What’s Keeping Stocks Near Record Highs?

Let's bring in Michael Ryan King, good friend of ours here on the show and a very good friend of mine personally, senior market strategist here at the Big Board.

So.

Not by the number at all-time high, but basically still at all time highs.

What is keeping us afloat for the most part right now?

Yeah, absolutely.

So I mean to take one quick step back, if you go back to the Fed meeting, right, the, the rally that we had from the day of the close of the Fed meeting to last week's high at the open on Wednesday, the S&P 500 was up about 500 points.

So call it 6.5% in like a little less than a handful of trading days, right?

And since, you know, since.

Last Wednesday we've really been consolidating.

We're in about a 50 point range for the S&P 500, right?

So we're just marginally below that all-time high.

I think, uh, you kind of Peter talked a little bit about it, right?

We're seeing the rotation, right?

So we've, we've seen kind of the tech stocks that got really just destroyed throughout the month of July kind of bounced back last week.

They did a lot of the heavy lifting, right, but you, you've seen kind of other areas of the market, you know, kind of also pick up the slack during the month of July.

So despite the The fact that you had memory stocks and semiconductor stocks that were down 30 to 40% in the month of July.

You had the S&P 500 that was hovering down 23, 4%, you know, just below those all-time highs.

So you've seen a lot of strength underneath the surface.

Earnings has really been the big story in terms of what is keeping this market afloat from my perspective.

You mentioned the Fed.

All eyes now.

What do we have?

We have 3 FOMC meetings left September October 1 in December for September for about 50/50, kind of a coin flip.

Hold, do we hike?

What may change that calculus for the Fed between now and then?

Yes, so I think, you know, Friday's jobs number, which you know was down 23,000 jobs, right, that does take a little bit of the pressure off of the Federal Reserve, but they've kind of really told you that the real kind of piece of data that they're focusing on is that inflation data, right?

So we do have CPI on Wednesday, PPI on Thursday.

That inflation data is going to be really the key, the key driver in terms of.

What happens from here, you know, last week there was a story in the FT suggesting, you know, from sources close to Warsh suggesting that if, you know, the inflation data came in hot between now and then that he would support a rate hike.

That's not necessarily like all that out of consensus, right?

I mean, obviously if inflation is moving higher, you know, you would expect, you know, the Federal Reserve chair to support a hike, and I think the other piece of that to keep in mind is that if the rest of the committee was going to hike.

I don't think he would want to vote in the minority and be at the center, right, because then it gives that appearance that he's kind of lost the, you know, has lost the committee, right?

So you know, if we do see some hot data, we've heard quite a bit of hawkish commentary from some of the folks on the Federal Reserve, we could see a hike in September.

It's interesting.

You look back at Bernanke, Yellen, Powell, they all raised interest rates their first or second FOMC meeting.

I learned that last week.

That's that's interesting.

I hadn't really kind of back, but now that now that you said.

That does, that does kind of cracked the history books like maybe some precedent here, so we'll see of course what Warsh has to do moving forward.

The yield curve, man, oh man, I love talking about treasuries.

It's kind of like the less splashy part, but it's really important here.

The 10 year, the 20 year, the 30 year, they're all trading at multi-year highs.

What does that mean in terms of potential bigger picture pressure on equities?

Yes, I think, you know, that is kind of, I think the key thing to kind of pay attention to in terms of where, you know, what can start to derail things from here.

Right as we have kind of the long end of the yield curve is sitting right right around those all time, you know, right around recent highs.

We're a couple of basis points below, you know, as we watch oil prices moving higher, right, that does kind of continue to put some pressure on the yield curve.

We're also just seeing so much issuance coming from kind of that technology sector, right, that's also having an impact where you're just having to digest all of this paper, you know, that being said.

Google last week they brought another $25 billion of new financing to the market, you know, pretty well, pretty well received by the market.

So you know we have additional supply and kind of those inflation pressures that are kind of pushing things higher.

Yes, corporate debt issuance is also one of those less flashy things like super important if you want to learn about go down those rabbit holes.

I mean we talked a little bit already about oil, but I want your take.

The president said this weekend we are low keying.

I'm not personally sure what that means, but he also said we're only semi-negotiating with Iran.

How are you being geopolitical risk?

So my colleague Eric earlier this morning said he went from the DMX song of Hit Em Hard to a yacht rock version.

You know, we're low keying, we're low keying.

You know, just before we came on, he actually said that the Strait of Hormuz is open, so he did amp up that, you know, kind of his rhetoric a little bit this afternoon, you know, over in the In his interview with Axios, right, he had suggested that we were going to start to allow the economic pressures to mount to bring them back to the table, you know, this afternoon, you kind of once again brought the, you know, kind of the military escalation back into the conversation.

One man who has never low keying his interviews here on Taking Stock, the great Michael Ryan King of the Big Board, my man, come back anytime.

All right, thanks for having me.