Transcript of THE BOND MARKET REVOLT: Yields Surge 26 bps as Hike Odds Hit 85%!
Wall Street Truthbombs
0:00Hello everyone. I'm Mark Malik, founder0:01of Wall Street Truth Bombs and CIO at0:03Sebert Financial. This recap is0:06sponsored by Sever Financial, where0:08investing is for everyone. Now, let's0:11break down the big themes that drove0:13markets this week, the top three stocks0:15that were very interesting to me at0:17least, and the key economic data behind0:20it all, and what's coming up next week0:22that you absolutely positively need to0:24have on your radar. So, stay tuned for0:27all of that. My friends, this was a0:29short week that felt well, quite0:31frankly, like a long week. Monday was0:34closed for Labor Day, so we got four0:35full trading sessions and three were0:38actually pretty ugly. The S&P 5000:40finished down 8/10en of a percent. The0:43Dow, it lost 841 points or 1.6% and the0:47Nasdaq fell 7/10en of a percent and the0:49Russell 2000, the small cap index, well,0:52took the worst of it. It was down 2.4%.0:56Friday's 1% rally that we had snapped a0:594-day losing streak, an ugly one, and1:01pretty much saved the scoreboard, but1:04not the story. This was the week the1:06cost of everything, my friends, pretty1:08much went up, and the market went1:10looking for somebody else to pay for it.1:13It started, not surprisingly, in the oil1:15patch, but it didn't stay there. US1:17strikes on Iran linked tankers and1:19Iranian retaliation held traffic through1:21the straight of Hormuz at roughly just1:2410 ships a day and Saudi Arabia's Jan1:27refinery was hit yet again. Uh Brent1:30pushed through 100 bucks on Wednesday1:32for the first time since July and WTI1:35settled Friday and 100 bucks and 5.1:38That's down $2431:40after Iran on Friday agreed to talks in1:43Oman, or at least they said they were.1:45But still, it's up roughly 9% on the1:47week. And this stopped being a commodity1:49story when wholesale diesel prices rose,1:52get this, 24.1% in a single month. My1:56friends, you know this cuz we talk about1:58this all the time here at Wall Street2:00Truth Bombs. Diesel is not a consumer2:02price. Diesel is the price of moving2:05everything else. So, pretty much2:07anything that you touch has a component2:10in diesel. The bond market, well, the2:13bond market got the message first, as it2:15usually does. The 2-year yield went from2:174.37% to roughly 4.63%2:21in just four sessions. That's a 52- week2:24high. The 10-year hit about 496, that's2:27the highest since 2023. That is uh 262:31basis points of tightening before the2:33Fed even sits down to have their first2:36government donut. The Russell 2000 fell2:392.4% while the NASDAQ lost less than 1%.2:43Small companies, as you probably know,2:45borrow at floating rates, so when you2:47see yields going higher, it affects them2:49almost immediately. Mega Cap Tech, well,2:52they lend money to other people. Okay,2:55we're about to wade further in, but2:57before we do, if you like this type of2:59content, my friends, please click like3:01and don't forget to subscribe. It's3:02really important to be in the know, and3:04this is exactly how you do it. Okay,3:07Friday, my friends, the consumer spoke.3:11Michigan preliminary sentiment came in3:12at 47.8 against 51.0 expected and 51.03:18from August with expectation component3:20at 45.8. And this is the tough one here.3:24The one-year inflation expectation, it3:26jumped to 4.6%3:28against 4.0%3:31expected. That, my friends, is one3:33combination uh that no central banker3:36wants to hear. A consumer who feels3:38broke and expect prices to keep climbing3:41anyway. Let me tell you why central3:42bankers uh fear that number so much.3:45It's all about expectations and what3:48consumers expect. If consumers expect3:50prices to continue to rise or stay where3:52they are, that puts pressure on them and3:55it affects a their consumption patterns,3:57but b importantly it affects what they4:00ask for in terms of wages from their4:03employers. So when they expect prices to4:05go up, they would like to get paid more4:08and that puts pressure on employers to4:10pay higher wages. If wages goes up, that4:14puts