In some ways, yesterday was a magnificent day, and most of the so-called “Mag Seven” rallied and almost carried the entire market along for the ride.

New Paradigm

Things are different because things are different. The Fourth Industrial Revolution (4IR) is picking up speed, and the disruptions between companies powering the future and the lumbering giants of yesteryear are on full display. Forget the angst over the weighting of ten names on the entire S&P 500 – check out how much more valuable Nvidia (NVDA) is compared to five S&P 500 (SPX) sectors.

It's all about chips. Yesterday, the Technology (XLK) Sector was the only one to finish in the green, driven by semiconductors. They are the brains of the future.

Earnings Season & Low Hurdles

The earnings consensus for the second quarter plummeted during the initial period of tariff turmoil. Earnings estimates generally begin the new year elevated and edge lower. In this case, the 4% point cut was slightly ahead of the average 3% percentage point cut. In the process, the market was supposed to be set up for positive surprises.

On that note, banks were supposed to power ahead today, but when the closing bell rang, Citigroup (C) was the only stock in the Financial (XLF) Sector to finish in the green.

Manufacturing Swing

While inflation detectives were peering endlessly with their magnifying glasses, we all should have paid more attention to the New York Fed Manufacturing Survey for June, which came in at +5.5 against a consensus of -9.2 and the May reading of -16.0. Substantial improvements in key categories, but prices remained elevated.

Empire Fed Manufacturing Survey

The big headlines come from the spike in future expectations. I’m feeling so great about the future.

Today’s Session

The PPI report this morning was a crusher…for the fearmongers.  Bloomberg polled 50 economists, and not a single one got the actual number correct – 0, they all had higher expectations.

Headline:

• 2.3% consensus 2.6% year over year
• 0.0% consensus 0.3% month to month

Core:

• 2.6% consensus 2.8% year over year
• 0.0% consensus 0.3% month to month

Components that filter into PCE hint at +0.3%.

Lots of additional economic data and earnings are out, and we will update on the afternoon note.

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