To the Moon Alice! – Who knew Ralph Kramden could be so prescient! Clearly he’s referring to the skyrocketing move made by equities, namely large-cap tech as it once again breaks new ground, the Nasdaq 100 reaching an all-time intraday high in the process. A strong ISM manufacturing figure has helped propel some of the cyclical spaces higher while pharma lags in a big way; the House subpoena of Abbvie on broad industry pricing the culprit there. Wal-Mart continues to remake itself and details of its Wal-Mart+ launch. September has traditionally been a difficult month for stocks but during a year when up is down, and left is right, you going to bank on that?

Out with the old – Actually, today’s action is looking just like the 1st day of the month.  Growth (as in Mega Tech) is outperforming Value by 100bps (for SPX), and both Apple (+4.5%) and Tesla (+9.6%) are doing what they did pre-split.  Microsoft is down 1.58% after China announced over the weekend that they could block and foreign buyer of artificial intelligence.  Outside of Tech, Biotech is the best sector (IBB +1.97%) with the group seeing more M&A.  Nestle announced a takeover of Aimmune Therapeutics (AIMT +171%), paying $2.6bn in cash for them.  Energy and Banks have had a tough year, so it shouldn’t be a surprise that they are the laggards today, given the focus on Tech. 

Putting the lipstick on – It’s only one way this week for the S&P, and that is higher.  If the index can close in the green, it will be the 7th day in a row, something that has occurred only 5 times in the last 5 years.  But before the bulls can high five each other, month end is Monday, so some re-positioning could occur today.  The re-opening beneficiaries are outperforming, and that group is large (Beauty, Cruises, Airlines, and Restaurants).  And Mega Tech are currently trending towards the red.  Economic data this morning showed some improvement in Personal Income (+0.4% vs June’s -1.3%), but Spending dropped m/m (+1.9% vs June’s 6.2%), showing that the economy is still working through Covid related issues. 

•Flipping the Script – In a week that was wholly leveraged towards today’s Jackson Hole ‘conference’, even a telegraphed move by Powell and Co seemed to catch the market off guard some. The Fed is adjusting to a world where wage inflation had been persistently sluggish in response to low unemployment and inflation had persistently under shot the 2% target. Covid-19 has only served to tilt these trends in a much more deflationary direction. As a result, the Fed will allow inflation to overshoot the target – if it can – for a potentially prolonged period of time. The USD reacted like a yo-yo but currently resides where it did pre-Powell; it remains below our concern for risk level @ 94. Ultimately the lower for longer regarding rates and continuing accommodating narrative had equities holding gains, while bond traders have been more inclined to sell in the face of a future inflationary environment, TIPS specifically.

Well It WAS Looking Like a Pre-Fed Snoozefest… With futures in a holding pattern pre-market, but it should be no surprise by now to see the S&P and Nasdaq shooting towards another record close on back of the usual Software / Media / Tech workhorses. Salesforce (CRM +27%) is providing a little extra giddy-up for the space after topping off its inclusion in the Dow with a monster earnings beat, but the rest of the Big 5 are throwing their weight around as well. Retail is also in the outperformers mix, buoyed by all-time highs for Home Depot, Lowe’s and Ulta Beauty ( to name a few) as non-S&P names Dicks Sporting Goods (DKS +15%) and Urban Outfitters (URBN +19%) delivered their own impressive results. The mini-rotation to Value at the end of last week seems to be decidedly over, with Energy, Banks, and Industrials all in the red. The 10-year Treasury yield is remains elevated near June levels along with the USD, both rising in anticipation of a bit of inflation ahead as Powell is expected announce in his speech tomorrow morning that the Fed will be more tolerant of inflation above its usual 2% goal in deciding when to raise rates (again, they said they’re “not thinking about thinking about it”).

