Everything felt anticlimactic yesterday, but it was a very informative session. While the initial reaction to Nvidia (NVDA) was more selling than buying, the broad market was able to move out of the shadow of the Technology (XLK) juggernaut.

This is considered a great development for a market that has mostly been in the dark, while seven stocks frolic in investors' adulation. To be fair, the admiration was due to their mind-boggling earnings growth and world-changing ambitions.

With the shadow moving away, the sun shines on the rest of the market. Remember, you cannot get “green shoots” without sunshine. On that note, the more impressive part of recent action is the ability to generate excitement beyond the highfliers.

Spreading the Love

The S&P finished unchanged, but seven of the eleven sectors finished in the green.

Market breadth was overwhelmingly bullish.

Market Breadth	NYSE	NASDAQ
Advancers	1,985	2,664
Decliners	812	1,490
New Highs	236	152
New Lows	17	90
Up Volume	1.55 billion	3.23 billion
Down Volume	720.07 million	1.74 billion

Getting Ahead of Rate Cuts?

Small-caps outperformed in value, core, and growth. It's clear investors want more exposure to small-caps.

Historically, small-caps outperform when the Fed is cutting rates.

Landmines

With 40% of the names inside the iShares Russell 2000 ETF still losing money and many potentially facing difficulty in refinancing debt, the winners will be amazing. Still, the losers will be like a Marvel intergalactic villain capable of eating planets.

Today’s Session

This morning, the focus shifts back to economic data with the release of PCE data, which is largely in line with consensus.

The Federal Reserve seems okay with the rate of inflation drifting to its target, which is what this report is signaling – a very slow drift.

This pedestrian pace of disinflation should not be confused with prices coming down (deflation), although the media articulates it as such. The media has now completely made manufacturing political outcomes mission critical.

The dilemma for most Americans is adjusting to those higher prices while bowing to the pressure to keep up with the Jones across town.  It has always been an American issue (spending more than what you earn), and it's powered the economy and created fabulous wealth for those who provide us with things to buy and ways to buy those things.

What jumps out most is another decline in personal savings as a percentage of disposable income.  It stood at 7.7% in February 2020, then 32.0% in April 2020, and now it's down to 2.9%.

Note June's income was revised to 0.1 from 0.2.

The rate cut narrative is still in play heading into the long weekend. It will be interesting to see if buyers are so eager that they bid up the market for a three-day weekend.

Next up is the jobs report, where bad news will be good news, and good news will be okay.

Special Note:

Today, we are laying our brother, Byron Kirkland, to rest. He worked as a representative at Wall Street Strategies for years before going into semi-retirement. He never failed to smile and laugh each day and bring that same joy into the lives of those around him.

RIP
BK

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