Post Fed – With little inflation and high unemployment, the Fed was not expected to do much to change their stance, especially after Chairman Powell unveiled the new inflation criteria in Jackson Hole last month.  The Fed did not change rates, and actually moved their expectations for low rates through 2023, when they see inflation moving towards 2%.  That extra year (rate low through 2022 was the original view), showed that Powell intends to help heal the economy with low rates, even if that may push certain assets higher.  Also in its statement, the Fed will continue with their asset purchases.  Pre-Fed, the S&P 500 was trading around 3404, Nasdaq -57bps, and Treasury yields at 0.67%, but after the more dovish stance, Tech has traded up from its lows, and this has helped Nasdaq off its lows (now down 10bps), and the 10-year is yielding 0.70% (day’s high).  This can all change of course in the last hour!

After Merger Monday Comes… Tech Tuesday? Ok not the cleverest bit of alliteration but the usual gang of Tech, Media, Semis & co are leading the charge once again, though Apple (AAPL +1.4%) is off its highs as its September product event has yielded few surprises. It should be noted the optimism continues to spill over into to pretty much every sector too (besides Banks/Financials), including reopening/recovery spaces (XLB new all-time high, TRAN index nearly the same, SML back above the 50-DMA). Many labeled the early September Tech wreck as an inevitable removal of froth, and the somewhat broader rally of the last 2 sessions provides some hope that the market isn’t simply “re-frothing”, but still a look at FANG concentration shows that the short-term plunge was barely a blip on the longer-term radar. There’s a long way to go before it can be said that investors are spreading the love…

Monday to Funday in 3 Seconds Flat…This week wasted absolutely no time in getting after it. Aside from the fact that the Fed, the ECB and BoE will all make announcements later this week, and there will be a slew of meaningful economic data throughout, there is also quad witching on Friday. Thus, this week was already geared up for some hype before this morning came in extra hot with 2020’s busiest weekend of deals worth upwards of $69bn. The biggest headliners: Oracle (+4.3%) beating out Microsoft (+1%) for the US operations of TikTok,  Immunomedics (+100%) doubling after Gilead (+2.6%) agreed to by the cancer drug maker for $21bn and Nvidia (+4.5%) buying Softbank’s Arm in a $40bn chip deal. Further, UBS is apparently studying the feasibility of a Credit Suisse tie-up. No doubt much focus will be on these deals and all of the aforementioned data, as well as the “skinny stim” plan and how slim it’s actually going to get. But for now, the path of least resistance is still up. One caveat: volumes are average at best – S&P 10-day AVAT -15% today thus far.

In Like A Lion, Out like A Lion…This morning it seemed as though all of the action for the week had already taken place. Never count your chickens or your options. Today’s volatility has continued this week’s trend as megacap tech has now led markets lower for the sixth day out of the last seven. The S&P tech sector is currently subtracting 9 points from the index (without them it would be green) and the Nasdaq is about to close out its worst day since March. All of the maj favorites are down over 1% with Apple and Amazon down another 2% today. Ironically, things ended where they began —with Softbank. Softbank reported mid-morning that it might change its options strategy (now that the world knows it). $9bn in losses could do that to a fund. In the meantime, the dollar has seen a small recovery on the day after inflation data and materials and industrials aren’t feeling a thing. This week began with a bang and is now finishing with a whimper as we all go off to lick some wounds. Our charts team notes however, that the 50-dma are holding– for now. (let us know if you want to see their piece).

Buy the Dip Just a Blip?… US stocks got off to a strong start in trying to add to yesterday’s big bounce but since then it’s been a bumpier ride. The usual suspects FAAMG / Tech / Semis were hot once again out of the gate but have stumbled as investors are struggling to forget the recent correction. Indices are have spent the afternoon in the red but are hovering near the lows of the day; the DXY rising back near positive territory on the day as the Brexit worries crush the GBP hasn’t helped their cause. Still there are bright spots, including Casinos names (LVS +4.2%, PENN +12%) which are benefitting from broker upgrades and Apparel names, with Nike (NKE +0.8%) making fresh all-time price and relative highs. Autos, which fared relatively well through the Tech plunge, and Energy are the laggards (crude lower once again following surprise US inventory builds). It seems investor confidence in buy-the-dip strategy is only so strong at the moment. Comparisons to Tech bubble of 1999 are all the rage these days, so interesting to note just how many dramatic 10% drops the that S&P Information Tech sector experienced that year before the bubble popped…

JOLTED – After dropping for three days, US equity indexes were hovering at or just above their 50 day moving averages.  But a job opening reading from JOLTS showed that the datapoint rose to 6.628mn in July, better than the 6mn expected, and above June’s 6.001mn.  The S&P 500 gapped higher on the print, and is back above 3400.  Instead of buying the re-opening stocks though, investors are focusing on the YTD winners (see below).  Granted the JOLTS data is from July, so tomorrow’s weekly claims number will be a better gauge to job/ jobless growth.

