It was a distant session, where the closing gain of +0.38% yesterday masked the fact seven sectors traded higher after an initial hesitation.

Financials (XLF) led the way as insurance stocks surged and investors rushed into Consumer Staples (XLP) and out of Consumer Discretionary (XLY). 

The saber-rattling pressured Google (GOOG) shares, setting the tone for a down day in Communication Services (XLC), which couldn’t be offset by the rally in Netflix (NFLX) shares.

Bringing the Heat

When those big boxes and rectangles are green, the market is golden.

Semis Soar

The VanEck Vectors Semiconductor ETF (SMH) has erupted in the past seven days after the wheels came off in a combination of panic-selling and profit-taking. The former must feel terrible, but I do not understand trying to trade high Beta names with tight stops or investors going long without conviction.  The fundamental story for these names might sound too good to be true. But it’s real.

The Small-Cap Dream is Gone

Large-caps outperformed while small-caps sold off. Despite rate cuts looming, that small-cap dream has been dashed for the bow.

Here Come the Bottom Fishers

After the close, we learned Warren Buffett took a stake in Ulta Beauty (ULTA), which I guarantee was not on your BINGO card.

Bill Ackman, American fund manager, took a stake in Nike (NKE), which we brought to your attention in yesterday’s commentary. The company has a similar story to Starbucks (SBUX).

The Most Important Economic Datapoint

Today, we get the read on the Initial Jobless Claims, which becomes the most important economic datapoint. Last week, it saved the market. Now the pressure is on.

Today’s Session

The market is celebrating a slew of economic data with promising headlines. There is more trouble in the details, but Wall Street wanted to cheer any news that wasn’t as bad as anticipated (whispers).

Initial Jobless Claims came in below consensus to 227,000.

Retail Sales

The headline of +1.0 against a consensus of +0.3 is fantastic, but this is not necessarily a sign of a strong consumer.  The report is not adjusted for inflation, where prices play a role, but we must flag autos where a major internet shutdown in June stalled sales that were made up last month.

However, the actual narrative of the report is that consumers are moving away from discretionary to staples.  Grocery store sales +1.0, restaurants and bars +0.3. while Sporting Goods and Clothes moved lower, miscellaneous plunged -2.5%.

Miscellaneous Store Retailers

• Florists
• Used merchandise stores
• Pet and pet supply stores
• Office supplies, stationery, and gift retailers
• Art dealers
• Manufactured (mobile) home dealers

The trend that worries me the most right now is real wages.

Yesterday's data revealed a concerning trend: a mere 0.1% increase in real hourly earnings and a 0.3% decrease in real weekly wages. This underscores the necessity for more detailed and comprehensive data.

So, while there is cheer, initial jobless claims are misplaced.

In fact, the only August data came from the Philly Fed and NY Fed (Empire) released this morning show that hours worked continued to plunge.

Philly Fed

Empire Fed

Conclusion

WalMart's (WMT) earnings point corroborates the shift in consumer spending, even among higher-income households.

The market is cheering, and we will never fight the tape but always keep our eyes wide open.

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