Market Hits Pause as Health of Economy Takes Center Stage

Following a jump of 22% from the lows hit in April, the market took a little rest on Wednesday. Breadth was around two to one negative, but narrow strength in the Magnificent Seven, and especially Nvidia NVDA and Alphabet GOOGL helped to push the Nasdaq 100 QQQ up about 0.55%. 

Small-caps lagged with a drop of 0.6%. Pharmaceuticals and biotechnology were under the most pressure, with Eli Lilly LLY and Merck MRK looking particularly ugly. It wasn’t terrible action, but there were some signs of exhaustion after the big move.

There continues to be a barrage of deals emerging from President Trump’s trip to the Middle East, with Boeing BA being the most significant immediate beneficiary. Concerns about trade and tariffs have been set aside for now, but debate over the health of the economy is taking center stage. There is more focus now on fundamentals and valuation, but there isn’t a huge supply of attractive values or entry points right now.

Bonds continue to sell off as interest rates rise, and the dollar bounced a little after a drop on Tuesday. There continue to be signs of rotation out of dollar-denominated assets, which may be the biggest market obstacle in the weeks ahead.

A pause day is healthy and is needed, but if the dip-buyers lose their enthusiasm on some minor weakness, then we may need to play some tougher defense.

We have some economic news Thursday with the PPI and Retail Sales data being of particular importance.

Have a good evening. I’ll see you Thursday morning.

At the time of publication, Rev Shark had no positions in any securities mentioned.