Weekly Trader's Outlook

If you read last week's blog you might recall that my colleague Joe Mazzola expected some consolidation and potentially an uptick in volatility, citing last Friday's soft Nonfarm Payrolls report and this week's lineup of economic data. Stocks hit new highs and are on track to register modest gains this week, but it's perhaps a bit of a surprise given the economic data points. Markets apparently are seeing the deterioration in the labor market data as "glass half-full" since this likely translates into more monetary easing from the Federal Reserve. Following last Friday's meager gain of just 22K payrolls in August, we got a 911K downward revision in job creation (for the period April 2024-March 2025) from the Bureau of Labor Statistics (BLS) and a jump in Initial Claims to the highest level since 2021 this week. On the inflation front, the producer price index (PPI) came in well below estimates while the consumer price index (CPI) showed some stickiness in some of the components (more on this in the "Economic Data, Rates & the Fed" section below).

Perhaps one of the reasons that investors maintained a more sanguine attitude towards the economy is because of the bullish signal that Oracle provided regarding the AI secular growth story. The software and cloud giant's earnings report on Tuesday showed that its remaining performance obligations (RPO) rose 359% year-over-year to $455B. This suggests that the company's Cloud Infrastructure revenue will grow from an estimated $18B in fiscal 2026 to $144B in fiscal 2030. Separately, on Monday after bell AI infrastructure firm Nebius Group said that it inked a $17.4B five-year deal with Microsoft to provide AI-related cloud services. The AI bottom line is that demand still appears to be robust, and the growth trajectory still appears to be "early innings" in terms of this investment business cycle.

At the time of this writing (1:30 p.m. ET), stocks are mixed (DJI - 159, SPX + 4, COMPX + 98), though the S&P 500 and Nasdaq Composite notched fresh record highs earlier in today's session. Markets have continued to maintain "melt up" mode which appears to be driven by the backdrop of a massive AI investment cycle coupled with the prospect of a Fed easing cycle. Although valuations are historically high, and uncertainty around tariffs/inflation persist, the "don't fight the Fed" axiom appears to dominate investor sentiment for the time-being. Add in the technical trader axiom "the trend is your friend," and positioning which could still be considered a bit skeptical, and you can see why the uptrend off the April lows has been so persistent. Yes, we are still in September, which historically is the worst month for stocks from a historical perspective, so traders should at least remain alert for the potential of a routine pullback at some point. And its possible that we get a profit taking excuse or "sell on the news" event following the Fed's interest rate decision/dot plot release next Wednesday. However, if the Fed delivers a (widely expected) rate cut and conveys a dovish/accommodative stance, this could provide fuel incremental buying into the rate sensitive areas of the markets (Russell 2000, housing, financials, real estate, etc.). Therefore, given the bullish technicals and the potential for the Fed to contribute to rate-sensitive positioning, my overall forecast for next week is "Slightly Bullish." What could challenge my forecast? If there is more dissent within the Fed, or a more hawkish dot plot release versus market expectations, this could trigger a subsequent profit-taking pullback in stocks, so the potential for a bearish wobble lies in the back half of next week.

• Monday (Sep. 15): Empire State Manufacturing
• Tuesday (Sep. 16): Business Inventories, Capacity Utilization, Export Prices, Import Prices, Industrial Production, NAHB Housing Market Index, Retail Sales
• Wednesday (Sep. 17): Building Permits, EIA Crude Oil Inventories, Federal Open Market Committee (FOMC) Rate Decision, Housing Starts, MBA Mortgage Applications Index
• Thursday (Sep. 18): Continuing Claims, EIA Natural Gas Inventories, Initial Claims, Leading Indicators, Net Long-Term TIC Flows, Philadelphia Fed Index
• Friday (Sep. 19): no reports

• Monday (Sep. 15): Dave & Buster's Entertainment Inc. (PLAY), Hain Celestial Group Inc. (HAIN), Immersion Corp. (IMMR), Ispire Technology Inc. (ISPR), Radiant Logistics Inc. (RLGT)
• Tuesday (Sep. 16): Barnes & Noble Education Inc. (BNED), Brand House Collective Inc. (TBHC), Ferguson Enterprises Inc. (FERG), Nutex Health Inc. (NUTX), Spire Global Inc. (SPIR)
• Wednesday Sep. 17): Bullish Inc. (BLSH), General Mills (GIS)
• Thursday (Sep. 18): Cracker Barrel Old Country Stores Inc. (CBRL), Darden Restaurants Inc. (DRI), FactSet Research Systems Inc. (FDS), FedEx Corp. (FDX), Lennar Corp. (LEN), Rezolute, Inc. (RZLT), Scholastic Corp. (SCHL)
• Friday (Sep. 19): MoneyHero Ltd. (MNY)

There was a solid dose of economic data for markets to digest this week, which was highlighted by relatively benign inflation data and further evidence of labor market softness. I characterize the monthly inflation reports (CPI/PPI) because the PPI data was much cooler than expected while the CPI had some slightly warmer signals. On the labor front, the annual BLS revision was the largest drop since 2000, while this week's Initial Claims jumped to the highest level since October 2021. Here's the breakdown from this week's reports:

