Happy Friday, investors. Next week my team is hosting the Silvia Investor Summit, where top public company CEOs and investment strategists will convene to talk markets and macro with over 1,000+ independent investors.

I’ll be speaking there, too.

And since you’re an Opening Bell subscriber, you get 25% off General Admission tickets with code BELL25.

See you there.

Now let’s get to markets.

Fewer stocks are carrying the market higher than at any point since the spring.

The share of S&P 500 stocks above their 200-day average has dropped from 75% this summer to 49% today, marking the sharpest deterioration in breadth since the Fed’s hawkish pivot at Jackson Hole.

The benchmark index’s forward multiple hovers near 19 times earnings, right at its lowest point since March.

At the same time, more than half of Russell 3000 stocks have sold off more than 20% since June.

Semiconductors — the winners of the last cycle — are getting hit hardest, which Morgan Stanley sees as a sign of rotation rather than a true bearish shift. Earnings revisions, too, are near cycle highs.

At any rate, the valuation compression suggests investors are well aware of the risks across geopolitics, rising bond yields, and higher-for-longer interest rates. 

The bond market could hold the key, according to Morgan Stanley strategist Mike Wilson.

“If bond volatility doesn’t calm down, we see breadth and price meeting in the middle in the next month followed by a strong finish to the year,” Wilson wrote in a note to clients this week.

If bond volatility does subside sooner than later, Morgan Stanley expects breadth to catch up to the index, with both grinding higher together.

The MOVE index closed at 106.61 on Tuesday, its highest level since spring, while the VIX sat at 16.04 that same day, near its own average but still lower than most investors would expect against such an uncertain macro backdrop.

According to Wilson, his firm is sticking with large-cap quality and asset-light stocks, with plans to add more risk-on names in October. 

Narrow breadth has foreshadowed choppiness and bear markets before, but this time the earnings underpinning asset prices is pointing to a more constructive story.

Partner content:

Michael Proffe has spent 30+ years beating the market and identifying powerful market trends. 

He turned $30,000 into $3 million with his trend-following strategy.

Now, he’s zeroed in on three stocks he believes could be major beneficiaries of AI’s next phase — and they’re not the names you’d expect.

📊 US Treasury yields spiked to a 24-year high before pulling back. The 10-year note briefly touched 5.34% and the 30-year reached 5.67% as investors flagged fresh unease over the US fiscal trajectory and sticky inflation. (Investing.com)

🚀 Accenture rallied more than 20% in its best session on record. The consulting giant topped fiscal fourth-quarter estimates and guided fiscal 2027 above Wall Street, with AI-related client bookings providing most of the lift. (Yahoo Finance)

🏦 Economists see September payrolls rising by 90,000. FactSet's consensus from 27 economists spans 60,000 to 130,000 with the unemployment rate expected to hold at 4.1%. (FactSet Insight)

📊 Bank of America's sell-side indicator is one notch away from a flashing sell signal. The firm's gauge of bullishness climbed to 57.2% in September, its highest reading since March 2022 and just below the 57.5% contrarian trigger. (Yahoo Finance)

Jeff Hirsch is the editor of the Stock Trader’s Almanac and a widely-followed market historian.

We sat down to discuss seasonality around the midterm election, the AI supercycle in the context of history, an updated outlook for the Nasdaq, and his favorite opportunities in the market right now.

Tune in on Spotify, Apple Podcasts, or YouTube.

🗓 October 2, 2001: Switzerland's national airline Swissair grounded its entire fleet after running out of cash, stranding tens of thousands of passengers worldwide in one of the largest corporate collapses in Swiss history.

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