Matrix of Economic Indicators – 9/8/26
Our Matrix of Economic Indicators provides a concise summary analysis of the US economy’s momentum. We combine trends across the dozens and dozens of economic indicators in various categories like manufacturing, employment, housing, the consumer, and inflation to provide a directional overview of the economy.
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Back to Work and Back in the Red
The S&P 500 is off to another weak start after Labor Day, down about 0.4% as we write this. If the decline holds through the close, it would mark the tenth straight year that the index has fallen on the day after the holiday. The last gain was in 2016, when the S&P 500 rose 0.30%.
Since 1945, the day after Labor Day has averaged a decline of 0.14%, with gains 49% of the time. Over the last ten years, though, the average decline has been a much larger 0.81%. That recent weakness has often extended beyond the first day back. The S&P 500 has declined in seven of the last ten Labor Day weeks, averaging a drop of 0.80%. Performance over the rest of September, historically the weakest month of the year, has been evenly split between gains and losses, but the average return has been negative at -1.17%, although the median decline is a much more modest 0.05%. September declines of more than 5% in 2021, 2022, and 2023 weighed on that average.
Through year-end, the picture has been more positive. The S&P 500 has rallied over the post-Labor Day period in eight of the last ten years, averaging a gain of 3.57% and a median gain of 5.36%. The only declines came in 2018 and 2022, with 2018’s 13.60% drop standing out as the weakest by far. Those results are broadly consistent with the longer-term record. Since 1945, the index has averaged a 3.23% gain over the rest of the year, with positive returns 73% of the time.
Bespoke’s Morning Lineup – 9/8/26 – Back to the Grind
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“If people knew how hard I had to work to gain my mastery, it would not seem so wonderful at all.” – Michelangelo
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It could be worse. US equity futures are down across the board this morning as traders return to work after the long holiday weekend. Dow futures are down 0.8%, but the damage is much less in the S&P (-0.3%), while Nasdaq futures are barely lower (-0.1%) as the picture has been improving all morning. Why could it be worse? That’s because crude oil keeps rising, with WTI trading nearly 3% higher to $94 per barrel. Along with rising crude oil, energy products are also trading higher off already high levels.
Energy prices can’t keep rising without impacting the market, and at some point even a tame inflation report later this week may not mean much if crude oil prices remain in the mid-90s, approaching triple digits.
Outside of equities and energy markets, Treasury yields are little changed this morning, gold is down nearly 1%, and Bitcoin is down over 1%.
Asian equities were mostly lower overnight except for onshore Chinese stocks, which rallied modestly. The Nikkei fell 1.7% while South Korea fell a more modest 0.6%. In economic data, Japan’s Q2 GDP report showed stronger-than-expected growth at 0.4% q/q versus forecasts for an increase of 0.3%, while South Korean GDP was right in line with expectations at 0.6%.
European equities are little changed, with the STOXX 600 down less than 0.1% and no major country’s benchmark down more than half a percent as a rate hike at its policy meeting later this week is a near certainty.
In the US today, it’s a quiet morning with NFIB Small Business Sentiment being the only report on today’s calendar. That reading for August declined more than expected, but the NFIB’s chief economist Bill Dunkelberg noted that “Uncertainty remains elevated among small business owners as they face a mixed set of challenges”. Besides that report, we’re in the heart of conference season, so be on guard for companies issuing not-so-rosy comments at some of these meetings across Wall Street this week. Looking forward, while today’s calendar is quiet, the PPI and CPI reports on Thursday and Friday will be main events.
Back in late July, as the dollar was breaking out to multi-year highs versus the Japanese yen, authorities intervened to stop the slide. The yen immediately rallied, taking the cross versus the dollar down to its 200-DMA for the first time since last fall. After the initial rally, though, the yen slowly started weakening again, leading some to question the move’s efficacy.
The last week may have been quiet for US markets, but it’s been a big move in the yen. The currency has resumed its rally versus the dollar as market participants increasingly expect the BoJ to raise rates at its meeting next week. This morning, it’s trading at its strongest levels relative to the dollar since February. As the WSJ noted this morning, “Bessent’s Yen Bet Is Paying Off—for Now”.
While the yen is rallying, the Nikkei 225 has been under some pressure. The index peaked in mid-June and has been trending lower ever since. The index briefly peaked its head above the 50-DMA for about a week in early to mid-August, but quickly lost momentum. On Monday, the Japanese benchmark made another attempt to reclaim that level, but reversed lower overnight.
The picture for European stocks looks similar. The STOXX 600 peaked in early August, but it too has been trending with weaker momentum for the last few weeks, and it now also finds itself trading below the 50-DMA.
