The Economy Is Hot! 

Manufacturing

• Purchasing Managers’ Index (PMI) 57.0, consensus 53.7
• New Orders highest since April 2022
• Employment highest since March 2022

Services

• PMI 58.7, consensus 53.8
• New Orders highest since May 2022
• Employment highest since June 2022

Composite

• 58.4, consensus 55.3

We already knew a manufacturing renaissance was underway, but it seems to have shifted into an even higher gear. In addition, the service economy is also firing on all cylinders.

In a common-sense world, this would be great news, worthy of celebration and high stock prices. In the world of a hyperactive Federal Reserve, it's too much of a good thing and must be tamped down.

Bond Yields Spike

The ten-year bond (TNX) yield saw its biggest spike since Liberation Day last year.

Meanwhile, odds of a rate hike in October rose sharply. That would be a remarkable move ahead of the midterm election.

Fed chairs and presidents have been at loggerheads throughout history, especially over rate changes or inaction ahead of elections. President Bush blamed Alan Greenspan for his 1992 defeat. It goes without saying that Trump would be furious if the Federal Open Market Committee (FOMC) hiked rates in October – especially because the economy is finally in gear.

Only one sector was higher; also, software (IGV) bounced after initially resuming its downward slide.

Discombobulated

Never has the stock market been this scattered – every stock moving to its own ‘bear,’ and it's mostly lower.

The number of names changing hands above the 200-day moving average has plunged to 48%.

Drawdowns

Software stocks have suffered the most.

Factors

Yesterday’s red shaded all factors, with small-caps under the most pressure, as yields spiked.

It's interesting that retail has been selling, and hedge funds and institutions have been buying. 

Muse is Hot: American AI Is Crushing It

Lots of tech leaders at the state dinner tonight. I suspect there won’t be an AI agreement, but I hope Americans see why it's important not to give away this leadership. 

Here are some of the biggest names expected to attend the Trump-Xi state dinner on Sept. 24:

• Mark Zuckerberg, Meta

• Elon Musk, Tesla/SpaceX

• Jensen Huang, Nvidia

• Sam Altman, OpenAI

• Sundar Pichai, Google

• Jeff Bezos, Amazon

• Tim Cook, Apple

• Satya Nadella, Microsoft

• Michael Dell, Dell

• Jamie Dimon, JPMorgan

• Jane Fraser, Citi

• Albert Bourla, Pfizer

The dinner is scheduled for Thursday evening at the White House during Xi Jinping’s Sept. 23-25 U.S. state visit.

Today’s Session

The focus is back on the Fed Funds rates as oil has turned higher and yields are at multi-year levels.  The question is whether this is the consequence of a strong economy and should be allowed to percolate longer or whether it's all about inflation.  Most of my favorite economists think the case for more rate hikes is weak, and I agree.

The key drivers of inflation are peaking or have peaked.  The AI buildout is now considered to be a $10.0 trillion investment – the kind of domestic investment many thought was long gone from these shores. 

President Trump has ramped up his public pressure on the Fed since the hike, demanding lower rates as he tries to use the bully pulpit. That approach could backfire in this situation.

Comments

It's September, at last check. And as usual the StMkt is Down. We can fret about the reasons and macro-this-and-that but it's the dog days of September. Embrace it. 'Nuff said. T in Tx T in Texas on 9/24/2026 10:43:55 AM

In business if your not growing you are dying. Let it roll. Jack Stevens on 9/24/2026 11:18:45 AM

It would be best if one country did NOT HAVE INFLUENCE FROM AI. Maybe we could divide up the various areas of AI. MY THOUGHT--Put all of our AI energy into developping cures for cancer, Alzheimer's and many other diseases so that---THE WORLD WOULD TRY TO BEAT OUR DOOR DOWN TO GET WHAT WE CAN OFFER. THAT IS LEVERAGE !! HEALTH IS WORTH MORE THAN MONEY ! James G. Williams on 9/24/2026 11:37:00 AM

My question is why do we even have a Fed since they usually create more problems than they correct, playing God does have it's drawbacks Tom Sanders on 9/24/2026 12:04:56 PM

Again the Fed has a habit of screwing up the economy with their opinions, mostly political! Tom Sanders on 9/24/2026 12:07:27 PM

"It's interesting that retail has been selling, and hedge funds and institutions have been buying." It seems like we should be channeling Buffett and Payne here in this environment. Retail investors need to "know what they own" and stay the course. Sound familiar??! Steve Fifer on 9/24/2026 12:13:35 PM

My self-serving instinct is to let it run hot and take advantage of the opportunities. However, I believe the biggest challenge is the inflation rate caused by the war and tariffs. I believe that even after the war is over, prices will not come down, except for gasoline prices. Companies are charging more money for their services and don't think they will charge less; they will pocket the margins. So unfortunately, I think the Fed will have to increase rates to choke the economy. Patrick McGinley on 9/24/2026 12:23:53 PM

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