The Dow gained 235.06 points (.58%) on Thursday while the S&P 500 rose 0.75% and the Nasdaq closed 1.0% higher on the day. The S&P 500 cut its September losses to just 0.9% and sits only 1.3% from a new record high. Shares of mega-tech and semiconductor companies continued their rally Thursday with Nvidia gaining 1.9%, while Google parent Alphabet and Meta Platforms each gained more than 2%.
sources: CNBC, WSJ, Bloomberg
Closing snapshot
source: ThinkOrSwim
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Playing defense
There’s been a flight to safe haven assets as questions about the health of the U.S. economy, the magnitude of Fed rate cuts, and uncertainty about the presidential election have investors playing defense. Shares of utility, real estate and consumer staples companies have been the best performers so far in September.
Gold (which made a record high Thursday) is also outperforming and bonds are on track for their best month since December as yields fall.
source: NYT, CNBC, Bloomberg, WSJ
Venture Capital
VC behemoth Sequoia Capital believes most of the money to be made in AI will come from building applications, rather than building models, though the firm is investing in both according to partner Pat Grady. Speaking at a Goldman Sachs conference, Grady said his firm has invested $150 million in companies building foundational models such as OpenAI, Ilya and xAI. These models, which are the building blocks for the products offered by many AI companies, are expensive to build and Sequoia’s investment to date seems a wee small for a company with $55 billion of assets under management (AUM).
On the other hand, Sequoia has an “order of magnitude” more dollars invested at the application layer even though the revenues being generated by applications are currently much smaller. Sequoia believes that the application layer is where the greatest number of billion dollar companies will come from.
sources: Bloomberg, WSJ
“The years teach much of what the days never know.” – Ralph Waldo Emerson
The ECB cuts rates
The European Central Bank cut rates on Thursday for the second time in three months. The ECB lowered short-term interest rates from 3.75% to 3.5% in an effort to bolster a weakening European economy and reduce a widening policy gap with the Federal Reserve. Major central banks (except the BoJ) are shifting focus from fighting inflation to supporting growth as inflation falls steadily while economic momentum sputters.
sources: Bloomberg, WSJ
PPI
The Producer Price Index, or PPI rose by 0.2% in August versus July, in line with expectations. Year-over-year prices increased 1.7%. Core PPI, which exclude volatile food and energy prices edged up by 0.3% on the month, higher than expectations of a 0.2% increase.
sources: Bloomberg, WSJ, Labor Department
In other news:
PwC is planning to layoff 1800 workers in its first formal job cuts since 2009 according to the WSJ.
U.S. Secretary of State Antony Blinken signals that the West is consider allowing Ukraine to strike deeper into Russia, as Russia acquires ballistic missiles from Iran.
It’s a big week for Intel as its board considers whether to alter the CEO’s turnaround efforts.
Retailer and meme stock darling Game Stop is speeding up store closures after its sales fell 31.4% last quarter.
Relief at the pump:
sources: WSJ, CNBC, Bloomberg
The stinger
Disclaimer
This letter is not offering investment, trading, or investment advice nor is based on any individual portfolio or business operation. We are are not a registered investment, stock nor commodity advisor. One should consult with their own registered advisor to discuss investment strategies that are appropriate for their business or personal goals, risk tolerance and financial situation. Information in this report and on any website is derived from a variety of source believed to be reliable however no representation is made that the information is accurate, complete or correct. These lessons, newsletter and site content is not intended nor shall not constitute or be construed as an offer or recommendation to “buy”, “sell”, “trade” or invest in any securities, commodities, futures, options or other asset referred to in said lessons, reports or newsletters. Rather, this research is intended to identify situations and circumstances that those in the trading community should be aware of to better help assess and improve their own risk management skills.
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