No S&P For You! – The cult-like following (see below) of Tesla and its fearless leader had the car-maker mimicking a rocket shop with the unrelenting ascent of the company’s stock price. Out of the money calls (we’ll get to that), stock splits, a possible inclusion in the US benchmark index; all contributed to a stock gone wild. Fret not however, a 20% retreat this month alone still has it +317% YTD. With summer over, investors are skimming some of the market froth and again it’s mega-cap tech leading the way lower. Technically speaking there hasn’t’ been any significant damage to the FAAMG crew and if you’re using 2009 as a proxy, these last few days are a mere flesh wound. In fact, we’ve had numerous funds come into us expressing a sentiment of when, not if they’ll get back in. Not the case for value stocks as they give growth a run for their money, energy nearing a new all-time relative LOW vs SPX while banks are 2nd worst on the day.  

Aftershock… Nothing like a gut check before a long weekend. Markets appeared to have steadied after yesterday’s Tech-led turbulence was explained away as end of summer profit taking / a clearing out of “frothiness,” and all 3 major indices opened in the green following a headline beat on August non-farm payrolls (more on that below). But a wake-up call as violent as yesterday’s isn’t easy to shrug off, and a similar “sell the winners” stampede has dragged stocks lower through the morning. Equities have attempted to steady themselves after the Nasdaq bounced off its 50-DMA and are off their lows heading into the afternoon, with cyclical/value sectors like Banks, Autos, and Cap Goods all in the green once again. Still it’s ugly out there once-sizzling Media/Software/Tech crew, which will keep a lid on any attempted S&P turnaround unless sentiment really shifts into the close. The word perspective is being thrown around to remind that despite the optically horrific charts, it’s too early to call this a true trend reversal (sorry Value), but still the weekend can’t come quickly enough….

Dual Reality Existence Paused….For the past few months, it has felt like Americans were living 2 separate lives. There is the America that has been damaged by a virus, with unemployment and poverty afflicting millions. On the other hand, there is the America that seems to have a boatload of cash, with nascent investors pouring millions into the blue chip companies dictating the digital age. Apple (-6.7%) and its FANG frenemies have been carrying the stock market on their backs. Enter straw. Not saying anything is broken, but today’s NDX move -4.4% thus far led by the aforementioned “cool crowd,” is the pullback logic and stretched valuations have been awaiting. It all makes sense in hindsight of course, as per the below NDX RSI chart and the deviation from the 200-dma. This is the most overbought the Nasdaq has been in some time. The fact of the matter is there is always a pullback at some point, but a pullback doth not mean the end.

Full Speed Ahead… What looked to be another runway ahead day for Tech/momentum has become a bit more muddled, though indices aren’t complaining with the S&P, Dow, and Nasdaq all continuing to push higher into the afternoon. YTD laggards Utilities and Autos are at the top of the sector chart, with the latter rising mid-morning after Autodata showed industry sales topped 15M vehicles in August. Semis are also separating themselves, led by Nvidia (NVDA +4.0%) receiving more applause for their gaming chip rollout, and strong set of earnings from Jack-Daniels maker Brown-Forman (BF/B +11%) has Food/Bev riding high. Tech is the big underperformer thanks to Apple (AAPL -2.3%) taking a breather (otherwise all S&P Tech names green), and Energy is negative as Crude sinks following data showing weaker gasoline demand. The risk-on tone of the session has gotten an extra boost from more positive commentary from Fauci on vaccines, as well as new reports that steroids can significantly reduce mortality rates among severely ill Covid patients. Still the exuberance has felt overdone for a while now and signs of strain are still afoot: VXN (the VIX of NDX) continues to quietly climb higher even as the NDX notches record after record…