Yesterday’s session was akin to liberation for the S&P 500, which stumbled from the weight of the -2.51 % decline in Information Technology (XLK) but saw intense action in other sectors into the closing bell.

The 2024 rally had a Potemkin Village aura with the overwhelming dominance of growth sectors and seven stocks. Ironically, the reverse could be true, with more sectors higher but the broad market lower like yesterday’s session. The economic backdrop is also compelling, as the economy is in much more trouble than the Street wants to admit.

All That Smoke

They say where there’s smoke, there is fire, and smoke continues to bellow from those mega-cap tech and semiconductor names.

Nvidia (NVDA) was the drum major leading the parade higher, and now it's leading the way lower, having shed hundreds of billions in market capitalization.

The VanEck Vectors Semiconductor (SMH) has been in freefall and closed at a critical support point. It now has to make a stand. If it holds, the upside test comes at $240.

Advanced Micro Devices to the Rescue?

It was a fantastic quarter for Advanced Micro Devices (AMD) and Artificial Intelligence (AI) chip companies.

The company blew away revenue and earnings estimates, and the stock surged in after-hours trading:

• Data center revenue was up 115%
• Gross margin +2 ppts
• Operating margin +2 ppts
• Net income +19%

The AMD data center race accelerates.

Microsoft (MSFT) posted a solid number, but shares were initially smacked down by 7%. Management “expects capital expenditures to increase in coming years to support growth in cloud offerings, investments in AI infrastructure, and training."

Fear Returns

The Fear & Greed Index has crossed back into ‘fear,’ which is supposed to be a good development from a contrarian point of view.

More Anxious than Fearful

The market is more anxious now than fearful, but that could change with more downside pressure and the financial media hype machine.

Earnings Keep Coming

Key Industrial (XLI) names and Meta Platforms (META) are reporting today after the closing bell.

Fed Day

The Federal Reserve is expected to hold rates today but will only cut in September. I think the Fed should cut today, but I also thought they should have kicked off the hiking campaign with a 50-basis points (bps) hike. The Fed Powell playbook (below) will be studied for years to come. I’m not sure, however, if the focus will be on what to do or what not to do.

Today’s Session

Jay Powell has been myopically focused on the labor market to justify kicking off the rate-cutting cycle. Evidence is mounting. The labor market is deteriorating, but the pace of deterioration should create a sense of urgency within the walls of the Federal Reserve. 

The chief economist at ADP said this morning, "If inflation goes back up, it won't be because of labor." We also saw wage growth slow in the ECI report.

This dovetails with data from JOLTs and various wage trackers. 

Powell Steps to the Mic

The market has reacted well to the FOMC meeting this year and today is poised to take off. If Powell corroborates what the street says, there is a 100% probability of a rate cut in September. 

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