us experiencing much more of one versus the others.
As we dragged ourselves out of bed on Monday, US equities were similarly sluggish. The S&P 500 traded in a very tight range and ended slightly higher. However there was a distinct performance split as large and mega cap growth stocks traded much better than smaller stocks and those with on the Value side of things. Tuesday and Wednesday saw similar gains in the S&P 500 but market divergence increased as the small caps and the equal-weight indexes traded down. Today we’re seeing much more balanced strength. Actually, it’s tilted more to the rest of the equity universe. The S&P 500 is up about 1% but the small cap Russell 2000 and the equal-weight index are both outperforming.
For the week, all sectors are trading higher. Tech, and in particular AI and semi-related stocks, are leading. The big story was Oracle’s blowout bookings and backlog number announced during its earnings call. That sent the stock up over 30% this week. Broadcom continued to follow-through on last week’s strength, and Microsoft’s deal multi-billion dollar deal for compute infrastructure only added to the AI narrative, and helped related names in areas like electricity. On the other hand, Apple’s product event was met with disappointment by investors and the stock has sold off. Energy is also a leading sector this week, with much of its strength coming from geopolitical headlines. Some of the more speculative sections of the market have seen particular strength this week, such as digital asset treasury companies.
As we record this, the S&P 500 is up just under 1% today and up about 1.5% for the week. The equal-weight index and the small cap Russell 2000 are also up on the week but trailing by about 1%, with most of their strength coming today.
Economic data this week focused on both sides of the Fed’s dual-mandate: maximum employment and stable prices. The annual revision to the BLS’ payroll data benchmark was a widely anticipated event, given all the turmoil around labor data and its impact on monetary policy. Street estimates called for a downward revision of between 500 thousand to 1 million jobs. It came in at the high-end, 911 thousand. This number will continue to be revised over the next few months, but it clearly highlights that the labor market is not as strong as once thought.
On top of the BLS revision, today’s jobless claims data also showed a weakening labor market. Claims were a lot higher than expected at 263 thousand- 30 thousand above both last week’s number and the consensus estimate. It was the largest number in four years. The ongoing labor narrative has been companies are not laying-off workers but also not hiring. If this changes, it would trigger significant shifts in equity and rates regimes.
Moving to the inflation side of the mandate, we had Producer and Consumer Price Index updates this week and they gave off mixed signals. PPI came in noticeably cool, with the headline index falling 0.1% month-over-month after rising 0.7% last month. It was also below expectations. The core reading also fell 0.1%, well below last month’s 0.6% increase and below expectations. Getting into the weeds, it was Final Demand Trade Services that was again responsible for a lot of the movement. This is essentially a measurement of wholesaler/retailer margins and has been scrutinized to see whether businesses are eating tariff costs or passing them on to consumers. Last month it was up 1%. This time it fell 1.7%, producing a hazy picture of price trends.
Today we got the CPI and it was more or less inline with expectations. However it continues to show that inflation is running well above the Fed’s target rate of 2%, in particular if you look at the core measure, which excludes food and energy prices. That was up 3.1% year over year. Services inflation drove much of the increase, in particular shelter but goods inflation is present as well.
So how did yields react this week? The 2yr is actually around unchanged as it moved around a lot with all the data. However the longer-end of the curve has moved lower, with the 10 and 30 year down 7-10bp. This is in lock step with global long-term yields. The Dollar has slid as well but continues to trade in a range versus the Euro and Yen.
Over in commodities, the big story was the huge $50 billion merger between Anglo American and Teck Resources, creating a giant copper miner and kicking off discussions about more miner consolidation. Brent crude is up modestly this week and continues to trade around $67. OPEC announced a production increase, but it was smaller than prior increases. There’s also been news about the EU working on potential new sanctions on Russia. While these are positive price drivers, the EIA’s monthly oil report outlined rising inventories and supply growth, keeping prices capped.
Looking ahead to next week, the main event will be the Federal Reserve’s interest rate decision and Chair Powell’s follow-up press conference. A 25bp cut is essentially fully priced in with only slight odds for a 50bp cut. The updated economic projections from the committee will be heavily dissected, as will Powell’s commentary during his press conference. Staying with the Fed, Stephen Miran’s confirmation as new Fed governor could happen by Monday, so there’s a possibility he gets to join the meeting. The rest of the economic calendar will be pretty light, with Retail sales a headliner. FedEx will report earnings, which always provides a broad look at business conditions.
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Before we go, this isn’t just another Thursday. It’s the 24th anniversary of 9.11, a day that changed everything for so many, including most of the people in this building. Our thoughts are with those who lost loved ones, and we’re eternally grateful for the first responders and service members who run straight into danger so we can be brought to safety. Thank you, and Never Forget.
