Good morning,
Futures are sharply lower this morning, led by the Nasdaq, as over the weekend, top AI founders appeared to succumb to pressure to slow down the pace of AI development.
While I’m not in the business of rooting for lower equity prices, the early morning price reaction does provide some short-term validation of last week’s Overtime report conclusion that semis are not out of the woods. And the SOXX was already set to be featured as a potential pitfall in today’s report.
Some other things I’m thinking about as we start this week are: Does the market actually want the Fed to hike? And are we entering a correction or just already in one?
Tackling the latter point first, 31% of the Russell 3000 traded to a one-month low last week, so if you pick individual stocks, it already feels a lot more like a correction than the 2.3% drawdown in the S&P 500 would imply.
On the Fed, Wednesday’s interest rate decision coincidentally comes on the average intra-month peak for the index, so it seems almost too easy (but not necessarily wrong) to say the market may not like whatever it ends up doing.
In general, you would expect equities to favor dovish policy, but I found it interesting that the S&P 500 rallied on Friday, even as fund futures shot up following the CPI print. It’s almost as if rates at the long end need arresting, no matter the catalyst.
