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We have called the market stalled, but if so… more stall please? Some measures of upside momentum have turned flat, but it’s hard to call this market stalled with 750 NASDAQ new highs last week and NYSE stocks above their 200-day moving average moving from the mid-50s to the mid-60s. Maybe the worry is that we all know and therefore expect September to be not so wonderful. Or maybe it’s the focus on Nvidia (NVDA – 176) and Palantir (PLTR – 177) which have been stalled for a month, forgetting that stocks like Broadcom (AVGO – 345) and Oracle (ORCL – 297) have done quite well over this time. It’s not just the Market averages that are dancing around their highs, the average stock has done so as well — most days most stocks go up. Meanwhile, there has been ample reason for that not to be so, but a poor news background is yet to intrude. If it’s the Market that makes the news, there’s still much to like about this Market.
It is interesting that Nvidia is a bit under the weather, while the AI trade itself seems revived. The “AI trade” in this case is not easily defined, and these days we might just say it somehow includes anything acting well. It extends it would seem from Nvidia itself to something as mundane and distant as Utility stocks. And when it comes to power, Utilities are just part of that story. There are the builders here like OKLO (105), and then comes the sources of their power, Uranium Miners like Cameco (CCJ – 83). Add a little Comfort Systems (FIX – 800), and you’re almost there. Nvidia itself may be stalled for now, but the AI consortium is doing quite well. And that is not a small world.
When it comes to the stock market, bad news is good news when there is what you might call a second derivative or silver lining. Bad news on the economy, for example, can be good news when it raises the probability of lower rates. Of course, sometimes there is no silver lining, as would seem the case when it comes to political violence or attacks on Qatar and Poland. This is bad news that was bad news, yet the market did not respond negatively. We know markets make the news and good markets will ignore bad news, but only to a point. And that point is provided liquidity still is out there. Markets thrive on liquidity, not just good news. Rather than look at all the money in 401(k)s or money going into ETFs, when most days most stocks go up, advancing versus declining issues, there’s still money out there.
CNBC‘s Mike Santoli once observed Tesla (TSLA – 417) is a stock that “doesn’t show you its work.” We could not agree more. What drives the stock, car sales, robo news, whatever, it is always a bit of a mystery. But whether one thing or another, it always seems to get it done. Late last week the stock broke out from a significant base, aided by the news Musk has bought stock with some money he found in his couch. You can look here at a daily, weekly, or even a monthly chart, they are all impressive. Meanwhile, what is it they say about one man’s gain and another man’s pain? China may have turned a bit on Nvidia, in doing so it has helped its own AI endeavors, especially stocks like BABA (162) and BIDU (135). Both now considered AI. Despite China’s otherwise plethora of bad news, the market there acts well.
So, Powell managed to herd the cats. By the way, the assault on Fed independence may be the biggest negative the market has chosen to ignore. Even Powell’s Wednesday little diatribe left room for disappointment had the market so chosen. We know rates at the short end have responded, the question now is will the long end do the same. Rate-sensitive stocks have had a good year which should only get better. Their numbers in turn should be good for the advance/decline numbers. Meanwhile, the advance/decline numbers have nudged higher, but have been basically flat since mid-July, in other words stalled. As always, it will be important to see how they respond if the market does spike higher. No need for perfection, just reasonable participation.
Frank D. Gretz
PLEASE NOTE: Unless otherwise stated, the firm and any affiliated person or entity 1) either does not own any, or owns less than 1%, of the outstanding shares of any public company mentioned, 2) does not receive, and has not within the past 12 months received, investment banking compensation or other compensation from any public company mentioned, and 3) does not expect within the next three months to receive investment banking compensation or other compensation from any public company mentioned. The firm does not currently make markets in any public securities.
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