• Consumer Price Index (CPI): Headline increased 0.4% on a month-over-month (MoM) basis (above the +0.3% expected), which represents the largest one-month jump since January; Headline year-over-year (YoY) increased 0.2% from the prior month to 2.9%, in line with the expectations. Core CPI increased 0.3% MoM, putting the Core YoY CPI at +3.1% (both in line with expectations).
• Producer Price Index (PPI): Headline decreased 0.1% on a month-over-month (MoM) basis (well below the +0.3% estimate); Headline year-over-year (YoY) increased 2.6% (well below the +3.3% expected). Core PPI decreased 0.1% MoM (well below the +0.4% expected) while Core YoY increased 2.8% (below the +2.9% expected).
• Bureau of Labor Statistics (BLS) annual revision estimate: Showed that 911K less jobs were created for the 12-month period ending in March (estimates called for a drop of 300 to 900K).
• NFIB Small Business Optimism Index: Rose 0.5 points to 100.8 in August from 100.3 in the prior month, which represents the highest reading since January.
• University of Michigan Consumer Sentiment: Fell to 55.4 from 58.2 in August, which represents the lowest reading since May. One-year inflation expectations were unchanged from last month at +4.8%, while five-year expectations moved up to +3.9% from 3.5%.
• Initial Jobless Claims: Increased 27K to 263K versus last week's 236K, and well above the 242K expected. Continuing Claims were unchanged from last week at 1.939M.
• The Atlanta Fed's GDPNow "nowcast" for Q3 GDP was revised up to +3.1% on Wednesday from +3.0% on September 4th.

Treasury yields saw some volatility this week following the economic data and yields on the 10-year briefly breached the 4.0% for the first time since April. However longer-term yields have recovered late this week which has resulted in some flattening of the yield curve. Compared to last Friday, two-year Treasury yields are up ~7 basis points (3.574% vs. 3.509%), 10-year yields are higher by ~1 basis point (4.076% vs. 4.086%) and 30-year yields rose ~6 basis points (4.70% vs. 4.76%).

Expectations around potential rate cuts from the Fed in 2025 ticked up this week following the soft economic data. Per Bloomberg, expectations for a 25-basis-point cut at the September FOMC meeting remain at a theoretical 100%, while the total 2025 expected 25-basis-point cuts ticked up to 2.83 from 2.75 last Friday.

The S&P 500 (SPX) is on track to for a ~1.5% weekly gain and hit another fresh intraday all-time high (6,594) earlier in today's session. The bullish uptrend remains intact, though as Joe pointed out last week the RSI is signaling slowing momentum, which may suggest that future potential gains may be harder to come by than the rally that got us here. However, slowing momentum is expected given how far the index has rallied off the April lows, and as long as the SPX remains above support at the 30-day Simple Moving Average, the intermediate- and longer-term technicals remain bullish.

Technical translation: intermediate-term and longer-term bullish

The Russell 2000, although the relative underperformer out of the majors over the past year, continued to climb within its intermediate-term uptrend this week and closed at a year-to-date high yesterday. Certainly, the prospect for rate cuts and subsequent lower borrowing costs for smaller businesses has been a contributor to this uptrend. The RUT is within 2.5% of its all-time intraday high of 2,466 from last December and should the index push above this level it would provide further validation of the cyclical bull market in stocks.

Technical translation: near-term and intermediate-term bullish

Recent interest in tokenization, or bringing assets on-chain, continued this week as Bloomberg reported that asset manager BlackRock is looking to bring its exchange traded funds (ETFs) onchain. This includes BlackRock's Bitcoin and Ethereum iShares ETFs, which have seen cumulative inflows of $55B and $12.7B respectively, as well as tokenized funds related to "real-world assets," according to Bloomberg's report. BlackRock already launched its tokenized USD Institutional Digital Liquidity Fund (BUIDL) earlier this year, so this week's development would mark another step in the advancement of Web 3.0.

The Bloomberg chart below shows the current percentage of members within the S&P 500 (SPX), Nasdaq Composite (CCMP), and Russell 2000 (RTY) that are trading above their respective 200-day Simple Moving Averages (SMA). In short, stocks rallied this week and did so with a corresponding expansion in breadth. On a week-over-week basis, the SPX (white line) breadth moved up to 68.54% from 67.13%, the CCMP (blue line) rose to 54.12% from 51.19%, and the RTY (red line) ticked up to 65.24% from 63.23%.

Market breadth attempts to capture individual stock participation within an overall index, which can help convey underlying strength or weakness of a move or trend. Typically, broader participation suggests healthy investor sentiment and supportive technicals. There are many data points to help convey market breadth, such as advancing vs. declining issues, percentage of stocks within an index that are above or below a longer-term moving average, or new highs vs. new lows.

This Week's Notable 52-week Highs (91 today): Astera Labs Inc. (ALAB - $2.90 to $230.00), Broadcom Ltd. (AVGO - $0.25 to $359.38), Citigroup Inc. (C + $0.05 to $98.87), Micron Technology Inc. (MU + $4.31 to $154.88), Oracle Corp. (ORCL - $9.79 to $298.07), Reddit Inc. (RDDT - $1.84 to $258.70)

This Week's Notable 52-week Lows (9 today): Choice Hotels International (CHH - $0.77 to $114.34), Colgate-Palmolive Co. (CL + $0.44 to $84.50), Constellation Brands Inc. (STZ - $2.06 to $140.92), Lululemon Athletica Inc. (LULU - $4.53 to $161.25), McCormick & Company Inc. (MKC - $0.09 to $69.71), Watsco Inc. (WSO - $8.84 to $388.57)