Image Source: PexelsBad news was absorbed – essentially as good news; given labor market not falling off a cliff; but Consumer Confidence shrinking considerably. That’s just impetus for the Fed to make the 50 basis point rate cut the start of an easing cycle, not a ‘one and done’ more; and this action is inline with our forecasts.Even a (meritless?) DoJ lawsuit against VISA failed to ruffle big-cap feathers, so S&P managed to cull-out yet another record, in an up-down-grind higher (a pattern suggested in my morning ‘tweet/post’ on ‘X’) continuing the reluctant surge even higher, expected this week; although on a bit of a short leash.
The short leash recognizes that Oil advancing (also expected) relates more to China than the Middle East, as Beijing pulled-out a lot of stops to stimulate so many of their economic sectors, that it probably enhances optimism slightly (it matters for Oil demand or of course many other local factors to their market).In the Middle East, there’s a delicate chess match underway. Notably, reports of Hezbollah asking Tehran for intervention (specifically asking them to attack Israel) were apparently deflected by the explanation that Iran’s President is in New York for the UN gathering; so not an appropriate time. That new leader is believed not ‘as radical’ as his predecessor or peers, so we’ll see. Obviously it matters. ‘If’ Iran is only days or weeks away from a nuclear bomb, then it sure matters if they contemplate waiting for that, versus inaction now; versus what is probably wistful thinking.. that they’d really don’t want to engage Israel.While Israel is stronger than their enemies in several ways; they’re tired too of course. However, whether planned or not it’s brave militarily and politically just tightrope walking (for Netanyahu).. which might work well if Hezbollah stands down. The IDF has fortunately taken out large portions of the armamentarium of rockets and missiles with the ferocious pinpoint airstrikes; while also largely decapitating (figuratively speaking) the leadership structure of the terrorists.
If nothing else this should allow a long period of time for ensuing stabilization; at the same time that would require Iran remaining quiescent. Quite an if we’d say. If Iran does ignore the pleas of their wounded terrorist militias, there may be a window for something different as far as a ‘process’; but it’s narrow and if Iran moves heavily, you would see Lebanon suffer; and maybe Tehran as well plus the wild card.A ‘wild card’ would be dragging the United States into this, in which case while eliminating Iran’s brewing nuclear capability, take out the Houthi rebels as well, which is probably something that would also please Saudi Arabia. For sure we don’t care so much about pleasing the Saudi’s, but they care and with an eye on realigned regional security interests, there’s unfinished business. In addition, there are thousands of Lebanese-Americans in Beirut that may need to be evacuated, and that would be a task of U.S. Marines in the Med. In the meantime shame on Turkey’s Erdogan for his support of wrong causes again.
Market X-ray: the focus is on ‘National Security’ now; whether Middle East or even European (Russo / Ukraine war) concerns; plus again Chinese chips or software embedded in devices (including drones) being flown or operated in the United States. This is not only about the initiatives to make more here; but also to prevent these devices being ‘Trojan horses’ for Chinese espionage. It’s a shade of the Huawei issue, and even some in Europe are cognizant of this.S&P is really more of the same … grinding in record territory but not much and also not reflecting interest in fairly-valued or under-valued stocks, yet. Over a period of time this should evolve, but this is an odd time of year to expect that.Meanwhile, the UK is moving about 700 troops to Cyprus to support their RAF and RN operations; purportedly if they need to evacuate Brits from Lebanon. I noted two of their aircraft carriers in-port in Portsmouth so no urgency there it seemed. Of course, they might have been prepared to depart by now.. mostly it’s Iran’s unwillingness (and or inability) to aid their terrorists, that’s notable.Economic data reflects the bifurcated consumer; as much as bifurcated stock segments; perhaps even more so. However, the data basically ensures a Fed remaining on the ‘easier’ side for now; and that’s holding up the S&P; even at the same time as it makes the pricing level for big-cap stocks even more of an extended valuation than before (to wit; if earnings should slow).Today you saw a taste of that with the Housing sector; despite higher prices, and of course, allowing for mortgage rates that have more recently resumed a retreat that began a year ago. Too many creative (like tiny houses for rent and other gimmicks) or make-work ideas (for construction crews) reflect an unreal disparity between what home prices are at, and what younger buyers (more so than older of course) can afford. And yes, some younger buyers now see 200k a year as a baseline income (vs. 100k for my generation); but they are a small percentage of the overall potential clientele, which are probably lucky to make 100k between two-income households (or just a bit more than that sure seems to be the ‘average’).Certainly those of my era with paid-for homes or younger with 2-3% mortgages from a few years ago; are unlikely to move. (I don’t know if KB Homes results are representative of the industry; since the overall home deliveries are up; but the CEO talked of softer demand now on the upswing. We don’t follow the shares.)
Meanwhile . . . minor developments. BigBear.ai is one of two companies with a new US Air Force contract related to training Air Force cadets.. not huge but sort of affirming some of their relationships with the Defense Dept.Little LightPath Technologies got a 3.5 million dollar follow-on contract (with Lockheed) for optics related to the F35 fighter program. This merely means that Lockheed continues to use certain (lenses I presume) for the F35 and of course, it’s important to keep continuing contracts. This is ‘not’ the much noted and awaited new missile contract, which the CEO is eager to participate in as a subcontractor. (Lockheed has to win the DoD award over Raytheon first.)After the Close, there were more filings by insiders at SoundHound; a couple of which were telegraphed as ‘intent’ yesterday; and mostly 10b5’s or sales of stock as prior options were executed. None of this is having much effect, but it does restrain SOUN as it tries to work towards a consecutive close over 5.
Bottom-line: not much tension on the tape; just S&P grinding higher. Not so much else happening either; aside building to a crescendo of some sort in the Middle East; possibly just after the UN General Assembly meets end. Higher Oil is indicative of that; this time more so than Gulf of Mexico Oil platforms in evacuation mode (Hurricane Helene is to the East of the production fields).
More By This Author:Market Briefing For Tuesday, Sept 24Market Briefing For Monday, Sept 23Market Briefing For Thursday, Sept 19
