The Magnificent 7 Are Pulling Down The Rest Of The Market

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In his Daily Market Notes report to investors, Louis Navellier wrote:

Stocks are not bouncing back from yesterday’s late pullback. The focus is still on interest rate moves, while higher energy prices put a cloud over inflation trends.

Stocks tried to push into the green, while interest rates were modestly lower, after opening slightly in the red, but then interest rates popped and stocks reacted quickly to the downside. The US 10yr closed yesterday at 4.27% and drifted down to 4.24%, but after some new economic news jumped up above 4.30%, bringing back fears of mid-August market lows. The 2yr poked its nose back above 5% too.

Falling Apple

Of note is that Apple (NASDAQ:AAPL), the 800-lb gorilla, is down $6 today, which is a bit of a surprise given that next week they have their annual “Event” to roll out their newest iPhone and other products, and typically rallies into the news. With Tesla (NASDAQ:TSLA) down 4% and NVIDIA (NASDAQ:NVDA) down over 3%, the Magnificent 7 is pulling down the rest of the market.

The economic news that seemed to move interest rates, didn’t appear that profound. The S&P Global Service PMI for August came in slightly below forecast and has been drifting lower since June, the Composite Purchasing Manager was the same, as was the PMI data.

The ISM Non-Manufacturing prices did move noticeably higher, the second month in a row and the highest since April, the PMI was also higher, the highest since April, with new orders the highest since February. Evidently, it was enough to move the bond market, increasing the odds of another Fed increase before year-end. More importantly, it has driven the US dollar Index, touching 105, the highest since March, before pulling back modestly.

Sticky Inflation

In the bigger picture, today’s economic data appears to confirm the theory for some investors that inflation is “sticky”, helped along with higher energy prices, and brings doubts about how long the Fed will hold rates above inflation to achieve a steady state at or near 2% inflation. Extending higher rates exposes more maturing debt to rolling over at significantly higher rates, along with very much slowing housing market transactions, a traditional engine of economic activity.

Reprieve on the 20th?

September is earning its reputation of seasonal weakness early on in this abbreviated week. We may get a reprieve on the 20th when the Fed does nothing as expected, especially if the reason they keep another increase on the table is because the economy is doing so well. 

Coffee Beans: Error 404

A supermarket chain issued a recall for Paw Patrol snacks sold at British stores after it was discovered that a website URL on the packaging leads to explicit content. The website previously led to the homepage of Appy Kids Co., a subsidiary of Appy Food & Drinks, which dissolved in June 2022. Source: UPI. See the full story here.