Reaching For a Record… Don’t roll that B-roll footage of smiling NYSE floor traders just yet…the S&P and Nasdaq are currently poised to notch yet another record closing high but it hasn’t been an easy trek. The optimism that reigned pre-market as investors took a trip Phase One memory lane has been leveled out, as a disappointing August Consumer Confidence data offset some of the enthusiasm born from July Retail Sales data earlier this month. Still, Housing data continues to burn red hot, though Homebuilders (ITB -1.0%) are taking a dip into their impressive ytd gains (ITB +27% ytd). Tech hasn’t been its usual self today as Apple’s pre-split surge has cooled a bit, though Media is being propelled higher after Facebook (FB +3.9%) announced it’s pushing further into the e-commerce world. Otherwise Value isn’t having its best day, apart from Banks which are enjoying the 10-year yield moving back near 0.7%

Supercanes and Asteroids…Neither of these things could move a stock market that’s too big to fail. If asset prices aren’t elevated as per status quo, the weakness is immediately met by Central Bank action, national legislature or Robinhood call buyers of Apple, Amazon, Google, Facebook etc. This morning looked as though we would see a bit of a rotation actually, as Apple turned negative, along with The Nasdaq. However, plasma treatment optimism allowed everybody from Apple and The Nasdaq to The Dow bounce off their lows and hold levels well into the green. Everybody except for Tesla (-1.4%), whose stock is splitting this week, but whose shares are up about 50% since the announcement on August 11th. While the corona treatment optimism has boosted this week’s beginning, the highlight will be the virtual “Jackson Hole” gathering on Thursday and Friday, where the theme this year is “Navigating the Decade Ahead: Implications for Monetary Policy.” Inflation strategy is the name of the game. Also, this week, 2 major storms – Marco and Laura are forming a “supercane” around the Gulf Coast, which, in a year like 2020, could be pivotal.

Helpful Halitosis… Going on a date? Bad breath is a problem… But hoping for new all-time highs on the major US indices? Bad brea(d)th isn’t gonna hold you back. Despite another morning of soggy sentiment pre-market, indices are in the green thanks to who else but Tech / Semis dragging them higher, as the majority of S&P stocks sit in the red (Invesco S&P Equal Weight ETF RSP -0.3%). Pre-opening futures suggested we were in for a jittery Friday, however strong US PMI’s and a sizzling Home Sales number reassured that at least the US economic recovery remains on track. Still, the data allowed the USD has held onto to its gain gains earned (DXY still below resistance at 94) amid some repositioning in the crowded short $ trade, which has weighed on Gold and Oil. It seems nearly every market conversation these days revolves around the question “How much longer can this go on?” and we clearly have not found that answer just yet…

Can’t fight the Fed Tech – The Fed is backing the broader financial system with their balance sheet, and investors are backing the broader market via the tech sector.  Even with the underperformance of tech in Asia last night (TSM was down 6% locally at one point, Samsung -4%), US tech companies are shrugging off any 5G China slowdown concerns (Nikkei article here).  Mega tech was indicated higher pre-open and have not let up since.  Reits actually are the best performers as US Treasury yields move lower (10-yr at 0.64%).  Energy is following Crude (-0.79%) lower, and the sector (XOP) is down 2.6%.  Oil has been relatively stable, but any test of $40 could test the broader S&P strength since the commodity can be seen as an economic demand indicator. 

Another Day, Another Milestone… A day after the S&P finally notched its inevitable new all-time high, US equities are back at again today, with (surprise, surprise) Tech and Media near the top of the leaderboard as Apple (AAPL +0.9%) secures its own landmark achievement by temporarily surpassing the $2T market cap line (in honor the occasion, the chart below presents the latest Apple “stat of the day”).  Retail earnings are once again in focus, with Target (TGT +12%) and Lowe’s (LOW +0.5%) each putting up their own blowout numbers but actually holding onto their trading gains unlike Walmart and Home Depot yesterday. On the other end of the Retail spectrum, a less glamorous showing from TJX (-4.7%) is dragging on fellow apparel/provider Ross Stores (ROST -3.7%) ahead of its numbers tomorrow. Semis are treading water with Nvidia set to report after the close, while Energy sits in the red with Crude coming off following disappointing inventory data. Copper is higher, breaking through resistance at 300.