Yesterday, you could see it coming, but that doesn’t take away from the new all-time high for the S&P 500 (SPX), which saw ten of eleven sectors finish higher. I was surprised that Consumer Discretionary (XLY) fared well, and not surprised that Health Care (XLV) struggled.

Data Center “Power” Rally

One link in the data center power system has significantly underperformed: Utilities (XLU).

The selloff in these names got so bad that they showed an oversold relative strength index (RSI) signal last week. I understand the narrative about the spike in yields making these names less attractive, but the sector peaked back in March. Data center pushback and regulatory red tape have played a role, but data centers are going to be built, and they must be powered inside and outside.

Just Getting Started

I expect most of yesterday’s leaders to trade higher into 2027.

The Economy Is Humming

Institute for Supply Management (ISM) services continues its winning ways (27 months of growth). Along with manufacturing, it's very impressive and very encouraging. The only red flag is that prices for both keep edging higher.

Year-to-Date:

• Nasdaq Composite: +18.8%
• S&P 500: +14.0%
• Russell 2000: +14.1%
• S&P Mid Cap 400: +11.9%

Momentum is building, with names changing hands above their 50-day moving average. Meanwhile, market breadth is improving, but too many new lows still outweigh new highs.

Today’s Session

The AI data center doom campaign is shifting gears once again.  Although the biggest headline centers on the lack of a completed environmental impact study, we are back to financing and inflation concerns.

SpaceX is borrowing $40.0 billion to buy NVDA chips as the company continues to build out the compute part of its overall business model.

Meanwhile, the IMF is expressing concerns, and San Francisco Fed President Daly says the AI inflation shock could last longer than normal price shocks.

So there will be pressure out of the gate as we also await the Fed minutes.

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