Weekly Roundup: A Good Week to Lose Less as Market Stumbles

The S&P 500 and the Nasdaq Composite declined this week, adding to their larger move lower over the last month. The Pro Portfolio outperformed on a relative basis against those two benchmarks recovering some of our year-to-date lead we lost against the S&P 500 last week. 

Reviewing the week and its machinations, there were two key drivers stand out — the climb in oil prices and in Treasury yields. 

Help lifting both of oil and yields was the increasingly pessimistic tone about the Iran war, which rekindled concerns over inflation, oil prices, the cost of the war, and U.S debt. Wednesday, President Trump said he expected the war to end “immediately after” the midterm elections in early November. Looking at the calendar, that suggests at least another two months. 

However, according to reporting cited by Reuters and the Wall Street Journal, Vice President JD Vance and Secretary of State Marco Rubio have privately warned Trump that Iran could continue resisting for the remainder of his presidency, potentially taking the conflict beyond January 2029. Also this week, former Defense Secretary Leon Panetta shared his view that the war could continue for at least another six months.

The war is already more than six months old with no clear resolution, and the length of disruptions to oil flows from the Middle East and supply chains are rising. 

To that, we can also add the inflation findings, first in the August Producer Price Index report and then Friday’s August Consumer Price Index report. And to be clear, those reports do not reflect the continued climb in oil, gas, diesel and other prices September to date or their inflationary flow through to the rest of the economy. That combination pushed the market’s expectation for a Fed rate hike next week to more than 86%. 

While the market is focused on the Fed in the near-term, we will also be keeping a close watch on the 10-year Treasury yield. Reason being, should it break decisively above 5% and remain there, it could call into question the market’s valuation. By that we mean the S&P 500, which closed the week near 21x consensus 2026 EPS estimates of $362.03. Meanwhile, sustained 10-year Treasury yields above 5% has the potential to shift money from stocks to bonds and other income-producing securities as the risk free rate rises. 

Should we see oil, gas, diesel and related prices move even higher or remain at currently elevated levels for a pronounced period of time, the greater the risk to current S&P 500 EPS expectations. Higher petrochemical prices would sap disposable income and increase transportations costs as well as directly and indirectly pressure margins and economic growth. 

While those are scenarios to be mindful of, they are not a foregone conclusion. That said, we will continue to follow developments and revisit the probabilities for those scenarios and others as well as their outcomes. 

We will say that nearly all of the above plays into the narrative of September being a challenging month for the market. Here’s the thing, historically speaking, the S&P 500’s September weakness tends to become more pronounced in the second half of the month. An analysis of data spanning 1928 to 2025 by Citadel Securities finds that the second half of September has averaged a -0.91% return, making it the weakest two-week period of the year.

That helps put some additional context behind the Portfolio’s decision to exit its position in United Rental (URI) this week, and it also means we will be in a more cautious posture near-term. It also means that we could make another move or two to bulk up the Portfolio’s cash position as we go into the second half of September. Whether or not that comes to pass may hinge on market-shaping developments that could also influence oil prices and Treasury yields. 

With all of that said, our focus remains on identifying well-positioned companies poised to deliver superior EPS growth that are positioned to benefit from capital that is being spent by companies, governments, and consumers. Should the market give us a compelling opportunity to take advantage of the stocks for such companies going on a heavily discounted sale, we’ll want to be ready. 

Enjoy your weekend, Saturday’s signals alert, and we’ll see you back here, bright and early on Monday. 

Catching Up on the Portfolio This Week

While we can share the Portfolio regained some of its year-to-date lead against the S&P 500 that was lost last week, the return had more to do with the Portfolio dipping far less than the S&P 500 did this past week. In Wall Street speak, that relative outperformance can be attributed to weekly gains in Marvell (MRVL), Meta (META), Apple (AAPL), Broadcom (AVGO), Arista Networks (ANET), and Eaton Corp. (ETN). 

Week over week, the EPS All-Stars basket rose roughly 2%, bringing its QTD drag to the low single-digits. Gains in Bloom Energy (BE) as it heads into the S&P 500, as well as gains in Ciena (CIEN) and Lumentum (LITE) fueled the week-to-week outperformance relative to the S&P 500. 

The only trade we made this week was with the Portfolio’s position in United Rentals (URI). The catalyst behind that action was a combination of the August CPI and PPI data mixed with the 10-year Treasury yield near 5% and the continued rebound in oil, gas, and diesel prices. Taken together, they increase the odds for a Fed rate hike next week and an incrementally more hawkish tone from the Fed compared to the one delivered by Fed Chair Warsh just a few weeks ago at the Jackson Hole Economic Symposium. 

