Markets are shaking off a long weekend in a sour mood. The Dow is down over 500 points. Healthcare stocks are hitting hard and September is living up to its reputation. Underneath it all, there is an escalating US-Iran conflict, the Treasury stepping up bond buybacks, and an AI trade that just will not quit. Joining me to discuss this is Michael Reinking, Senior Market Strategist at the New York Stock Exchange. Michael, thanks for joining us.
Thanks for having me. A lot going on.
The Dow is down over 500 points. Most of the S&P is in the red. Is September being September or is there something bigger going on?
Equities have been under pressure throughout the week. We have continued to see escalation in the Middle East, oil prices are moving higher, and Brent is back above $100 a barrel — which is adding to pressure in Treasury yields, which are hitting new highs. Yesterday's Treasury buyback announcement did not live up to expectations. Yields continued to move higher following the release of the buyback schedule. And then we have this week's inflation data ahead of us. In about 15 minutes we are going to get PPI, and tomorrow we have CPI. That is going to really set the tone and give us a better understanding of what we might see from the Federal Reserve next week.
Brent touched $100. How serious is the market taking this and what is the level that starts spooking people?
People are on edge. Moving through that big round number of $100 a barrel puts it right in the radar. If we start to see prices really accelerate from here, that is going to add to some of the concern. What we have seen this week is a throwback to earlier in the year — some underperformance in equal weight areas of the market, consumer discretionary which makes sense given the move in oil. Tech has been offsetting some of those losses as we have had some positive reviews of the new model releases coming out.
The Treasury buyback announcement came out yesterday. Is that a real fix for yields or is it just buying time?
It was supposed to calm yields — it has not really worked. I do not think it is a real fix. The other piece adding to the move in Treasury yields this morning is President Trump saying he would write cheques to every adult American if Republicans won the midterms. So that shows a continuation of the idea that there is no real resolve within Washington to fix the fiscal issues that we have. That is also adding to some weakness in the Treasury yield market.
Let us talk about tech and AI. Apple released the new foldable iPhone yesterday. How is that sector doing?
Within tech, we had started to see some rotation out of AI tech hardware into software over the last month. That has started to reverse as we have gotten some of these new model releases — the Astra model from OpenAI and Meta's Muse AI agent, which has also gotten pretty positive reviews. That has really stoked some of the flames underneath the AI tech hardware trade. And speaking of hardware, Apple's foldable phone had a muted response yesterday, but it is getting some pretty positive reviews that might lead to some upgrade cycles ahead.
What is one thing you are watching towards the end of the week that could move markets?
Clearly the inflation data we are going to get over the next two days. If markets are hovering around 50-50 in terms of what we get from the Federal Reserve next week, that inflation data is going to very much set the stage. We also have an ECB rate decision coming up at any moment now.
Mike, thanks so much for joining us today.
Thanks for having me.
