Hi friends! 👋
Here’s what I’m looking at today.
The Market Looks Fine. Underneath, It Doesn’t.
What to Own If Rates Keep Climbing
Commodities Are Sending a Signal
The Most Bullish Chart on Software
A Mag 7 Shift?
The Most Shorted Stocks in the Market
Moves I’ve Made
Thanks for reading Spilled Coffee. Let’s get into it.
Eric
It was another solid week for stocks. The S&P 500 and Nasdaq notched their 5th positive week out of the last 6. But underneath the headline numbers, there’s quite a bit more going on.
The S&P 500 closed at 7,719, up a modest 0.1% on the week and still sitting on a 12.8% YTD gain. Nasdaq led again, up 0.4% and now up 14.1% for the year. The Dow lagged, down 0.3% on the week but still up 11.1% YTD. Small caps keep quietly outperforming. The Russell 2000 is up 19.0% YTD.
The bigger story might be commodities. Crude oil ripped 9.4% higher this week, its best week since July, and is now up a wild 57.4% YTD. The 10-year Treasury yield moved up 1.4% on the week, now at 4.78% and up 14.9% YTD. Gold barely budged, down 0.2% on the week, up 2.5% YTD. Bitcoin bounced 2.7% this week but is still down 8.8% YTD.
Market Recap
Weekly Heat Map of Stocks
Sentiment Check
The bulls are finally making a comeback. It’s the most bullish since July 15th.
The Jobs Report Was a Surprise
The economy added 162,000 jobs in August. The estimate was 53,000. That’s almost triple what economists expected, and it’s the kind of number that resets the whole conversation about where the labor market actually stands.
But the headline number isn’t even the most interesting part. Look at where those jobs came from. Leisure and hospitality alone added 62,000 jobs, the most since February 2023.
That is a pretty remarkable reversal. After months of weakness, one of the most consumer-facing parts of the economy suddenly added jobs at a pace we haven't seen in more than three years.
On the surface, this should increase the odds of an interest rate hike at the Fed’s September 16 meeting. And it has. Markets are now putting roughly a 60% probability on a hike, up from around 50% before the report.
You’ll hear plenty of talking heads over the next week say the Fed has to raise rates.
I won’t be paying much attention to that.
I think they should raise rates. I just don’t think they will.
The data is giving the Fed a pretty good reason to hike. The economy just added nearly three times as many jobs as expected, unemployment remains at 4.1%, and the labor market doesn’t look like it needs an emergency dose of lower rates.
But the Fed still has one more important piece of information to digest before September 16.
Inflation.
CPI comes out Friday.
And that’s the number I’m watching.
The Market Looks Fine. Underneath, It Doesn’t.
The index itself still looks calm. Grind higher, new highs, nothing to see. But look at what’s happening underneath that headline number and the picture gets more interesting.