Inside Markets

The direction of travel is higher in a bull market, and the SPX keeps its bullish trend intact at levels above ~6250.

The early-August rally in the SPX came with narrow breadth and the recent rotation out of momentum stocks has flowed into defensive sectors.

The momentum factor unwinds for a third time in calendar ’25 with the current drawdown measuring out to ~7% as of yesterday’s close.

Calls for a September rate cut intensified after July non-farm payrolls came in weaker than expected and July CPI came in better-than-feared.

Summer liquidity conditions usually produce choppy price action where each day seems to have its own narrative.

Summertime liquidity conditions and the potential for risk-off positioning into September macro data/seasonal weakness add incremental caution to our tactically bullish outlook.

Yesterday’s broad rally saw ~80% of the SPX finish higher led by high-beta segments that gained +2.8% (1.5z move).

The July CPI report falls into the ‘better-than-feared’ category with the headline and core rate in line with consensus at +0.2% and +0.3% MoM, respectively.

Core CPI will be the focus tomorrow where we look for a +0.33% MoM increase, which equates to +3.1% on a YoY basis (a tick higher than consensus.

In the short-term, stock prices rise and fall based on earnings estimate revisions – and estimates revisions have been higher this quarter.