pressure on corporate margins. And4:16then corporations, well, what do they do4:18to keep those margins high? They raise4:21prices. That is called a that is called4:24a wage uh a wage inflation spiral. And4:29people, excuse me, economists fear that4:32number. Uh it's not happening yet, but4:34if this keeps happening, we can expect4:36uh to see that. I could tell you that4:38the central bankers who are going to be4:40meeting this week are looking at that4:42very very closely. So you should too. So4:46let's line it all up. Energy was the4:48input. The bond market was the4:50transmission. And the consumer was as4:53always the casualty. And exactly one4:56buyer never asked the price. And who do4:58you think doesn't ask prices these days?5:00Only one. That is of course artificial5:03intelligence infrastructure. And your5:05truth bomb for the themes of the week5:07was is this. Everyone spent the week5:09arguing over whether the Fed will hike5:11on Wednesday, but the two-year well the5:14two-year already hiked 26 basis points5:17without even asking permission. When the5:19bond market moves first, the Fed is not5:22setting policy. It's just simply5:24ratifying it. Investing in your future5:27doesn't have to feel intimidating. At5:29SERT, you're never on this journey5:31alone. Our team of adviserss, brokers,5:33investment managers, and insurance5:35professionals is with you [music] every5:37step of the way. We believe your5:38financial plan should be as unique as5:40you are, not a one-sizefits-all5:42template. As a leading brokerage and5:44financial services firm, we tailor our5:46solutions to your [music] goals, your5:48timeline, and the life you're building.5:51If you're ready to take the next step5:53toward true financial freedom, visit5:55sever.com to learn [music] more.6:01And those themes showed up pretty6:02clearly in the individual names that6:04moved this week as well. Which brings me6:06to this week's top three stocks. All6:09three asked the same question. Who eats6:11the cost? Let's start with stock number6:14three. And that stock is Amgen AMGN.6:19Amgen fell 10.08% on Tuesday to 393176:24and finished the week down more than6:2613%. The catalyst wasn't even Amgen's6:29drug. Novartist released phase 3 topline6:32data on September 4th for pelicarin. I6:35hope I pronounced that right. And in6:378,3236:39patients, well, it missed its primary6:41endpoint. It lowered lipoprotein just uh6:45fine, but it did not cut heart attacks6:48uh for strokes or deaths. And that's a6:51problem. Uh with Monday closed, Tuesday6:53was the first chance to price it.6:55Novartis not surprisingly dropped 14%.6:58Now, Amen, Angen got hit because its own7:01phase 3 drug, I think it's called Opa7:03Opacerin, uh, that targets the exact7:06same pathway as the other drug. And7:09cut the stock to market perform. My7:12friends, the truth bomb on that is this.7:13When one drug fails and two different7:15companies lose over 10% in a single day,7:17you're not looking at a failed drug. You7:19are looking at a crowded theory. Okay,7:22stock number two. This is one you7:24haven't heard in a while. That is Huelet7:27Packard Enterprise HPE. Don't confuse7:31that with Huelet Packard. Two different7:33companies. Huelet Packard does the7:35consumer product, the stuff that you and7:36I might buy. Hula Packard Enterprise HPE7:40sells to surprise surprise data centers.7:44It jumped 12.44%7:46on Friday to 62 bucks 9 and it finished7:49the week up roughly 19%. Dell, another7:53company in the space, closed up almost7:5412% on the same day. My friends, neither7:57reported earnings this week. They7:59rallied on somebody else's spending8:01plan. Surprise. The setup was already8:04built. HPE posted 12.2 billion of8:06revenue on September 2nd. Earlier in the8:09month, that was up 34% with a record 7.68:12billion. Artificial intelligence8:14backlog. Well, that's that's a word that8:16shows up a lot lately. Super Micro, you8:19know that company that rose more than 6%8:21on the same read through. Here's your8:23truth bomb on that. The safest way to8:26own art artificial intelligence boom is8:28not to own the companies spending the8:30money. You