The Economy Is Hot! 

Manufacturing

• Purchasing Managers’ Index (PMI) 57.0, consensus 53.7
• New Orders highest since April 2022
• Employment highest since March 2022

Services

• PMI 58.7, consensus 53.8
• New Orders highest since May 2022
• Employment highest since June 2022

Composite

• 58.4, consensus 55.3

We already knew a manufacturing renaissance was underway, but it seems to have shifted into an even higher gear. In addition, the service economy is also firing on all cylinders.

In a common-sense world, this would be great news, worthy of celebration and high stock prices. In the world of a hyperactive Federal Reserve, it's too much of a good thing and must be tamped down.

Bond Yields Spike

The ten-year bond (TNX) yield saw its biggest spike since Liberation Day last year.

Meanwhile, odds of a rate hike in October rose sharply. That would be a remarkable move ahead of the midterm election.

Fed chairs and presidents have been at loggerheads throughout history, especially over rate changes or inaction ahead of elections. President Bush blamed Alan Greenspan for his 1992 defeat. It goes without saying that Trump would be furious if the Federal Open Market Committee (FOMC) hiked rates in October – especially because the economy is finally in gear.

Only one sector was higher; also, software (IGV) bounced after initially resuming its downward slide.

Discombobulated

Never has the stock market been this scattered – every stock moving to its own ‘bear,’ and it's mostly lower.

The number of names changing hands above the 200-day moving average has plunged to 48%.

Drawdowns

Software stocks have suffered the most.

Factors

Yesterday’s red shaded all factors, with small-caps under the most pressure, as yields spiked.

It's interesting that retail has been selling, and hedge funds and institutions have been buying. 

Muse is Hot: American AI Is Crushing It

Lots of tech leaders at the state dinner tonight. I suspect there won’t be an AI agreement, but I hope Americans see why it's important not to give away this leadership. 

Here are some of the biggest names expected to attend the Trump-Xi state dinner on Sept. 24:

• Mark Zuckerberg, Meta

• Elon Musk, Tesla/SpaceX

• Jensen Huang, Nvidia

• Sam Altman, OpenAI

• Sundar Pichai, Google

• Jeff Bezos, Amazon

• Tim Cook, Apple

• Satya Nadella, Microsoft

• Michael Dell, Dell

• Jamie Dimon, JPMorgan

• Jane Fraser, Citi

• Albert Bourla, Pfizer

The dinner is scheduled for Thursday evening at the White House during Xi Jinping’s Sept. 23-25 U.S. state visit.

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