Bonds Crash the Party
A bond market selloff muted what should have been a rally for equities on Wednesday. Also, feel that inflation chill?
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Already. That’s it: September is a wrap. Summer has rolled out. Autumn has rolled in. In central Florida, the two seasons are difficult to tell apart. At least until Halloween. The S&P 500 gave up 0.25% on Wednesday to close out the month down 0.45%. Coming into this September, the S&P 500 had returned an average of -0.8% for that month since 1970 and -0.47% since 1994, so one might say that the S&P 500 “outperformed” this year versus the forces of seasonality, if only by a smidgen.
Tech stocks, which is where we have fried out bacon for a number of years now, did much better. The Nasdaq Composite gained 0.24% on the last day of the month to close September at +1.86%. Coming into this year, that index had also returned an average of -0.8% since 1971 (The Nasdaq Composite was created in 1971). Clearly, stocks, especially for those more heavily invested in Tech / AI / Data Center (Cloud) stocks did not have the “awful” September that some of those alarmists in the financial media have been talking about.
Small caps? The Russell 2000 lost 5.4% for the past month as borrowing costs ran wild. That I get. About 30% of the broader Sarge-folio is in the bond market. It was around 33.5% not too long ago. How to survive in such an atmosphere? The Nasdaq 100 gained 3.23% in September 2026. Even better, the Philadelphia Semiconductor Index rallied 9.5% for the month. Investors and traders have to be able to hunt and kill in order to eat. Not just do and say what one is told to do and say. So, about that…
Keys to watching financial television. If it says “contributor” under their name, that means that they took the money to appear. I won’t say anything about anyone else, but I have never taken the money (despite being approached by every single major outlet back in the day) and my opinions remain exactly that. Secondly, if they work for a large broker/dealer or investment bank, you can almost guarantee that their legal departments have demanded the questions ahead of time and have manicured answers for the interviewee to memorize.
Do you want real answers to real questions? I pay attention only to those who actually trade for themselves or run smaller businesses. I want to know what someone who is supporting himself or herself in the marketplace thinks. How someone working for a large bank, supported by a base salary who expects a bonus every year thinks matters not one bit. Not even a little. That person is little more than a salesman in disguise.
We (professional traders and investors) look at that person as someone who has never even graduated. I want to hear only from people who have to create money while under pressure. The base salary crowd thinks Wall Street is tough. LOL. I haven’t worked for anyone else since 2016 and I’m darned proud of that. I’m actually a little embarrassed that it took me that long to trust my ability.
Prometheus
Titan! to whose immortal eyes
The sufferings of mortality,
Seen in their sad reality,
Were not as things that gods despise;
What was thy pity’s recompense?
A silent suffering, and intense;
The rock, the vulture, and the chain,
All that the proud can feel of pain,
The agony they do not show,
The suffocating sense of woe,
Which speaks but in its loneliness,
And then is jealous lest the sky
Should have a listener, nor will sigh
Until its voice is echoless.
– George (Lord) Byron, 1816
Bond Market Pity Party
Another selloff across the bond market muted what could have been or even should have been quite a rally for equities on Wednesday. Overnight, the U.S. 10-Year Note paid more than 5.34%, which was the weakest that this particular product has been since the year 2002. The U.S. long bond (30-Year) paid more than 5.68% overnight. Ugly.
Looking over the data, we see that the iShares Core US Aggregate Bond ETF (AGG) gave up 2.95% in September and is down 7.15% since peaking for the cycle back in February. The fund’s breakdown of assets held include U.S. Treasuries (almost 47%), mortgage-backed pass-throughs (almost 23%) and investment-grade corporates (almost 25%).
On average, since inception in 2003, September has been the worst month of the year (as it has been for the S&P 500) for this fund at -0.27%. Guess what? While October is known for its equity market volatility (Is it really 39 years since 1987?), it is one of only two months with a negative average performance since inception for this fund at -0.25%.
Inflation Chill
You kids see the August personal consumption expenditure inflation data on Wednesday? We might watch the consumer price index, but the Fed watched this release more closely. Brrr. I think I felt a chill. According to this release, inflation is already cooling and doing it far more quickly than even the sharpest economists expected. At the headline (includes energy), for August, PCE prices printed at +0.3% month over month (vs. expectations for +0.4%) and at +3.4% year over year. That annual print was down from 3.7% in July and well below expectations for another 3.7% posting.