finally figuring that out?8:32It's to own the companies that are8:34actually cashing the check. Okay, that8:38brings us down to stock number one. Drum8:41roll, please. Here's one interesting one8:44and that is Oracle OCL. Oracle reposted8:48fiscal first quarter 2027 results8:50Thursday after the close and the8:52headlines were enormous guys. Revenue uh8:55of 19.3 billion is up 30%. And ahead of8:59the 19.14 billion consensus adjusted9:03earnings of $1.92 a share. Cloud9:05infrastructure was up 121% to $7.49:08billion. And here's that word again, a9:11backlog of $664 billion. That's up $299:15billion from a year ago. Friday, the9:18stock opened up 7.5%. It touched uh it9:21went up as high as 8.5%, but it closed9:24down 1.7% by the end of the day at 1509:27bucks and 28. Then people read past the9:31backlog. uh capital spending was 28.59:34billion in one quarter against 8.59:38billion just a year ago. That is a huge9:40jump in spending. Fullyear guidance is9:4390 to 95 billion against 55.7%9:47billion from last fiscal year. Free cash9:49flow, well this is the stuff that should9:51get your attention. It was negative 5.49:55billion. Imagine if you did that in your9:57own budget. you would not be popular9:59with your friends or the people that you10:02want to lend you money. So, the market10:04sold Oracle and bought the two hardware10:07companies Oracle has to write the checks10:10to. Is it clear yet? Okay, here's your10:12truth bomb on that. Oracle posted a10:14record 664 billion backlog and still10:17close lower because backlog backlog is a10:20promise and 28.5 billion of capex in 9010:24days. That is simply, my friend, a bill.10:27The market pays a premium for revenue it10:29can see. It doesn't pay for revenue that10:32has to be financed first. Those, my10:35friends, are your top three interesting10:37stocks of the week. Uh there are plenty10:39more interesting stories that happened10:40this week and every week. If you want to10:43look into other stocks, you have other10:44ticket tickers that interest you, please10:46drop some comments below. We'll take a10:48look at those and see if we can address10:50those in future uh videos. Now, let's10:53get under the hood on the data that10:55explains why this week played out pretty10:57much the way it did. First, we'll start10:59with a review of the data that we got11:01this past week. The week came down11:03pretty much, as you probably know by11:04now, to two11:07inflation reports. On Thursday, we got11:10August producer prices, right? Those are11:13wholesale sale prices or factory gate11:16prices. And that's considered a leading11:18ind indicator to consumer prices, retail11:22prices that you and I paid. That was up11:244/10en of a percent on the month, which11:26was in line with estimates. But the11:28annual rate, the annual rate climbed to11:305.4% from 4.8% in July. Goods prices,11:35well, they rose 1.1% and more than 75%11:39of that was attributed to, I'm sure11:40you're not going to be surprised to hear11:42this, energy. That report is why stocks11:45and bonds both sold off on Thursday.11:47Pretty much Friday brought August11:49consumer prices and headline CPI rose11:524/10en of a percent on the month and11:543.4% year-over-year. Both were exactly11:58in line with economist and analyst12:00estimates. Gasoline rose 3.9% and drove12:03more than a third of the monthly12:05increase. Surprise, surprise. With12:06energy up 16.3%12:09over the past 12 months. But the number12:13that mattered was of course the core12:14which strips out food and energy. So we12:17get to see if those crazy other prices,12:19the ones that are so volatile are12:21actually affecting the the the stuff12:23that we buy every single day. We buy12:26that stuff too, but the core is what12:28we're watching right now because energy12:30is obviously is affected by uh the12:33geopolitical stuff going on in the Gulf.12:36So if you strip that out, we want to see12:38if that's starting to flow into the12:39other non-energy items. That's why we12:42look closely at core right now. And that12:44was up 3/10en of a percent against12:462/10en of a percent was expected. So it12:48was a little