Hopes for Interest Rate Cuts Improve as Worries About a Bubble Are Building
The market's surge on Wednesday produced much more talk about how lopsided the action is and about a potential bubble.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Recent concerns about a sputtering economy were forgotten on Wednesday as the market jumped higher on weaker-than-expected ADP payroll data. Earlier in the week, there had been worries about poor ISM Manufacturing data and a drop in job openings, but the market returned its focus to hopes for an interest rate cut and continued to pile into the market-leading Magnificent Seven names.
Bonds continue to trend higher, with the 10-Year note now yielding around 4.28%. The market is now pricing in a 71% chance of an interest rate cut on September 18, which is a sharp jump from 47% odds just a week ago.
Nvidia NVDA has been the star of the show as its market capitalization exceeded $3 billion and surpassed Apple AAPL. There has been very lopsided market action lately, which is the main concern of many bears, but the action on Wednesday caught quite a few folks leaning the wrong way and produced some short squeeze action as well as FOMO.
Investors Business Daily proclaimed the technical action to be quite positive and increased its recommended market exposure from 80% to 100%. The last time it was at that fully invested level was on May 22. That led to a very abrupt reversal the next day, so some investors may view this recommendation as a contrary indicator.
One of the most notable aspects of this market is that the surge on Wednesday has produced much more talk about how lopsided the action is and about a potential bubble. However, one of the biggest differences between the market in 2000 and now is that there has been so little small-cap speculation, but that has changed a bit in recent weeks. There are still a huge number of stocks that are not close to being extended, but some of the leaders make old-timers wonder about comparing Cisco CSCO during the bubble days.
The market will be anticipating a very important May jobs report Friday morning. A soft number could cement the chances of a September rate cut, but it would also raise concerns about a slowing economy. The market has been unconcerned about signs of economic slowing until just recently, but that will be a major focus as the chances of a rate cut increase.
At the time of publication, Rev Shark had no positions in any securities mentioned.
