This Too Shall Pass
Actually the sailing has been relatively smooth.
It’s been a little choppy here in the early days of summer, as we near the halfway mark of 2024.But it’s all relative: The S&P 500 hasn’t had a daily loss of more than 0.75 percent in 37 consecutive sessions, which is pretty smooth.
And history suggests it can still be smooth from here, like the 135 days in 1965-66 where the S&P 500 didn’t see a decline greater than 0.75 percent.
More recently, in 2017-18, there was a 100-trading-day streak, and in 2022 we saw this kind of smooth sailing for 77 sessions.
The recent chop is really a major-index-level phenomenon, maybe even just a one-big-stock thing.
As we put it in a headline in Monday’s issue, Nvidia $NVDA is not “the market.”
But its price action over the last four days has certainly defined movement for the S&P 500 and the Nasdaq Composite vis-à-vis the Dow Jones Industrial Average.
The 30-stock Dow, which doesn’t include NVDA, was the only one of the three in the green on Monday, when the AI chip maker shed another couple hundred billion of market cap.
Of course, it took a 300-point dive Tuesday, as NVDA was climbing 6.76 percent and back into the $3 trillion club. The S&P added 0.39 percent, the Nasdaq 1.26 percent.
But Home Depot $HD was down 3.58 percent to close at $338.32 and weigh heavily on the price-weighted index.
Dow $DOW, Nike $NKE, Boeing $BA, and Walmart $WMT also posted losses of greater than 2 percent.
So NVDA is not “the market.” But it does have extraordinary gravity right now.
We’ve seen a smattering of small spikes. But, again, it’s been relatively smooth, even amid NVDA’s recent big moves.
It’s a status quo supported by easing inflation, rate-cut expectations, AI enthusiasm, and earnings growth.
If there will be cracks, we’ll see it in the labor market first. And the most recent incoming data suggest there’s still ample hope on that front.
Though the Conference Board's consumer confidence index declined to 100.4 in June from a revised 101.3 in May, respondents are still generally positive about jobs.
The Conference Board’s survey found that 38.1 percent of respondents said jobs were “plentiful,” up from 37.0 percent in May, while 14.1 percent said jobs were “hard to get,” down from 14.3 percent.
That suggests stability in the labor market, and it supports the case presented on Tuesday by Federal Reserve Governor Michelle Bowman in favor of holding steady at a restrictive federal funds target range.
Governor Lisa Cook seems more aligned with Federal Reserve Bank of Chicago President Austan Goolsbee, noting in her own remarks yesterday significant progress on inflation and that the labor market is cooling.
Like Goolsbee, Cook didn’t get specific. “At some point,” her prepared remarks did read, “it will be appropriate to reduce the level of policy restriction to maintain a healthy balance in the economy.”
Sounds to me like we need to keep paying attention to incoming initial jobless claims data.
We’ll get the next set on Thursday at 8:30 a.m. ET.