Valuation impediments - restrict upside potential for now, hence no surprise at all seeing S&P leadership lag, while DJIA held up (largely Banks & Oils), as most managers are focused on earnings reports after the Close, including our long-held AMD (since 17, with portions sold between 120-150 reentered around sub-80) and strength in some newer stocks, particularly AEHR, held for two years. Oh, and AEHR (long since 7) made a record high today.

Pixabay

I'll briefly touch on the Fitch Rating cut in a bit, which is relevant. The newest indictment of Former President Trump isn't exactly a market-moving event. In a rare symbiosis, I tend to agree with Treasury Sec'y. Yellen who disputes the credit metrics that purportedly justified Fitch's ratings decision. No doubt this Government has encumbered us with incredibly huge debt, but Yellen looks at the recovery overall and has an argument. On the other hand in-principle I do agree with Fitch about the excess borrowing 'as policy' by the United States.

By the way, timing how this impacts markets will be tricky and treacherous, as what could happen is a sharp downside S&P swoon, which gets naysayers all excited, only to find they set themselves up for a sharp rebound, which harms those who play for the downside 'after' the Fitch news, at least temporarily. I'm thinking down-up and then we'll see for S&P. Part of the 'royal turbulence' (as the term 'royal' refers to the 'magnificent seven' types of mega-cap leaders). I have noted before, agreeing with a JTOS Chairman, our National Debt really is the greatest longer-term National Security risk to the United States.

After the Close, stocks that we don't particularly follow, but matter, reported at the margin better results than consensus estimates. Electronic Arts (EA) was one of those, as Caesar's (CZR) would be logical given a spending craze in Vegas, while Starbucks (SBUX) was a miss, coming in shy on revenue although sales were better...in China. But it's earnings were stronger.

You had other stocks 'miss' that we don't particularly have interest in, like the pandemic favorite Zoom (ZM), which dropped by about 6 points. Pinterest (PINS) beat on the other hand. Most bigger stocks ran-up fairly well so you get good news profit-taking and bad news selling, all of which seems logical after run-ups.

In-sum: 

There's no macro change in our view, so we won't elaborate much on what you already know and we continue to be both concerned short-term and optimistic beyond, and varying between bigger and smaller-cap stocks. S&P, in the way of Fitch's downgrade, sold off hard, then trimmed the losses later.

It's all a bit bifurcated, but we've discussed that and that includes pressure on domestic demand for Air Travel, as we discussed yesterday and is reflected in setbacks not only in Airlines, but cruise ships and hotels. It's expected, and I'd added not just time for kids to get ready for school, but weather extremes that cooled a lot of folks plans for late summer travel after hearing how others, for the most part, suffered in their so-called 'vacations', which became ordeals. I more than once reiterated good and bad experiences (good for friends visiting Northern Europe, Switzerland or Alaska, and not so good in the Med, Greece or Italy). Of course that varied, but airport / flight hassles were wide-spread.

At press-time we will envision 'the Street' pondering how to thread a needle in the wake of Fitch cutting USA ratings from AAA to AA+. It's re-steepening of yield curves, and bingo, that could be the catalyst for a big-cap shakeout right where it's 'supposed' to happen from the convergence of various trend-lines. So if it's that obvious be skeptical, and we'll look at it more tomorrow.

Hard to say if this is 'calm before the storm', but there should be periods of volatility encroaching on Senior Indexes, while it's hard for stocks that remain fairly undervalued to persist reviving through a turbulent time. It's a normal condition of 'regression to the mean', as even that evades .. so far.

Like me, you have even a Goldman Sachs trader today expressing 'taming' his bullishness, because he looked in the mirror and thought he was so bullish it just meant it was likely he had to become bearish. Either that or he's been reading my Briefing's or Tweets (hah). Tweet's (X posts these days) are the modern version of what were once 'smoke signals', that were replaced by the telegraph, and later by wireless communications. And by the way I'm not particularly bearish, just anticipate something rocky befalling the S&P soon.

More By This Author:

Market Briefing For Tuesday, August 1
Market Briefing For Monday, July 31 '23
Market Briefing For Wednesday, July 26