00:00 Speaker A
US stocks closing lower with the S&P 500 sliding for the fifth straight day. Drop comes as Fed share Powell's speech looms over rate cut hopes for more of the training day takeaways. Let's get to Yahoo finance's Josh Shafer. Josh.
00:16 Josh Shafer
Josh, it was another day we keep using this word rotation, right? In the stock market and what we've been seeing a lot is just a lot of losers from the year, a lot of losers from the quarter, the laggards have been the winners, right? So what I'm going to point to here, let's go to a year to date on the sector if I can find it. There's my year to date. So the sectors that had been sort of leading, right? You have tech over there, you have utilities, you have industrials, well, let's flip to a month to date and look at where you have tech, look at where you have utilities, right? So that has been the trade that was a little bit of the trade today. You've seen that healthcares, consumer staples, that sort of defensive tilt. And if you just look at today's action, something a little bit similar or different mixes of exactly where those sectors fall, but again, you haven't seen tech be the leader, right? It's been that flow out of tech. That's been the trade for essentially over a week now. And it's been also you've seen small caps catch a bit, the Russell 2000, I think close just above in positive territory today. Well, the S&P 500 did not. So that's been the trend. Of course, the question would be whether or not that trend continues, right?
02:19 Speaker A
Yeah, on on that tech lag there, Josh, I mean, do you think it's listen, it's just it's late August, nobody's around, no one's at their desk. It's really just Josh and Josh. That's it. And let's not make too much of it or no. You think, hey, this is actually maybe it is signaling something more meaningful.
02:45 Josh Shafer
And so I I think Josh what's helpful with that, right? Is let's look at say the Russell 2000, right? That's been kind of the one of the rotation out of trades would be, well, we're going to buy small caps, right? We're going to go down and cap size. But if I put a year on it, Josh, you look at areas where we're talking about the Russell 2000 a lot, the rotation's coming, the rotation's coming, even if I put a three year on here. Again, you've seen fits and starts with that rally a lot. And what strategists are saying right now is tomorrow's going to be a big day when we hear from Jay Powell, September's going to be big. Are the rate cuts really coming? The market has started to get excited about these rate cuts. Us an index like the Russell 2000 and sort of that broader broadening trade probably needs those rate cuts. So basically, we need a little bit more data and to be a little bit more confident, but if that move continues, then strategists do think maybe we do start to actually see the broadening truly happen. Remember that Russell 2000 hasn't hit a record high in this bull market while a lot of the other indexes have.
04:46 Speaker A
All right, Shafer, bullet point number two.
04:50 Josh Shafer
Interesting manufacturing data today, Josh, out of S&P Global. So manufacturing picked up in August, it hit its highest level in over three years activity. So that would be positive from an economic growth standpoint, right? But the in the release actually sort of cut two ways. So good on the growth front, this is prices paid across all sectors. That's not good, right? That's a potential indicator of future inflation, right? And so companies are saying they're paying more, they're passing those costs onto consumers. So what you've got here is a decent read on the overall economy. S&P Global's economist saying maybe it's two and a half percent GDP we're pacing at for the third quarter, but also looking at higher consumer prices too.
06:14 Speaker A
And so how do you think that um that impacts the fed narrative, Josh? How what do you think Jay Powell makes of that?
06:25 Josh Shafer
Yeah, it sort of looks maybe stagflationary or maybe even reaccelerating, right? I mean, S&P Global's economist, Chris Williamson actually pointed out, if this was really the case and you have GDP truly accelerating, and you also have inflation accelerating, I mean, that's when we start talking about rate hikes, right? And so that's not really, of course, in the conversation at this point, but just simply looking at this data point, it definitely doesn't argue for more cuts. Josh, so when we think towards September and those debates that are starting to trickle in of whether or not they're actually going to cut, you could put this data in the bucket of eh, maybe not.
07:34 Speaker A
All right, final point, Shafer.
07:37 Josh Shafer
Final point, it's a big day tomorrow, Josh. We've spent all week talking about
07:44 Speaker A
Wind up for this day.
07:46 Josh Shafer
Shar Powell's speech 10:00 a.m. tomorrow. And I think what's going to be interesting to watch is just really what we were getting into, right? Does Jerome Powell come out? He's certainly been perhaps on the more hawkish side of Fed officials. He's not talking a lot about cuts, he's not talking about interest rates needing to come lower. And you had a guest on earlier today, Calvin from BNP. He pointed out, if Powell talks like that again, like he did at that July meeting, might shake the market a little bit. We might see a little bit of a sell off. Maybe look at that Russell 2000 we were talking about, right? That's been rallying on rate cut hopes. If Powell comes out negative tomorrow or maybe they're not cutting in September, you might see some pressure most likely.
08:42 Speaker A
Do you think the action you've seen in the market this week? Do you think in part is that suggesting, hey, maybe markets investors kind of rethinking whether that cut in September is is a lock?
08:58 Josh Shafer
Yeah, I mean, I think a little bit, right? But I also think you've seen a market that's favoring that cut, I would argue, right? You think about home builders have been rallying, they would benefit from interest rates, right? We just talked about small caps. So you've seen interest rate sensitive sectors over the past week, over the past two weeks, sort of catching a bid. So I guess you could argue maybe the market's getting a little bit ahead of itself. Again, if Powell doesn't come out and be a little bit more lenient on when they're going to be cutting and the fact of the direction of interest rates will be lower.
09:41 Speaker A
All right, all eyes on J. Powell tomorrow. Thank you, Josh.
