Worries Weigh on Market, But Stock Pickers Continue To Do Extremely Well
Concerns about AI spending, new tariffs and a looming government shutdown made it a difficult week.
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A difficult week ended on a positive note following favorable inflation news. PCE inflation data were in line, which helped to boost the odds that the Federal Reserve will cut interest rates by a quarter point in both October and December.
Despite some favorable economic news, market players were concerned about AI spending and profitability, new tariffs and a possible government shutdown. Weak bond action and higher interest rates also caused some concerns. With the indices and many stocks technically extended, there were some good excuses for some overdue profit-taking.
The indices declined for three consecutive days for the first time in months, but overall, the selling was pretty mild, with some high-flying growth names suffering the brunt of the damage. The Magnificent Seven (MAGS) held up well, and the Russell 2000 (IWM) rebounded 0.85% on Friday to limit the damage.
There was quite a bit of choppy and mixed action all week, but pockets of speculative interest continue to emerge. Hot themes like data centers, quantum computing and nuclear energy suffered from some aggressive profit-taking, but traders shifted into other areas, such as biotechnology and semiconductors.
The JPMorgan (JPM) trading desk stated that the "pullback may last a few more days and then it is game time — we see the S&P 500 at 7,000 in November."
That is a very bullish take, but if the market can navigate through a potential government shutdown and more tariff threats, then there will be a very attractive technical setup as we head into third-quarter earnings in October.
October traditionally marks the end of negative seasonality, but it is also the month in which the biggest crashes have occurred. Market conditions are not bad at all, and any worry and doubt about a potential correction is likely a positive.
This continues to be a market that is rewarding astute stock picking and that is likely to continue into the earnings season. I’ll be spending some time this weekend looking for new ideas.
Have a great weekend. I’ll see you on Monday.
At the time of publication, DePorre had no positions in any securities mentioned.
