By Areena Fx- September has been the stunner of the year – stocks look like they will close at a new record. Lot’s of ‘window dressing’ happening.
- Earnings start in 2 weeks. Pre-announcements anyone?
- Beth Hammack cautious on any specific rate cut narrative.
- Lots of Eco data this week.
- Try the Roasted Pork Loin with Peaches and Honey.
So far, markets have turned history on its head…..September should have been a down month – or at least history suggested it be that way – but that was not the case in 2025 – September has been nothing short of amazing….stocks are kissing all-time highs….
At the end of the day on Friday – the Dow added 300 pts or 0.7%, the S&P up 39 pts or 0.6%, the Nasdaq was up 100 pts or 0.45%, the Russell ahead by 23 pts or 1%, the Transports added 65 pts or 0.4%, the Equal Weight S&P up 78 pts or 1% while the Mag 7 added 260 pts or 0.8%. (Note the divergence in the S&P and the Equal Weight S&P)
Month to date – The Dow up 2.37%, The S&P is up 3.63%, the Nasdaq is up 5.25%, The Russell is up 3.5%, the Transports are down 1.05%, The Equal Weight S&P is up 1.2% while the Mag is up 9.6%.! (Again, note the impact of the tech sector on the S&P vs. the Equal Weight S&P).
Analysts, strategists and asset managers are all betting that it is only going to get better from here – the S&P is expected to tease 7000 – up another 5.3% from here – but (hopefully) not before we get that ‘pullback’ that I and a lot of others have been discussing for 2 months now.
The 3rd qtr. is coming to an end – we have today and tomorrow – what could possibly happen? Are we going to get the pullback? Doubtful…. But Wednesday is the start of the 4th qtr., and with that – the ‘slate’ gets wiped clean (in a sense) and so I am in the camp that the pullback we have been discussing will be an October phenomenon. Look – on Tuesday evening – the ‘marking period’ is over, performance is locked in, and investors get their qtr. end statements, but Wednesday is a different story…..and it is also the start of the 3rd qtr. earnings season.
Now, earnings are expected to increase by about 7.9% on revenue growth of 6%. Here’s what it looks like –
Outperformers expected to be Tech, Utilities, Materials, Financials.
Underperformers/weak sectors: Energy (due to commodity headwinds), Consumer Staples, Health Care (nearly flat).
The clear and present danger is that with expectations running high — especially in Tech — there’s a real vulnerability to downside surprises if margins get squeezed or demand starts to fade. We’ll get a much better sense of what’s coming over the next couple of weeks as analysts start to tweak their numbers — or as companies that know they’re going to miss decide to come clean ahead of the official earnings announcement.
According to FactSet, the current 7.9% earnings-growth expectation for the S&P 500 has already been nudged higher from 7.3% earlier in the quarter — a sign that analysts have been lifting estimates. That’s bullish. (Should it become clear that earnings are NOT going to meet these expectations then watch the reaction). Most of those upward tweaks have come in Tech, Financials, and Communication Services — which tells you where the Street’s optimism is concentrated.
Now, about the pre-announcements — the intent is pretty clear. A pre-announcement (often called negative guidance or an earnings warning) is when a public company issues an unscheduled press release — or files an 8-K — before its official earnings date to tell the market that upcoming results will differ materially from consensus expectations.
While it can cut either way, let’s be honest — when a company pre-announces, it’s usually not good news. Management would rather get the bad news out early and take the hit up front. They’re perfectly happy to “surprise to the upside” on earnings day and let the stock run.
Most pre-announcements show up before the end of the quarter, but they can also hit the tape as late as a week before the official report. So, stay tuned — because we are in the ‘confessional window period’ and any reversal of fortune can and will hurt sentiment.
Next up – We have the potential gov’t shutdown tomorrow (which is a non-event for stocks – no matter what they tell you, but gold is another story.) and we have chatter from Cleveland FED’s Beth Hammack, who reiterated — really, warned — that we’re in a “challenging time amid inflation worries.” (Remember, she was one of the Fed members who pushed back against an aggressive rate-cut schedule.)
She said the Fed faces real challenges as it tries to fight “stubborn” inflation in the face of a (supposed) weakening labor market. I think it’s key that she chose the word stubborn to describe inflation — that, to me, screams concern.
Stubborn suggests that inflation just isn’t budging despite repeated efforts and expectations that it should be coming down. It carries a tone of frustration — as if the usual tools aren’t working and the problem is digging in its heels.
On top of this – the team at our friends at Goldman are going all in on stocks thru year end…. They are now ‘overweight saying that ‘this asset class typically performed well in a late cycle economic slowdown when policy support was strong’. I didn’t know we where in a late cycle economic slowdown – all of the data tells us otherwise, no? And isn’t the argument that ‘policy is restrictive’ true any longer? In the end – they are telling us to ‘buy any dip’ in stocks…. OK – so has everyone else on the street, so now what?