Between the moves we made Thursday and Friday that closed out our URI position, we locked in a 60% gain. In Friday’s trade, we explained that we would place URI in the Portfolio’s Bullpen for future consideration. Likely catalysts for us to reconsider URI include a rebound in homebuilding construction or inflation pressures subsiding to the degree they prompt a potential rate cut by the Fed. Odds are either one of those is more likely to be a 2027 event, but if and when in 2027 will hinge on multiple factors. 

The returned investment capital and big gains from our URI exit plus receipt of quarterly dividends from Applied Materials (AMAT) and Microsoft (MSFT) put the Portfolio’s cash position at just over 10% of its assets on Friday. We’ll get the another dividend payment from Google (GOOGL) next week, leaving ones from Bank of America (BAC), Waste Management (WM), and Broadcom to come before we close out September. 

Now let’s see what others on Wall Street had to say about the Portfolio’s holdings during this shortened but busy week for the market:

Monday: Freedom Broker upgraded Costco (COST) shares to Buy from Hold with a $1,030 price target. Moffett Nathanson lifted its Apple (AAPL) target to $304 from $270. UBS upgraded the shares of Eaton to Buy from Neutral, and upped its price target to $515 from $450. 

Wednesday: Piper Sandler initiated coverage of Nvidia, Marvell, and Broadcom, each with an Overweight rating and respective price targets of $300, $270, and $460.

Thursday: JPMorgan upgraded Meta shares to Overweight from Neutral, and reset its price target at $820 vs. the prior $640. BofA took $10 off its Apple target, landing it at $370.

Friday: Rosenblatt reiterated its Buy rating on Palantir (PLTR) with a $225 price target after attending AIPCon 11. The firm believes Palantir’s “strong” commercial momentum should continue for the rest of 2026 and beyond. DA Davidson lifted its Palantir target to $250 from $200. 

Key Global Economic Readings

Chart of the Week: Oil Prices and Bond Yields

Higher interest rates and crude oil are joined at the hip, but if you didn’t believe it, you might look at the chart below of the United States Oil Fund (USO). The power of this one-two punch is amazing but given the potential of “higher-for-longer” inflation with out-of-whack crude oil prices it makes sense that bonds would be less attractive.

Remember, bond investors abhor inflation. They see the rise in rates as poisonous to their investments. Why is that? Well, if you buy a bond at a fixed rate of say 4% and then suddenly due to market conditions a similar quality bond sells at a rate of 4.5%, the one you hold is suddenly worth less (because a new buyer can get a higher yield).  

The price of your bond drops to a level that is equivalent to the new bond at 4.5%, meaning the price goes down (no longer at par, or 100).

Back to the chart. Oil has been climbing steadily for weeks since a drop in late June (red line), but the 10-year yield has pushed higher since a low in early March. That six-month swing to current levels too yields from 3.9% to nearly 5% currently.  

That is quite the swing, and with a couple of Fed meetings in between that period and no action, the market is now screaming for rate hikes to help get inflation under control.

The steepness (arrow) over the last couple of weeks is unsustainable (most likely shorts are getting squeezed here badly), but it could continue onward. We have not seen the correlation this tight between yields and crude oil for some time, but if the Fed does act next week that correlation might finally take a break.

Other charts we shared with you this week were:

Tuesday, September 8: S&P 500 –  Uphill Battle Remains for the Index

Tuesday, September 8: Bloom Energy (BE) – Bloom Is Creating Positive Energy as Big News Arrives

Wednesday, September 9: Morgan Stanley (MS) – Morgan Stanley Could Spring Into Action

Thursday, September 10: First Trust Nasdaq Cybersecurity ETF (CIBR) – What Luck, Another Buying Opportunity in Cybersecurity!

The Week Ahead

Between the Fed’s policy meeting and few more investor conferences, we have another very full week ahead of us as we close in on the end of September and Q3 2026. With little in the way of new inflation data coming before the Fed concludes that policy meeting, our view remains the same. We expect the Fed to deliver a 25 basis point rate hike and, based on September-to-date data, comments that lean more hawkish. If the Fed opts to stand pat, odds are it would do so provided its comments Wednesday afternoon are decisively hawkish. 

Also on Wednesday, we’ll get the August Retail Sales report. In addition to our normal year-over-year analysis, we’ll be giving it the once over from a sequential basis because of the climb in gas and other prices. This report will not only serve as a yard stick for Costco’s (COST) robust adjusted comp sales figures, but it starts the clock ticking for October-quarter comp sales figures from other retailers. 

Our position remains that because of the renewed climb in oil and related prices, and the subsequent impact they will have, Costco, TJX (TJX) and Amazon (AMZN) remain well positioned as we approach the year-end holiday shopping season. As we move closer to that season, the usual holiday shopping forecasts should emerge. We also think investors will start to focus more on which retailers are better or best positioned for holiday shopping.

