It was a tough session yesterday, but the market exhibited the grit needed to turn the tide. Still, the S&P 500 is caught in a downtrend with lower lows over the past few sessions.

A growing appetite for Blue-Chips helped the New York Stock Exchange (NYSE), but the Growth stock-dominated NASDAQ struggled.

Market Breadth	NYSE	NASDAQ
Advancers	1,401	1,884
Decliners	1,392	2,297
New Highs	215	83
New Lows	54	155
Up Volume	1.12 billion	2.22 billion
Down Volume	1.45 billion	2.06 billion

Utilities (XLU) and Consumer Staples (XLP) continue to port in a storm, while the move in Energy (XLE) reflects continued weakness in West Texas Intermediate (WTI). That is not good news for the global economy, including the United States.

Heat Map

Those smaller boxes potentially represent the opportunity to make significant gains.

Recession Watch

The 2-year and 10-year Treasury yield curves finally uninverted after 850 days. This move is known as a “bull steepener,” which is odd considering it is associated with recessions and tough stock market times.

I argue that the Fed should begin the rate-cutting cycle with 50-basis points (bps).

Cause & Effect

I understand that kicking off cutting cycles is associated with a recession, but the Fed was too late to stop the recession.

The economy is so bifurcated that most people are already in a recession. Think about the 2.9% savings rate. Sure, folks with stocks and homes don’t need money in the bank, but half the nation isn’t that fortunate.

We got the U.S. Initial Jobless Claims this morning, which some believe are more critical than the Bureau of Labor Statistics (BLS) jobs report. It's not as important as the jobs report, and both are highly flawed, but they move markets. The following two days could set the stage for the rest of the year.

Today’s Session

The ADP Employment Report came in for August at 99K, far below estimates of 145K and below last month’s downwardly revised reading of 111K. Overall, the report shows the labor market is deteriorating. Notably, the services component added 72K jobs.

ADP report is only private payrolls and often the results don’t correlate with monthly BLS report.

The ISM Services is scheduled to be released at 10 am ET, which could be market moving. We will dive into it in the afternoon note.

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