It is a big week of economic data…..Today is Pending Home Sales, which are expected to be flat m/m. Tomorrow will be the August JOLTS Job Openings data and the Conference Board Consumer Confidence.
Wednesday is the latest ADP report that is expected to show 52k new jobs created. We are also going to get the S&P Manufacturing PMI of 52 (expansionary), ISM Manufacturing PMI of 49 (contractionary) and Construction Spending m/m of -0.1%.
Thursday brings us Factory Orders of +1.4% and the Final Durable Goods Orders at +2.9%.
Friday is the big one…It is the monthly NFP report…and that too is expected to only show 50k new jobs created. Unemployment remains at near historic lows at 4.3% while the Underemployment rate hovers around 8%. Avg Hourly earnings m/m of +0.3% and y/y of +3.7% – in line with last month.
This morning bonds are up – the TLT is up 0.7% while the TLH is flat in overnight trading and that is sending 10 yr yields down 3 bps to 4.14% and 30 yr yields down 3 bps to 4.71%. Current 30 yr mortgage rates remain around 6.3%.
Oil is down $1.20 at $64.52 after chatter about a potential November OPEC+ production hike — the narrative being that supply will outstrip demand next year, creating a “supply glut.”
I’m not buying that. A glut implies supply is going to far exceed demand, and I’m not convinced that’s the case. Remember, just last week the talk was all about an OPEC+ production cut because China demand was weak – something I called out as BS….which we now know is true – China has been buying oil from Iran (on the side) – so stop with the histrionics. Demand is fine. Technically, crude is still above all three key trendlines, with $64.35 acting as near-term support.
Speaking of energy – Have you been watching what nuclear names are doing this year? SMR +112%, CCO +65%, LTBR + 352%, BWXT +62% and NLR (Van Eck Uranium and Nuclear ETF) + 67%.
Gold is surging up and thru yet another new century – up $58 at $3,817 (now up 45% ytd) all this on the idea that the gov’t shutdown is coming…along with a weaker dollar. I have now stopped trying to call the top in gold, because the momo guys have taken control, and when that ends – it ends…
This morning – US futures are surging…. The Dow is up 200 pts, the S&P is up 36, while the Nasdaq is up 160 and the Russell is up 17! Not sure about you, but this is beginning to feel like a blow off top…. There is not any specific data that is fueling today’s move…I’m in the camp that it’s end of qtr. window dressing.
End-of-quarter window dressing is a classic portfolio-management move you see from mutual funds, hedge funds, and other big money managers in the last few days of a quarter.
It’s when managers buy recent winners and sell recent losers just before the quarter ends so that, when they report their holdings to clients or regulators, the portfolio looks more attractive — as if they’d been in the right names all along.
Why do they do it, you ask?
Optics: Clients and boards often see only the end-of-quarter holdings list. Managers don’t want to show a portfolio full of losers.
Marketing: Being able to say “we own the market’s leaders” can help explain performance (or soften the blow if it’s been a tough quarter).
Psychology: Managers sometimes chase performance near quarter-end to close the gap with benchmarks.
It’s all very orchestrated.
European markets are mixed…Spain and Italy lower while the UK is the leader up 0.6%.
The S&P closed at 6,643, up 39 points. After we broke down and thru 6625, it should have acted as resistance, but it did not and this morning – futures are pointing higher still. 6699 is the all-time intra-day high….and while I do not think we will breach that today – we could before the end of the qtr. tomorrow – if they (the algo’s) want to create another new high for the S&P.
I am in the camp that Friday’s PCE report has put the whole rate-cut discussion on hold. We have a tug-of-war going on between rising inflation pressure on one side and a supposedly softening labor market on the other.
Investing is exciting and frustrating at the same time. And while I think this move is overdone, I’m not complaining because I am participating and so are you. But it is about having a plan. It’s about time in the markets and not timing the markets. It’s about discipline and risk management.
Roast Pork Loin w/Peaches and Honey
This is a simple dish and presents beautifully on a platter.
For this you need: 1 3lb boneless pork loin, canned peaches, honey, fresh lemon juice, brown sugar, s&p.
Preheat the oven to 400 degrees.
Season the loin with s&p – nothing more…massage the s&p into the loin and then place the loin in a baking dish – and place in the oven – uncovered and let it roast for 30 mins….
Now – in a pan – add the canned peaches with the juice, the juice of 2 fresh lemons, 2 tblsp of honey and ½ c of brown sugar. Bring to a boil and then crush the peaches with the back of a spoon – cook for maybe 4 – 5 mins…then remove and let cool.
After 30 mins – add the peaches to the baking dish – pour the peaches over the whole loin. Return to the oven and cook for 10 more mins…. You can turn the loin if you want to – when done – remove – tent and let rest for 5 mins/ Slice and then place on a serving platter – spoon the peaches and juice over the top and serve with roasted cauliflower and a large mixed salad.