At the core, which excludes those nasty gasoline prices, for August, prices printed at +0.2% month over month (vs. expectations for +0.3%) and at +3.0% year over year. That annual print was down from 3.3% in July and well below expectations for another 3.3% posting for August. Interesting. Futures markets are now pricing in a 63% probability that the Federal Open Market Committee will push out their next rate hike from Oct. 28 to Dec. 9.
Will inflation continue to ebb. We had thought that disinflation might be too much to ask for this soon, but voila! Apparently, we have been basking in the disinflationary sun for more than a month already. Who knew? Not the folks looking for a job. Or are they?
The economic data released on Wednesday was hot. Red hot. First the Bureau of Economic Analysis revised their estimate for second-quarter gross domestic product significantly higher, from growth of 1.5% all the way to growth of 2.2% (q/q, SAAR). The need for the increase came via consumer spending, investment and government spending. On top of that, ADP reported that 90,000 private sector jobs were created in the U.S. in September, up from 38,000 new jobs in August and 46,000 new jobs in July. This was also well above expectations for growth of 70,000 positions. Results for both August personal spending and the September Chicago PMI also blew away expectations. August personal income growth actually slowed. Hmm. Kick some dirt on it. Maybe nobody will notice.
Fed Another…
At least eight Fed speakers headed your way on Thursday. Must have something to say. Party on, dudes. Bureau of Labor Statistics September jobs tomorrow. Fun, fun.
Micron
Last night, Micron (MU) crushed earnings expectations while issuing much better-than-expected guidance. The stock? Doing nothing overnight. More proof that tech is the pace to be for me.
Project Meridian
On Wednesday Defense Sec. Pete Hegseth signed a memorandum directing Pentagon CTO Emil Michael to commission “Project Meridian.” The project will study and analyze advances in AI, autonomous systems, directed energy, robotics, and biotech and will be distributed to military leaders throughout the armed forces. Incredibly, we touched on this yesterday ahead of this news, in response to the announced Boeing (BA) contract award.
The project is projected to take about four months to complete. The intention is to better identify potential theaters of conflict where the U.S. must maintain its advantage, assess weaponry and address future needs, and integrate private sector innovation. Civilian leadership will be provided by Elon Musk, CEO of both Tesla (TSLA) and SpaceX (SPCX), Palmer Luckey, co-founder of Andruil, and former Speaker Newt Gingrich, who is broadly respected as a military historian.
Economics (All Times Eastern)
08:30 – Initial Jobless Claims (Weekly): Expecting 199K, Last 197K.
08:30 – Continuing Claims (Weekly): Last 1.719M.
09:45 – S&P Global Manufacturing PMI (Sep-F): Flashed 57.0.
10:00 – ISM Manufacturing Index (Sep): Expecting 54.9, Last 54.6.
10:00 – Construction Spending (Aug): Expecting 0.1% m/m, Last -0.5% m/m.
10:00 – JOLTs Job Openings (Nov): Last 10.334M.
10:00 – JOLTs Job Quits (Nov): Last 4.026M.
10:30 – Oil Inventories (Weekly): Last -86M.
10:30 – Gasoline Stocks (Weekly): Last -86M.
10:30 – Natural Gas Inventories (Weekly): Last -86B cf.
4:30 p.m. – API Oil Inventories (Weekly): Last -86M.
1:00 – Baker Hughes Total Rig Count (Weekly): Last 779.
1:00 – Baker Hughes Oil Rig Count (Weekly): Last 621.
The Fed (All Times Eastern)
09:05 – Speaker: Richmond Fed Pres. Tom Barkin.
09:05 – Speaker: Boston Fed Pres. Susan Collins.
09:05 – Speaker: Kansas City Fed Pres. Jeffrey Schmid.
10:00 – Speaker: Reserve Board Gov. Christopher Waller.
1:30 p.m. – Speaker: Federal Reserve Vice Chair Philip Jefferson.
3:00 – Speaker: Reserve Board Gov. Michelle Bowman.
3:30 – Speaker: Reserve Board Gov. Lisa Cook.
6:45 – Speaker: Dallas Fed Pres. Lorie Logan.
Today’s Earnings Highlights (Consensus EPS Expectations)
Before the Open: ACN (3.18), AYI (5.86), MKC (.76)
After the Close: NKE (.44)
At the time of publication, Guilfoyle was long MU equity.
