The S&P 500 touched an eight-day high as earlier gains reversed. The index is up 0.2% after earlier falling to 6808. Last was at 6844.
Tech remains a drag with the Nasdaq down 0.3% while the Dow Jones Industrial Average touched a record high. The US bond market is closed today but futures how yields would be down 3-4 bps, which is probably a result of the soft weekly ADP employment report. More weak jobs news could nudge the Fed closer to cutting rates again in December.
Notable gainers:
- FDX +5.3%
- DVN +4.7%
- MRNA +4.4%
- NKE +4.4%
Energy in general is strong today
Notable drags:
- ENPH -5.5%
- HPE -4.0%
- MU -3.9%
- VST -3.6%
- NVDA -2.8%
- ORCL -2.6%
Chipmakers are struggling in part due to SoftBank’s complete exit from its NVDA stake.
Here is an except from a Wells Fargo note pushing back on the bears:
“1. Liquidity is tight: It was, led by a big TGA [Treasury General Account] refill absorbed by the market. But SOFR [secured overnight finance rate] is largely back to normal, the TGA is at the highest since COVID, and QT is ending. Liquidity conditions should get better. 2. Weak consumer + layoffs: Yet, a Dec cut is only 63 per cent priced in. We expect a cut and a risk-on rally. 3. 10-per-cent-plus sell-off over 1-2 years: That’s the norm. 10-per-cent-or-more corrections occur 0.8 times a year on average 4. Hyperscalers are overspending: We also worry that hyperscalers’ capex is ‘a must’ to stay competitive, which will prolong the capex cycle (and pressure FCF ). But shouldn’t that be great news for AI infra stocks? ASOX [AI semiconductor index] was down as much as 7 per cent from its peak. Buy the dip in AI capex takers – we prefer Power and SMID AI capex beneficiaries. 5. Valuation is too high: Fair, but valuation is only half the equation – the other half is EPS surprise. If EPS grows at 10 per cent per year over the next 5 years (we forecast 10 per cent or more per year in 2025-27E), then SPX should generate 8-per-cent-per-yearr total return for the next 5 years according to our valuation model, or 9500 by year-end 2030″
This article was written by Adam Button at investinglive.com.