Happy Friday, investors. The S&P 500 cleared 7,800 for the first time Thursday after a second cool inflation print in three days took another Fed rate hike off the table.
Retail sales for July drop at 8:30 AM today to mark the last key data point before Jackson Hole.
Let's dive in.
Calm at the surface
Wall Street’s fear gauge has not been this quiet since the first week of January.
The S&P 500 just hit another record high while the VIX finished at 14.6, roughly 30% below its long-run average.
Volatility that cheap speaks to how calm trading has been, though it doesn’t necessarily mean choppiness won’t come back.
Index volatility has remained depressed in part because correlations between individual stocks have broken down.
As I discussed on Fox Business on Thursday, earnings have propelled niche AI names up or down double-digits in moves that trump any market-wide responses to inflation or jobs data.
That dynamic keeps the VIX suppressed. S&P 500 price action has reflected that.
The index has moved an average of 0.38% over the last five trading sessions and it hasn’t dropped 1% since July 29.
Notably, too, the last time the VIX moved at these levels in January the S&P 500 traded 13% below Thursday’s closing price.
Macro investors will point to a more challenging backdrop today compared to 8 months ago:
CPI inflation is running at 3.4% year-over-year
Wholesale prices are at 4.7%
30-year Treasury yield is above 5.2%
To be sure, none of this is meant to come across as a sell recommendation.
Historic earnings continue to give bulls plenty of reason to keep buying stocks, and in the market’s view the Federal Reserve is now further away from a rate hike than just a few days ago.
That said, calm trading in the index can be largely chalked up to single stocks canceling each other out.
That works right up until they start moving the same direction.
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Market snapshot
Elsewhere
📊Producer prices cooled faster than expected. July PPI rose 4.7% year over year against a 4.9% consensus and a 5.5% prior print, adding fuel to a potential September rate cut. (Yahoo Finance)
🏦 Silver Lake is in talks to take Workday private in one of the largest software buyouts ever. The deal would value the human-resources software company at roughly $43 billion. Workday shares jumped nearly 20% on the report. (Reuters via Yahoo Finance)
🚀 Nelson Peltz's Trian is assembling a consortium to take Wendy's private. Peltz already owns 16% of the fast-food chain and is bringing in outside backers including Flynn Group for a bid expected in the coming weeks, sending WEN up about 12%. (Quartz)
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Rapid-fire
Coherent fell 14% as optical component stocks gave back recent gains (Yahoo Finance)
Strait of Hormuz vessel traffic hit a near three-month low as the U.S.-Iran conflict grinds on (CNBC)
Reddit stock jumped double-digits after being added to the S&P 500 (Barron’s)
Initial jobless claims rose to 209,000 topping the 202,000 Bloomberg consensus and hitting a two-month high (Bloomberg)
Trump officials rolled out an AI system to catch tariff dodging by Chinese exporters (Bloomberg)
Inflation doesn’t bother investors like it once did (Opening Bell Daily)
Full Signal
Kenny Polcari is the chief market strategist for SlateStone Wealth. We discussed why the AI bull market is still early, parabolic earnings, a handful of specific stocks he currently owns, and how he’s positioning for the next rally.
Tune in on Spotify, Apple Podcasts, and YouTube.
On this day
🗓 August 14, 1935: President Franklin D. Roosevelt signed the Social Security Act into law, creating the payroll-tax-funded retirement system that reshaped US household savings, labor economics, and every fiscal debate that followed.
Last thing
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*Distributor: Foreside Fund Services. An investment in JEDI is not a direct investment in Shield AI.