In an increasingly manic market, this slow-and-steady fund has broken out

MW In an increasingly manic market, this slow-and-steady fund has broken out

By Steve Goldstein

Critical information for the U.S. trading day

Being a contrarian doesn't always work. Seems like everyone - even permabull Tom Lee - warned September is a historically difficult month for the stock market and it did get off to a pretty horrid start.

Tuesday's selloff had many causes, but at its heart was concerns over the U.S. economy, shown mostly clearly by small cap stocks IWM tumbling and credit spreads widening. The likes of GE Aerospace and Caterpillar skidding show the investing world isn't just concerned about overheated valuations of artificial-intelligence plays.

Also read: Former Fed official says investors can get distracted by 'bouncing ball' of economic data

That's a point made clearly by Morgan Stanley's chief market strategist Mike Wilson, who acknowledges the fears around the economy could quickly be erased, just as they were last month. "A stronger-than-expected payroll number and lower unemployment rate would likely provide markets with greater confidence that growth risks have subsided, paving the way for equity valuations to remain elevated and a potential catch-up in some other markets/stocks that have lagged," he says.

But he does note that cyclical stocks relative to defensive ones haven't rebounded (even before Tuesday's slide), and that less-volatile companies have shown very resilient performance. Outside of the stock market, the bond market, yen and commodities "reflect lingering suspicions that the coast might not be clear."

"We recommend focusing on defensive businesses that prioritize operational efficiency or that have durable pricing power (or both)," says Wilson, pointing to Walmart $(WMT)$, Colgate-Palmolive $(CL)$ and Coca-Cola $(KO)$ as consumer staples stocks on its "fresh money buy list."

There was one stock-market fund that actually touched a record high on Tuesday - the Invesco S&P 500 low volatility ETF SPLV, which counts all of those consumer staples stocks in its top 15 holdings and whose top component is none other than Berkshire Hathaway.

Kevin Muir, the former trader who runs the Macro Tourist blog, points out the fund - unlikely the Nasdaq 100 QQQ - has "quietly chugged higher" since the July 11 report that showed consumer prices rising more slowly than forecast.

Now it's showing signs of breaking out, he says.

The market

Stock index futures (ES00) (NQ00) were lower after Tuesday's 626-point tumble for the Dow Jones Industrial Average DJIA. Crude-oil futures (CL00) fell below $70 per barrel.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              5528.93    -1.57%  6.61%   15.91%  22.44% 
   Nasdaq Composite                                                     17,136.30  -3.33%  5.78%   14.16%  22.12% 
   10-year Treasury                                                     3.819      -2.10   -13.50  -6.19   -46.46 
   Gold                                                                 2514.3     -1.54%  2.54%   21.36%  27.88% 
   Oil                                                                  69.94      -5.97%  -7.30%  -1.95%  -20.14% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Trade deficit, job openings, auto sales and the Fed's Beige Book feature on the day's economics calendar.

Cybersecurity company Zscaler $(ZS)$ offered earnings guidance that fell considerably short of Wall Street expectations.

Software-development company GitLab $(GTLB)$ raised its earnings guidance.

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Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   GME     GameStop 
   TSM     Taiwan Semiconductor Manufacturing 
   AAPL    Apple 
   NIO     Nio 
   HOLO    MicroCloud Hologram 
   AMD     Advanced Micro Devices 
   SMCI    Super Micro Computer 
   DJT     Trump Media & Technology 

The chart

OK, this is nine charts, but JPMorgan Asset Management's Michael Cembalest assembled the fate of market cap leaders after reaching the top. (Nvidia got there for one day in June). He is fairly even handed on the company, pointing out the meteoric growth in projected revenue but also that there really is no killer generative AI app yet.

Random reads

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An emu, native to Australia, was found wandering around western Pennsylvania.

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-Steve Goldstein

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September 04, 2024 06:34 ET (10:34 GMT)

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