4 min read
The market didn't fall. It swapped.
The S&P barely moved today. Underneath it, money ran out of chips and into oil and groceries.
The Close Flat on the surface. The S&P slipped 0.06% to 7,807. The Dow rose 196 points, or 0.4%. The Nasdaq lost 0.4%. The bond market was closed for Columbus Day, so Treasuries didn't trade. Stocks did, and all the action was underneath.
The chip stocks took the hit. Micron fell 3.9% after reports that China's CXMT is making progress on a new memory design. Intel lost 3.2%, AMD 2.3%, Broadcom 1.9%. A basket of chip stocks has now fallen five days in a row. Chipotle fell 3.8% after Starbucks said it isn't buying the company. Salesforce rose 2.1% on a Bank of America upgrade. Meta gained 3.4% the day it launched its newest AI model. Medtronic rose 3.9%. Off the index, Bumble jumped about 50% on reports of talks to take it private at around $1 billion. What The Market Is Pricing In Yes, oil did the talking today. Brent settled at $106.65, up 1.8%, after new drone and missile attacks on Saudi Arabia. President Trump suggested the U.S. may join Saudi strikes on the Houthis. But watch where the money went. Tech fell 1.2%. Energy rose 1.4%. Consumer staples, the companies that sell groceries and soap, rose 1.2%. The money didn't leave the market. It changed seats. Investors sold the stocks that need a calm, cheap-money world and bought the ones that hold up when prices rise. On Wall Street they call it sector rotation. Here's what the market is pricing in. Oil above $100 feeds straight into the price of gas, shipping and everything trucked to a store. Wall Street expects Wednesday's inflation report to show prices up 3.6% from a year ago, up from 3.4% in August. And the Fed is listening. Cleveland Fed President Beth Hammack said Monday the Fed should move "relatively quickly" toward rates that slow the economy. The dollar climbed to an 18-month high, because money goes where rates are highest.
I've seen this before. In 2022, oil and inflation ran hot and the Fed kept hiking. Energy was the best sector in the market that year. Tech was one of the worst. That's the setup now. Until oil cools or inflation does, the market keeps paying up for the companies that pump, sell and stock shelves, and keeps marking down the chips. What's Next Three things I'm watching: 01 The Banks JPMorgan, Goldman Sachs, Citigroup and Wells Fargo report tomorrow morning. The big banks have been sold for a month. If they say customers are still borrowing and paying on time at these rates, that selloff looks overdone. If loan losses start to climb, it tells you high rates are finally biting. 02 Inflation, Wednesday The September consumer price index comes out Wednesday, October 14, at 8:30 a.m. Eastern. The Street expects 3.6% headline and 2.5% core. A hotter number puts a Fed hike at the October 27-28 meeting firmly on the table. A cooler one gives the chip stocks room to breathe. 03 Oil and the Dollar Brent above $106 and the dollar at an 18-month high are pulling in the same direction. On Thursday morning, wholesale prices and retail sales both come out. If shoppers keep spending with gas this high, the Fed has no reason to back off. Nobody sold the market today. They moved the furniture around inside it. Wednesday's number tells you whether they moved it to the right room.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||