hotter than expected. And12:50shelter uh shelter uh accelerated uh to12:543/10en of a percent from 1/10enth of a12:56percent. Although it has been kind of12:58bubbling down over the past several13:00years, but that's the last bit of sticky13:01inflation that gets everybody nervous.13:03We don't like to see that go up even13:05though it was just one month. Core is13:07still only 2.4% year-over-year which is13:10not that bad. Uh the 0.1 point miss took13:13the odds of a hike unfortunately next13:16Wednesday from roughly a coin flip was13:18roughly more than 50% to right now mid13:21to high 80s. It got as high as 90%13:24probability. You know Wall Street a13:26number that big is almost a pretty short13:28bet. And that is the thread. The energy13:31shock showed up in wholesale prices13:34Thursday and consumer prices on Friday13:37and of course in the two-year yield all13:40week. And an Oracle getting no credit13:42for good news. Okay, let's look at the13:45week ahead. Next week, my friends, is13:47the one that really counts. The uh13:50Federal Open Market Committee, the FOMC,13:52it meets September 15th and 16th with13:55the decision at 2:00 p.m. uh Wall Street13:58time on Wednesday. You better show up14:00for that one because it will be a doozy.14:03The target range right now for the Fed14:05funds rate is 3.5 to 3.75% that stands14:08to be raised and the market is pricing14:10as I said before uh 85% or higher odds14:14of a 25 basis point hike. This is also a14:18projections meeting, right? So, we get14:20the fresh dot plot and chair Kevin Walsh14:24is at the podium speaking about all this14:26stuff and of course the SEP report that14:29talks about the projections of Fed14:33members. We'll see if Walsh actually14:34fills in his dot this time. Wednesday14:37morning uh is pretty loaded as well14:39before we get the FOMC uh before we get14:42the FOMC uh data. August retail sales14:46that comes in at 8:30 a.m. Wall Street14:48time about five and a half hours as I14:50said uh before the Fed announces its14:53decision. Thursday well that brings our14:56weekly jobless claims number and we get14:58the uh we get the beginning of a rash of15:01housing numbers and we get housing15:03starts. Uh and of course we get the15:05Philly Fed index, right? That is a15:07regional Fed indicator. The Bank of15:10Japan uh that we've been talking a lot15:12about lately, they meet on Thursday and15:13Friday right after the FOMC. And with15:16Japanese 10-year yields near 3%, that15:19matters more to US bonds than it used to15:21matter. They I believe are expected to15:23raise their key lending rate as well.15:27Pay close attention to that because it15:29affects stuff in the US bond market and15:32stocks uh very much so. We have a lot of15:35videos out on that. So check out our15:37homepage and look for those videos if15:39you want to know more detail about the15:41inflation numbers uh but also more15:43importantly the relationship between15:46Japanese yields uh and US uh treasury15:49bonds and of course the currency15:52discrepancies between the two countries.15:54Okay, so here are two questions. If the15:57Fed hikes into a sentiment reading of15:5947.8, how many more hikes does the dot16:02plot show? And can retail sales hold up16:05when gasoline ate a third of the month's16:08inflation? Well, here's the bottom line.16:11An oil shock set the inflation rate. The16:13bond market set the policy before the16:15Fed could. And the only trade that16:17worked was owning suppliers instead of16:20big spenders. Am lost 13% on somebody16:24else's trial. HPE gained 19% on somebody16:28else's capex. The one thing to watch16:31Wednesday at 2 p.m. It is not the hike.16:34You got to watch the dots. My friends,16:37I'm Mark Malik. This has been your16:38weekly market recap, top stocks and week16:41ahead review. It was sponsored by SB16:44Financial, where investing is for16:47everyone. My friends, stay disciplined,16:50stay truthful, and I will see you in the16:53next one. But before then, join me every16:55single day at Wall Street Truth Bombs,16:57where I drop them right here before the16:59market figures them
2,771 words · 400 lines
