We are officially finished for trade this week and on this Friday session. Let's take a look at the tape to see where the major indices fared. The Dow Jones Industrial Average down by about half of a percent. The S&P 500 off four-tenths of a percent. The NYSE Composite down by three-tenths of a percent. The Russell 2000 actually up by three-tenths of a percent. So small caps certainly outperforming here in this market today. Joining me now with more is Peter Tachman. He's the Einstein of Wall Street. You know him, Peter. Great to see you.
My pleasure. It's good to be here.
Rounding out the week, what do you make of this market?
You know what? I mean, it's kind of curious. Let's think about it. We're through the end of the summer, but Labor Day weekend's sort of a big deal. We're seeing a light volume for the last four or five days. It picked up a little bit in September 1 through today because you have fresh money coming into the market. I think what moved the market, and a lot of what's been moving market, I think, is anxiety around what's happening in the Middle East, lack of clarity. and the price of oil spiking up after the attacks last week. We've had these trades. In the absence of earnings and something specific that investors can bite their teeth into, we've had the oil market downtrade. Today was not that trade. Today was, obviously, I think it was a lot to do with the jobs number. We have a Fed meeting coming in a couple of weeks. There's anxiety about how sticky inflation is. What's the Fed going to do? We went from sort of an even money, there's no chance they're going to raise rates to a 60% or more, possibility based on what the economic data that's coming out, whether we actually do raise rates or not. And so that's kind of got the people a little bit edgy coming into a three-day weekend. Three-day weekends tend to be more on the red side. We had one down day earlier in the week, two nice rally days we saw, right? And so we see good momentum on the way up, and then sort of sluggish momentum on the way down, which I appreciate. And so we'll close out the week. Think about it. We're still at these frothy numbers, for sure, right? And so given all the things that have been thrown at this market, 86% of the S&P beat earnings and guidance. That's impressive, thinking that the numbers we're looking at were from the three months that we were in the middle of a war or a conflict, whatever you want to call it. So with all that, I think that's a big deal.
Yeah. I am curious now how much the inflation data matters, right? The Fed has a dual mandate. It's meeting mid-September, as you referenced there. These job numbers, not only better than expected for August, but upward revisions to June and July as well. So how does the inflation component fit into this now in terms of the data that's on deck?
I think it fits in a lot. I think, you know, we've seen that, look, part of the month we've got earnings that tend to drive the momentum of the market. Then we've got the war in the Middle East that can drive it, right? The oil, as I described, the oil trade versus the market trade. That's significant. Think about it. Oil above $90 for three, four, five months sustainable at those levels has a massive inflation component to it and implications in a big way. I mean, think about it. Because of that, the price of oil Think about it, we started at $67.39 on oil when the war broke out. We went to $120. For every $10 of a barrel of oil, increase in price is equivalent to 1% GDP. So we went from a solid, nice, strong economy at 4.2% before the war, virtually to flat, right? And so we've been fighting that with a new Fed chairperson. There's a dissent amongst the ranks in the governors that we've had, which we haven't seen for a while, more dissent than we've ever seen before. So it's like, what's the, there are a lot of moving parts to the story. And so you've got a Fed, great thing about this guy is, and I respect him, and I was a major J-PAL fan. The bottom line is he does what he wants to do, and he doesn't tell everyone about it beforehand. kind of like a true economist and a true statesman, kind of, in a way. And so, you know, we're not sure what he's going to do. There's no way to predict it. Anything can happen in the next two weeks. Think about it. I don't think anybody predicted that we'd have such great numbers and revisions for the last three months. I mean, it's been sort of an odd summer. Since when do we have like a rally? Unless it's maybe summer jobs or stuff like that. Sometimes, you know, the number is not that distinct, like that the economy and unemployment is really boosting up. that we have more jobs than expected. So there's so many moving parts.
Okay, September historically is more of a choppy month for markets. So what do our viewers need to know, of course, as we get deeper into the month of September?
I think everybody, it's a day at a time, in my opinion. It's really going to be, all eyes are going to be on, look, we had a lot coming out of Jackson Hole. Right, you know, everybody is really listening to economic data is for one thing, the Federal Reserve and the stickiness of inflation is another thing, the conflict in the Middle East, okay, and the oil trade trading at these higher levels for a sustained period of time. Think about it, the price of oil going up, you're talking about trucks are paying more for gas, everything, building houses. We're in the midst of this amazing revolution in the AI space. We're building data centers. Bottom line is Google announced no free cash flow for the first, no free cash in their balance sheet for the first time. What does that mean? That means the CapEx spending that they've put in towards AI is not being offset by monetization yet. The shareholders are impatient. And so with all that going on, I'm like blowing my own mind by thinking about all that I just described that goes into decision making by the Fed chairman and investors. So how do you position yourself? You're right. September is choppy. Right. You've got the Fed meeting coming out of a summer. And on top of that, we've got all these things going on.
Right.
So, you know, we've had to go back to that August 6. What was it called? The carry trade. Remember two years ago that in Japan and that overnight market opened down huge. And then this September, when they actually cut rates for the first time, the market reacted aggressively on the downside. These are things that the market has sort of PTSD sometimes. Right. And then you're already starting to think about October and the crash of October. You know, it's sort of funny. Investors are sort of quirky. And then you've got a whole new group of retail investors who are just trading the market. Right. And they are a component. They're a legitimate component now. So people need to go.
All right, Peter Tuchman, Einstein of Wall Street.
Three-day weekend, Nixon 5, I love it. All right.
Cheers. Thanks so much, sir.