Moving closer to home, the S&P 500 went into Labor Day weekend trading above both its 50- and 200-DMAs, but it too has been trading in a sideways range since its high on August 13th. Based on where futures are trading this morning, last week looks to have been the second-lowest high since that peak in a very tight downward-sloping range of less than 3%. Not a terrible setup, but not the momentum bulls want to see heading into the weakest month of the year.
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Brunch Reads – 9/6/26
Welcome to Bespoke Brunch Reads — a linkfest of some of our favorite articles over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.
The President and the Anarchist: William McKinley arrived in Buffalo on September 5, 1901, near the height of his presidency. The former Ohio governor and last Civil War veteran elected president had recently won a second term after leading the country through the Spanish-American War and the expansion that followed. After delivering a speech at the Pan-American Exposition, McKinley returned the next afternoon, September 6, to greet the public inside the Temple of Music.
As McKinley shook hands with visitors, 28-year-old Leon Czolgosz approached with a revolver concealed beneath a handkerchief and fired twice at close range. Czolgosz, an unemployed factory worker drawn to anarchism, believed government served the wealthy at the expense of working people and viewed McKinley as a symbol of that system. One bullet entered the president’s abdomen, and although he initially appeared to recover after surgery, infection and gangrene set in. McKinley died on September 14, eight days after the shooting.
McKinley was the third president assassinated in 36 years, following Abraham Lincoln in 1865 and James Garfield in 1881. His death elevated 42-year-old Theodore Roosevelt to the presidency and pushed the Secret Service toward its permanent role protecting the president. John F. Kennedy became the fourth president assassinated in 1963, and attacks or serious plots have targeted several others, including Andrew Jackson, Franklin Roosevelt, Harry Truman, Gerald Ford, Ronald Reagan, and Donald Trump.
AI & Technology
Businesses Are Using AI to Transform Work, Not Cut Jobs (Liberty Street Economics)
AI use has jumped across businesses in New York and northern New Jersey, rising from 40% to 61% of service firms and from 26% to 51% of manufacturers over the past year. Job losses have been limited so far, with just 4% of service firms and no manufacturers reporting AI-related layoffs, and companies have been much more likely to retrain workers than replace them. [Link]
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The Bespoke Report – Summer, Out – 9/4/26
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In this week’s report, we dive into today’s jobs number and the impact it had on rates and Fed expectations. We also take a close look at chart patterns for the major indices and what they’re signaling as summer wraps up and post-Labor Day trading begins.
Closing in on 1000 Days of ChatGPT
As we head into Labor Day week, the summer is just about (unofficially) over. That means the NFL season and the holidays are all right around the corner. Another date of note is November 30th, which will mark four years since the release of ChatGPT. November 24th will also be the 1000th trading day since the release of ChatGPT, which kicked off the AI era in earnest. As we show in the chart below, the Nasdaq’s path post the release has been eerily similar to how it traded in the wake of the first major internet browser, Netscape, in 1994.
Friday is the 944th trading day since the release of ChatGPT, and the Nasdaq has risen 141.1% in that span. That compares to a 128.5% gain in the 944 days post-release of Netscape (9/14/1998). The past few years remain an impressive example of history at least rhyming. With that said, it is impossible to know how long the AI-fueled bull run will last, but assuming history continues to repeat, or at least closely rhyme, the Nasdaq would still have plenty of runway left.
Nike (NKE): Just Not Doing It
While it has served its purpose as the main US equity index in the past, the Dow Jones Industrial Average in the modern day is considered a less representative major index than other alternatives like the S&P 500 and Nasdaq. As such, its more limited exposure can miss out on certain trends, and in the past two decades, it has generally lagged the likes of the S&P or Nasdaq.
With the lagging performance aside, there have been some notable big winners among the index’s 30 components. As shown below, Caterpillar (CAT) is now up over 92% in the past year, even after the recent pullback. Earlier this summer, it was up almost 160% since last September. Meanwhile, Merck (MRK) is up over 80%, and Cisco (CSCO) has gained over 60%.
On the other hand, one stock within the Dow has been an absolute dog: Nike (NKE). The consumer apparel giant has been nearly cut in half over the past year, making it by far the worst performer in the index. As the runner-up, Home Depot (HD) is only down 21%.
As Nike (NKE) has nearly been cut in half, we would note that its weighting (the DJIA is a price-weighted index) doesn’t even come up to half of a percentage point. Accordingly, it is the smallest weight and by a wide margin. The only other stock whose price point is so low that it accounts for less than 1% of the 30-stock index is Coca-Cola (KO) at a 0.98% weight.
Given the stock’s low weight and impact on the index, it raises the possibility for it to be removed. However, as we illustrate below, in the past 30 years, a stock being an enormous decliner is not the sole ground for removal. In fact, of all removals in that time, only about half were in the red at all in the year leading up to their removal. Further, the drop in NKE would be one of the larger ones, as it would rank as the worst since General Electric (GE) when it was removed in 2018. The only other larger declines were the removals of General Motors (GM), Citigroup (C), and American International Group (AIG) in 2008 and 2009.