Thursday and Friday bring the August Housing Starts and Industrial Production reports. The move higher in Treasury yields and mortgage rates since late June tells us we should not expect any major rebound in housing starts. In reviewing the August Industrial Production data, we’ll focus on manufacturing production and the read through for truck and rail traffic as well as heavy truck demand. 

Here’s a closer look at the economic data coming at us next week:

U.S.

Tuesday, September 15

Empire State Manufacturing Index – (September) 8:30 AM ET

ADP Employment Change Report – (Weekly) 8:15 AM ET

Wednesday, September 16

MBA Mortgage Applications Index – (Weekly) 7:00 AM ET

Retail Sales (August) – 8:30 AM ET

Import/Export Prices (August) – 8:30 AM ET

Business Inventories (July) – 10:00 AM ET

NAHB Housing Market Index (September) – 10:00 AM ET 

EIA Crude Oil Inventories – (Weekly) 10:30 AM ET

FOMC Monetary Policy Decision & Economic Projections (2 PM ET)

Thursday, September 17

Initial & Continuing Jobless Claims – (Weekly) 8:30 AM ET

Housing Starts & Building Permits (August) – 8:30 AM ET

Philadelphia Fed Index (September) – 8:30 AM ET

Pending Home Sales (August) – 10:00 AM ET

EIA Natural Gas Inventories – (Weekly) 10:30 AM ET

Friday, September 18

Industrial Production & Capacity Utilization (August) – 9:15 AM ET

International

Monday, September 14

Japan: Industrial Production & Capacity Utilization (July)

Tuesday, September 15

China: Industrial Production, Retail Sales, Fixed Asset Investment, Vehicle Sales (August)

Germany: Wholesale Prices (August)

UK: Employment Change (July)

Eurozone: ZEW Economic Sentiment Index (September)

Wednesday, September 16

Japan: Machinery Orders (July)

China: Foreign Direct Investment (August)

UK: Inflation Rate (August)

Eurozone: Industrial Production (July)

Thursday, September 17

Eurozone: Inflation Rate (August)

UK: Bank of England Interest Rate Decision

Friday, September 18

Japan: Inflation Rate (August)

Japan: Bank of Japan Interest Rate Decision

Germany: Producer Price Index (August)

UK: Retail Sales (August)

As you can see below, we have an unusually light week ahead when it comes to quarterly earnings results. What that means, however, is that we and other market watchers will have much more time to focus on comments corporate managements make at the next round of investor conferences. Those include the Piper Sandler Growth Conference, the Barclays Global Financial Services Conference, and the Morgan Stanley Laguna Conference. Across those events, Bank of America (BAC), Morgan Stanley (MS), Axon (AXON), American Express (AXP), Boeing (BA) and Eaton (ETN) will be presenting. 

In addition to those financial conferences, the AI Infra Summit 2026 is being held on September 15-17, and it has the potential to be a catalyst event for several holdings in the Portfolio. Keynote presentations from Amazon Web Services, Meta (META), Google (GOOGL), Microsoft (MSFT), Marvell (MRVL), and Nvidia (NVDA) are on the schedule. The conference also has multiple presentation tracks ranging from compute and AI data center to data movement and physical AI, which suggests networking and robotics will also be hot topics. In addition to the stocks mentioned above, the event should be a catalyst for several holdings in the Portfolio’s EPS All-Stars basket. 

As we sift through those presentations, we will also be watching the SEC’s website for Anthropic’s S-1 registration statement. 

Here’s a closer look at the earnings reports coming at us next week:

Monday, September 14

Close: Dave & Buster’s (PLAY)

Tuesday, September 15

Close: Trip.com (TCOM)

Wednesday, September 16

Close: Lennar (LEN)

Thursday, September 17

Open: Carnival (CCL)

Portfolio Investor Resource Guide

Economic Data: Here’s a List of Links to the Key Economic Data We Closely Watch

Investing Terminology: 16 Key Terms Club Members Should Know

10-Ks: Want to Know About a Stock? Read the Company’s Reports

10-Qs: Unlock the Numbers and Key Information Behind Your Stock With the 10-Q

Income Statement: Our Cheat Sheet to Understanding This Financial Document

Balance Sheet, Cash Flow Statements, and Dividends: How to Know If a Company Is Off-Kilter? Read Its Balance Sheet

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The Portfolio Ratings System

1 – Buy Now (BN): Stocks that look compelling to buy right now.

2 – Stockpile (SP): Positions we would add to on pullbacks or a successful test of technical support levels.

3 – Holding Pattern (HP): Stocks we are holding as we wait for a fresh catalyst to make our next move.

4 – Sell (S): Positions we intend to exit.