Category: Newsletter

In last week's Bull Bear Report, I warned that a "Meta-style reaction" to this week's mega-cap earnings could push the S&P 500 below its 100-day average and back toward the September lows. Alphabet delivered that reaction on Thursday. Intel finished the job on Friday. The S&P 500 fell 1.8% on Friday to close at 7,580, its lowest close since September 16, and ended the week down 0.6%. On Friday alone, the Nasdaq Composite dropped 2.9%, and the Dow lost 1.1%.

In last week's Bull Bear Report, I warned that a "Meta-style reaction" to this week's mega-cap earnings could push the S&P 500 below its 100-day average and back toward the September lows. Alphabet delivered that reaction on Thursday. Intel finished the job on Friday. The S&P 500 fell 1.8% on Friday to close at 7,580, its lowest close since September 16, and ended the week down 0.6%. On Friday alone, the Nasdaq Composite dropped 2.9%, and the Dow lost 1.1%.

The headline reason for this week’s tech rout was Meta. The company beat earnings estimates, then reported its first cash outflow in more than a decade as AI spending outpaced cash inflows. It also announced a two-for-one split and will issue non-voting shares to help fund the buildout. The stock fell 7% on Thursday, and the Philadelphia semiconductor index dropped 6.7%. The Nasdaq Composite had its worst day since early June. Friday added oil to the pile, with Brent settling at $116.72, a six-month high. The S&P 500 finished the week at 7,623.68, down 0.4% and its second straight weekly loss. The Dow, oddly enough, gained about 1.4%.

The market sold off hard to finish the week. The S&P 500 fell 1.09% on Friday to 7,659.44, closing the week down 1.95%, its worst week since June. The Nasdaq Composite fared worse, dropping 2.15% Friday and 4.48% for the week. Meanwhile, the Dow eked out a 0.67% weekly gain, and the Russell 2000 lost 3.05%. That split tells you most of what you need to know about what happened: there was a continued rotation from growth and risk to value and safety.

The S&P 500 gained 1.1% this week to close Friday at 7,811.51, just shy of Tuesday's record close of 7,818.93. The Dow added 0.9%, and the Nasdaq Composite rose 0.6%, while small caps slipped nearly 1%. Last week's Q4 outlook noted that Treasuries now offer a return that stocks haven't matched since 2002. This week, the 10-year yield pushed to its highest level since 2002 on Wednesday, then eased to about 5.25% after strong demand at the 10-year auction. Brent crude held above $100 after President Trump said the U.S. would not strike Iran before the midterm elections.

The bond market ran the show this week. On Thursday, the 10-year Treasury yield touched 5.34%, its highest level since April 2002. It eased back to roughly 5.28% by Friday. The 30-year yield pushed toward 5.67%. Stocks absorbed the shock better than you might expect. The S&P 500 slipped 0.3% to 7,722.72. Meanwhile, the Nasdaq-100 gained 0.7% as Nvidia set a record, topping $5.7 trillion in market value. The Dow lagged, with banks and other rate-sensitive names taking the brunt.

The S&P 500 gained 1.2% this week to close at 7,744.64. That leaves the index up 13.1% for the year and just 0.7% shy of its August 13 record close of 7,798.99. While that is a bullish headline, the real story was in the bond market.

Unsurprisingly, this past week's market action belonged to the Federal Reserve. On Wednesday, the FOMC delivered its first rate hike since 2023, lifting the funds rate to 3.75%-4.00%. While the hike was widely expected, the 12-0 vote and the lack of rate cuts scheduled in 2027 shocked the markets. Furthermore, Kevin Warsh made clear that more hikes could follow.

September, so far, is living up to its reputation. The market slipped to the 50-day moving average, with the tape taking orders from crude oil. For the week, crude rose about 9% over four sessions, which pulled the 10-year Treasury yield higher right along with it, closing just under 5%. The corners of the market that hate higher rates slid while the S&P 500 dipped 0.68% to close the week at 7,666. However, that rather lackluster headline conveniently hides the real story beneath it.