What Happened Yesterday
Thursday, October 1. First day of Q4. Nobody wanted to commit.
Close | Move | Mood | |
|---|---|---|---|
S&P 500 (SPY) | 763.99 | +0.18% | Snapped a 3-day skid |
Nasdaq 100 (QQQ) | 742.03 | +0.31% | Mildly smug |
Dow (DIA) | 508.62 | +0.01% | Asleep |
Russell 2000 (IWM) | 279.02 | +0.41% | Small win, take it |
VIX | 16.39 | +0.31% | Hit 17.59 midday, then sat down |
2-Year Treasury | 4.78% | -10 bp | Exhaled |
10-Year Treasury | 5.24% | -5 bp | Off the 2002 high |
30-Year Treasury | 5.61% | -3 bp | Barely blinked |
Gold (GLD) | 382.76 | +0.50% | Fine |
Oil (USO) | 150.02 | +2.99% | Still no deal |
Bitcoin | $84,853 | +1.55% | Woke up |
The S&P 500 index rose 14.91 points to 7,666.45. The Dow added 20.51 to 50,926.56. The Nasdaq Composite gained 10.54 to 26,871.60. Energy (+1.95%) led the sectors; health care (-1.32%) brought up the rear.
The Thermometer Said Fever
The Doctors Said Wait
Remember yesterday's "one thing that could ruin everyone's day"? A hot prices number from the factory survey? It showed up right on time. ISM's prices index jumped to 77.9 in September from 71.1, way past the 72.3 forecast. That index asks purchasing managers whether they're paying more, and 58.6% said yes while 2.8% said no. That's not a survey. That's a group complaint.
ISM blamed steel and aluminum, tariffs, and oil-based products from the Middle East conflict. The headline factory index slipped to 54.5, a hair under the 55 forecast but still growing for a ninth straight month. Anything over 50 means expansion. Jobless claims came in at 197,000, under the 200,000 forecast, so nobody's getting fired either.
So rates went up, right? Nope. The 2-year yield fell 10 basis points to 4.78%, per Treasury. A basis point is a hundredth of a percent, so that's a tenth of a point in one session, on the bond that tracks Fed expectations most closely. The 10-year slid to 5.24%.
Why? The doctors called. Fed Vice Chair Philip Jefferson said the Fed's view on the next move "may take more time." New York Fed President John Williams said earlier this week there's "no need for urgency." Both vote on every decision. Odds of an October hike dropped to somewhere between a quarter and a third, depending on whose CME FedWatch snapshot you read, from about 70% a week ago.
The patient's thermometer read 77.9 and the doctor said, "Let's see how you feel Friday." That's not a diagnosis. That's a scheduling decision. The Fed is waiting on the jobs report this morning, and so is every 2-year bond that just got a little too comfortable.
Your Mortgage Didn't Get the Memo
Freddie Mac's weekly survey put the average 30-year mortgage at 7.28%, up from 7.03% a week earlier. A year ago it was 6.34%.
The survey is based on loan applications from earlier in the week, while the 10-year was closing at its highest since 2002, so Thursday's dip hasn't reached the loan office yet. Lenders raise rates by elevator and lower them by staircase.
The kitchen-table math: on a $400,000 loan, 7.28% costs about $68 more a month than 7.03%. That's roughly $811 a year, from one week of bond traders having feelings.
The Fed can talk patience all it wants. Your mortgage is priced off the 10-year, and the 10-year closed September at its highest since 2002. Patience is free for the Fed. It costs you $68 a month.
AI Was Supposed to Eat the Consultants
The Consultants Sent an Invoice
Accenture closed up 15.78% after its fiscal fourth quarter. Revenue was $18.68 billion, up 6%, and above the top of its own guidance range of $17.75 billion to $18.40 billion. Earnings were $3.29 a share. At one point the stock was up more than 22%.
For a year, the bear case on consultants was simple: AI does the PowerPoint now, so who needs an expensive human to make it? Turns out companies need someone to explain the AI. Then install it. Then explain why it didn't work. Then install it again. That's three invoices.
In a gold rush, sell shovels. In an AI rush, sell the guy who reads the shovel manual. Accenture just jumped 15.78% because the robots created more meetings, not fewer.
Nike Just Did It
"It" Was Disappointing Again
After the bell, Nike reported fiscal first-quarter revenue of $11.21 billion, down 4% from a year ago and a bit short of the roughly $11.3 billion Wall Street expected. Profit beat: 48 cents a share versus 43 cents expected. Normally a beat is good news. Then Nike opened its mouth about the rest of the year.
It now expects full-year revenue to fall by a high-single-digit percentage. Greater China sales dropped 22% to $1.18 billion. The company plans job cuts. CEO Elliott Hill said results were "below both our expectations and our potential," which is the corporate version of "it's not you, it's me, and also it's you."
The stock closed Thursday at $35.15, already its lowest close in more than a decade per EODHD. It was down about 8.5% before Friday's open.
The $1,000 test: $1,000 in Nike at its November 2021 peak close was worth about $198 at Thursday's close. Before today's drop.
Here's the Thing: Nike beat on profit by cutting costs and missed on sales because people aren't buying the shoes. You can cut your way to a good quarter. You can't cut your way to a cool sneaker. And rivals like On keep showing up at the starting line in shoes your kids actually want.
What to Watch Today
Friday, October 2 (all times CT).
7:30 AM: the September jobs report from the Bureau of Labor Statistics. The forecast is about 90,000 jobs, down from 162,000 in August. Unemployment is seen at 4.1%. Average hourly earnings are up 0.3% for the month and 3.2% year over year.
Broadcom: Bloomberg reports its banks are gathering $60 billion in debt to help fund AI chips for Anthropic and other AI companies, with Blackstone leading an $18 billion junior slice. Not announced yet. Broadcom fell 2.15% Thursday as "circular financing" worries spread.
Oil watch: US-Iran talks over the Strait of Hormuz are still proposals and counterproposals. Status: no deal. Oil rose 3% anyway.
Scorecard: the S&P 500 is down about 1% for the week going into today. It needs a good morning to finish flat.
Programming note: a September 29 executive order directs federal agencies to call artificial intelligence "Super Intelligence," or SI. We'll keep calling it AI. Our compliance department is two guys and a coffee maker.
The one thing that could ruin everyone's day
A hot wage number. ISM already showed factory prices running hot. If hourly earnings come in at 0.4% or better on top of a solid payroll count, Thursday's "let's wait" turns into "let's hike," and that 10-basis-point rally in the 2-year gives itself back before lunch.
The doctors said wait until Friday. It's Friday.
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