Summer Flings and Heartbreaks
Summer is over. Those could be three of the worst words in the English language, but as much of a bummer as it is to bid goodbye, it was a decent run for markets. Since the close on the Thursday before Memorial Day (because let’s be honest, most of you probably took off or cut out early on that Friday before the holiday weekend), the S&P 500 has rallied 3.7%. Sector breadth has been almost evenly split, with six sectors trading higher while five were lower. Leading the way higher, Health Care posted a healthy 16% rally, followed by a 12.4% gain in the Financials sector. On the downside, only Communication Services fell more than 5% (-8.1%).
With Health Care coming in as the top-performing sector this summer, it shouldn’t be surprising that three of the top four performers in the S&P 500 were from that sector. Moderna (MRNA) had a summer fling for the ages, tripling since Memorial Day. Outside the sector, Dell wasn’t a slouch either, gaining 104%.
Of the 25 stocks listed, six sectors are represented, with the most coming from Technology (9), followed by Consumer Discretionary and Health Care with five each. Financials was the second-best-performing sector this summer, but only two stocks from the sector cracked the top-performer list: Robinhood (HOOD) and FactSet (FDS).
Technology was the most well-represented sector on the “flings” list, but it absolutely dominated the ‘heartbreak” list, accounting for 14 of the 25 names listed below. The three worst performers on the list were all from the Technology sector, as Ciena (CIEN), AppLovin (APP), and ON Semiconductor (ON) all fell 30% or more.
Of the remaining 11 stocks, six other sectors were represented: four from Industrials, two each from Communication Services and Utilities, and one each from Consumer Staples, Health Care, and Materials. The only sector not to make either list was Real Estate. Not surprisingly, it experienced the smallest absolute change, with a decline of just 0.5%.
Bespoke’s Morning Lineup – 9/4/26 – Summer’s Last Stand
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“Far and away the best prize that life offers is the chance to work hard at work worth doing.” – Theodore Roosevelt
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Heading into the last unofficial day of summer and the August employment report, US equity futures are trading higher, with the S&P 500 up a modest 0.10% while the Nasdaq is up 0.54%. Treasury yields are little changed, with the 10-year trading at 4.76%. That comes despite an FT story noting that the manager of Norway’s $2 trillion wealth fund proposed to cut holdings of US Treasuries in its portfolio. Crude oil is down less than 1% to just below $91, and after a monster rally yesterday that took its price up to $82K, Bitcoin is modestly lower and trading just above $81K.
Asian stocks closed out a mostly negative week on a positive note, with the Nikkei rallying 1.3% as JGBs rallied. Despite the gains, Japanese stocks still finished the week down more than 2%. Hong Kong’s Hang Seng and the South Korean Kospi both rallied more than 1.5%.
In Europe, it’s been another quiet session, with the STOXX 600 rallying 0.1%, led higher by Germany, where the DAX is up 0.3%. Retail Sales in the Eurozone unexpectedly fell 0.6% in July versus forecasts for an increase of 0.3%
The August employment report is the only release on the calendar this morning, and the consensus forecast is for an increase of 55K jobs, which would be an improvement from July’s 23K decline. Average hourly earnings are expected to increase 0.3% with the average workweek remaining at 34.3 hours. Over the last three months, monthly payroll growth has averaged about 20K, so unless August’s report comes in significantly better than expected, overall momentum in the labor market remains sluggish.
As depressing as Labor Day weekend is for anyone who hates the colder weather, it’s been a good year so far for the S&P 500. Heading into Labor Day weekend, the S&P 500 is up over 12%, making this the sixth time in the last ten years that it is up by double-digit percentages heading into the unofficial end of summer. While 10%+ YTD gains heading into Labor Day aren’t all that uncommon (40% of all years since 1945), the current run of strength with gains in nine of the last ten years, including six with 10%+ advances, is impressive.
The chart below shows the performance of the S&P 500 during Labor Day week since 1945, and the dark blue bars indicate the years from the above chart when the S&P 500 was up at least 10% YTD. While the S&P 500 declines an average of 0.14% during all Labor Day weeks, with gains 51% of the time, in years when it was already up at least 10%, it averaged a gain of 0.35% with positive returns 63% of the time.
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The Closer – Waller Waits, Trade, Claims – 9/3/26
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- Fed Governor Waller offered much less hawkish commentary today versus his last speech in July.
- Three key AI driven categories dumped an additional $14.8bn in imports into the US in July, almost twice as large of an increase as we expected.
- Jobless claims remain at healthy levels, although claims are increasingly coming from those outside of the prime age workforce.
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