The Market Brief
U.S. futures hovered near flat during early trading on Thursday after Fed officials delivered their second straight rate reduction on Wednesday to support a softening labor market.
Macro Viewpoint
U.S. stock futures struggled for direction early Thursday after Trump and Xi ended their trade meeting with a range of expected concessions, keeping markets near record highs.
The central bank cut its benchmark rate by a quarter point on Wednesday but cautioned that another reduction in December “isn’t a foregone conclusion.”
Overall, there weren’t many major surprises from the 2 p.m. statement, but Powell’s warning that a December cut is “far from certain” sent markets on a volatility ride before ultimately closing flat after a rebound in the last hour.
Prime Intelligence
Market breadth has been deteriorating rapidly over the past several sessions. Yesterday alone, over a third of S&P 500 stocks touched a one-month low, even as the index itself hovered near record highs.
If you opened your equities portfolio specifically on Tuesday with the SPX making new all-time highs, you would be in disbelief as to why you were negative for the day despite positive SPX returns.
So, how bad was it on that day? We modeled the spread to find out, and in the dataset (chart below) that spans decades, this was the lowest breadth EVER.
Although SPX reached another all-time high, it did so without the support of the broader market and mostly driven by a handful of stocks. By the close, nearly ~80% of S&P 500 constituents were in the red, with an average decline of 1.5%.
While it’s possible the rest of the market eventually joins the rally, the risk with such a concentrated advance is clear: if the leading stocks lose momentum and correlations rise, the broader market could quickly feel the impact.
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