Internal | September 8th, 2024

GOOD MORNING

Here's everything you need to know this week: The stock market is still so addicted to cheap money that it’s acting like the Fed has already cut, except, like, they haven’t. The S&P 500 had its worst week since March 2023, tech stocks tanked, and everyone is scrambling. Amazon dropped 3.7%, Nvidia fell 4%, and Broadcom shed 10% after lackluster guidance. Weak August jobs data added fuel to fears that the Fed might not nail the so-called "soft landing" after all. Investors are hoping weak numbers push the Fed to cut rates aggressively, but this sell-off feels like the one markets usually throw after an aggressive cut, so will they start buying back after the get what they want?

1. Janet Yellen Says Relax

Janet Yellen is doing what she does best, calmly telling everyone to chill, baby. At the Texas Tribune Festival, J-Yellz assured us there’s no need to worry, despite yet another weak jobs report rattling investors and sending the S&P 500 into a nosedive, calling the economy “good” and “solid,” with low layoffs and steady employment. Yellen’s trademark calm? Unshaken. “I don’t see red lights flashing,” she said, as markets wrapped up their worst week since March and nonfarm payrolls missed expectations by coming in at 142,000 versus the 161,000 forecast. The former Fed Chair is indicating that this is all part of the Fed’s master plan as she keeps saying “soft landing” in that not-so-soft Brooklyn accent.  So while everyone else is sweating, Janet Yellen is still keeping it dry and cool.

2. Boeing Looking to Take Care of One of Its Many Percolating Dramas

Boeing is throwing cash at one of its problems: preventing its largest union from striking. The offer? A 25% wage bump, a $3,000 bonus, and a promise to build the next plane in Seattle. So, after the 747-Max debacle and its NASA rocket having major performance issues, this is at least one thing CEO Kelly Ortberg might count as a little victory. But union workers aren’t thrilled about settling for a 25% raise when they wanted 40%, and we’re going to go out on a limb and guess that if Ortberg is coming up to 25% with all that’s going on over at Boeing just might have labor negotiators smelling blood in the water.

3. Norfolk Southern: Our CEO Can Blow up a Town, But Not His Love Life

So, it seems Norfolk Southern’s CEO Alan Shaw might finally be in some real trouble. No, not the toxic train derailment that almost destroyed an entire Ohio. He’s maybe banging a co-worker. CNBC is reporting that the railroad giant’s board, which shrugged off the 2023 East Palestine disaster, a plummeting stock price, and an activist campaign by Ancora that aimed to remove Shaw, has now launched a probe into an alleged inappropriate relationship. Meanwhile, Ancora’s probably throwing its hands up, like, “Really? This is what’s gonna do it?”

4. The NFL is Bearish on Drake

We hope you’re coming into the trading week with a short on Drake. Kendrick Lamar is taking over the 2025 Super Bowl halftime show, and it’s a move that might be more than just music. With Kendrick headlining the biggest stage in America, it’s a clear signal that the ongoing feud between him and Drake has fully tilted in K-Dot’s favor. Drake may still be popping out hits, but Kendrick is taking the cultural crown, and that’s seriously bearish for Drizzy.

Political and Market Sentiment

With Trump and Harris virtually tied in the latest New York Times/Siena poll, Goldman Sachs is throwing a curveball, stating Harris would be better for the economy, projecting she’d create 30,000 more monthly jobs than Trump. This revelation adds serious weight to Tuesday’s debate, now a key moment in the race. Investors are keenly watching as a slight shift in polling could tip the scales. Goldman’s pro-Harris economic outlook is now on the minds of both Wall Street and Main Street, with regulatory concerns and market volatility hanging in the balance.

Global Markets Overview

Europe: European markets face-planted with the STOXX Europe 600 Index dropping 3.52% on fresh global growth fears. France’s CAC 40 slid 3.65%, Germany’s DAX took a 3.20% dive, and even the UK’s FTSE 100 tumbled 2.33%. And bond yields? Down because of course they are. September rate cuts are still in the air at the ECB, but some officials are making it clear that they don’t want anyone getting too excited about October. 

Asia: Japan's markets just had a rough week, with the Nikkei 225 down 5.8% and the TOPIX off 4.2%. Semiconductor stocks got dragged by a U.S.-led sell-off, but the real kicker was yen strength. The yen appreciated to around 142 against the dollar, causing headaches for Japan’s export-heavy companies. The yen's rise also isn't great news for the yen carry trade. With expectations that Japan might finally raise rates while the Fed looks set to cut, traders should be bracing for the fallout… we cannot emphasize “should” hard enough.

The Week Ahead

More inflation data’s coming in this week, and everyone’s guessing how much it’ll push the Fed to cut rates. But let’s also talk valuations because the S&P 500’s trading at 21 times forward earnings, which is way above its historical average, and tech is still flying high at 28 times. The AI buzz seems to be losing steam as investors question if it’s really worth the price tag. And don't forget Tuesday’s Harris-Trump debate. Combine that with September’s historically brutal market record, and this week is shaping up to be a real week indeed. Happy Monday?