(This is a wrap-up of the key money moving discussions on CNBC’s “Worldwide Exchange” exclusive for PRO subscribers. Worldwide Exchange airs at 5 a.m. ET each day) Investors Friday morning were getting ready for September with the tech trade on their minds, as well what the market is saying about a possible recession. The tech trade and the broadening market Matt Maley of Miller Tabak says if tech continues to trade lower it could threaten the overall market despite the rotation that has pushed healthcare, industrials and materials to record highs. “The big cap tech names are so highly weighted in the big averages the Nasdaq-100 and the S & P 500, if those start to roll over in a significant way instead of lagging to the upside, that’s going to pull those indices down.” Maley said on Worldwide Exchange. “If the major indices are going down, investors are going to start saying ‘do I really want to rotate into another sector, or do I want to rotate into cash, which still pays me 5%'”. Headline risk and the transports rally The Dow Jones Transportation Average is up nicely off the lows seen during the sell-off on August 5. David Vernon of Bernstein said expectations that the Federal Reserve is beginning a rate-cut cycle is largely the catalyst for the move. “The market’s anticipation of the Fed easing, combined with some rational policy decisions, getting past the election is going to lead to a pick-up in economic activity, pick-up in freight demand,” said Vernon. However, Vernon is warning the sector is facing headline risk specificially tied to a possible strike by the International Longshoreman’s Association (ILA), a union that represents 85,000 workers at East Coast, Gulf Coast and Great Lakes ports. The ILA’s contract expires on September 30 and union delegates are schedule to meet on September 4-5. “It’s going to be a risk in terms of ‘headline risk’. The East Coast port workers are going to be looking for something better than their West Coast brethren have gotten. That could lead to some disruption and freight flows shifting from East Coast ports back to West Coast ports,” he said. Chart of the Day Maley said investors need to keep an eye on regional banks as a read on the strength of the broadening trade, specifically into small- and mid-cap stocks. Maley said regional banks have a high weighting in the small-cap benchmark Russell 2000 and believes they should see additional benefit from the yield curve dis-inverting. Word of the Day: Crosscurrents Amy Wu Silverman of RBC Capital Markets said that investors are caught between potentially market moving data points with the PCE Price Index, the Federal Reserve’s preferred inflation gauge, on Friday and the big jobs report coming a week later. “Those crosscurrents are going to determine the narrative of the market.” Silverman said on Worldwide Exchange. “We are sort of in this muddle through period until we get the next earnings cycle and we get the next earnings cycle and people are asking, not if the Fed will cut or not, but how much?”
(This is a wrap-up of the key money moving discussions on CNBC’s “Worldwide Exchange” exclusive for PRO subscribers. Worldwide Exchange airs at 5 a.m. ET each day)
Investors Friday morning were getting ready for September with the tech trade on their minds, as well what the market is saying about a possible recession.
The tech trade and the broadening market
Matt Maley of Miller Tabak says if tech continues to trade lower it could threaten the overall market despite the rotation that has pushed healthcare, industrials and materials to record highs.
“The big cap tech names are so highly weighted in the big averages the Nasdaq-100 and the S&P 500, if those start to roll over in a significant way instead of lagging to the upside, that’s going to pull those indices down.” Maley said on Worldwide Exchange. “If the major indices are going down, investors are going to start saying ‘do I really want to rotate into another sector, or do I want to rotate into cash, which still pays me 5%'”.
Headline risk and the transports rally
The Dow Jones Transportation Average is up nicely off the lows seen during the sell-off on August 5. David Vernon of Bernstein said expectations that the Federal Reserve is beginning a rate-cut cycle is largely the catalyst for the move.
“The market’s anticipation of the Fed easing, combined with some rational policy decisions, getting past the election is going to lead to a pick-up in economic activity, pick-up in freight demand,” said Vernon.
However, Vernon is warning the sector is facing headline risk specificially tied to a possible strike by the International Longshoreman’s Association (ILA), a union that represents 85,000 workers at East Coast, Gulf Coast and Great Lakes ports. The ILA’s contract expires on September 30 and union delegates are schedule to meet on September 4-5.
“It’s going to be a risk in terms of ‘headline risk’. The East Coast port workers are going to be looking for something better than their West Coast brethren have gotten. That could lead to some disruption and freight flows shifting from East Coast ports back to West Coast ports,” he said.
Chart of the Day
Maley said investors need to keep an eye on regional banks as a read on the strength of the broadening trade, specifically into small- and mid-cap stocks. Maley said regional banks have a high weighting in the small-cap benchmark Russell 2000 and believes they should see additional benefit from the yield curve dis-inverting.
Word of the Day: Crosscurrents
Amy Wu Silverman of RBC Capital Markets said that investors are caught between potentially market moving data points with the PCE Price Index, the Federal Reserve’s preferred inflation gauge, on Friday and the big jobs report coming a week later.
“Those crosscurrents are going to determine the narrative of the market.” Silverman said on Worldwide Exchange. “We are sort of in this muddle through period until we get the next earnings cycle and we get the next earnings cycle and people are asking, not if the Fed will cut or not, but how much?”
