This Time Is Different? Earnings & Price Break 90-Year Trends
This Time Is Different? Earnings & Price Break 90-Year Trends Authored by Lance Roberts via RealInvestmentAdvice.com, September, so far, is living up to its reputation. The market slipped to the 50-day moving average, with the tape taking orders from crude oil. For the week, crude rose...
The market entered September with a noticeable slide toward its 50‑day moving average, a shift driven largely by a sharp rise in crude oil. Over four trading sessions crude prices jumped roughly 9%, a move that lifted the 10‑year Treasury yield to just under 5% at the close. That combination nudged the S&P 500 down 0.68% to finish the week at 7,666, a headline that masks deeper dynamics beneath the surface.
Diverging Sector Performance
The spread between market segments tells a more detailed story. Small‑cap stocks fell 2.38% while the Dow lost 1.51%. The equal‑weight S&P index slipped 1.87%, yet the cap‑weighted version shed less than a single point. The Nasdaq‑100 was relatively steady, declining only 0.52%. When the average stock declines three times faster than the index, leadership narrows rather than broadens, leaving the market vulnerable to errors from a handful of heavyweight names.
Inflation Numbers Stir Bond Market
Headline consumer‑price inflation reported a 3.4% year‑over‑year increase, remaining sticky, while core CPI held at 2.4%, just above the Federal Reserve’s 2% target. Those figures supplied the bond market with the justification it needed to react, even though neither number signaled an imminent crisis.
Producer Prices Signal Oil Shock
Producer‑price data painted a louder picture, with the monthly PPI rising 0.4% and the annual rate climbing to 5.4% from 4.8%. Goods pricing contributed most of the pressure, up 1.1%, and diesel alone surged 24%. Core producer prices registered a 4.6% increase. Analysts view this as an oil‑driven shock rather than evidence of an overheating economy, a distinction that does not automatically warrant a Fed rate hike.
Cross‑asset Signals Remain Mild
Across assets, the reaction fit a classic “rate scare.” Gold prices slipped, the dollar stayed flat, and volatility edged higher without approaching panic levels. Nonetheless, cyclical and rate‑sensitive groups dragged lower throughout the week, underscoring the underlying weakness.
FED Meeting Looms
The Federal Reserve is set to meet on Tuesday and Wednesday, with market participants still leaning toward a quarter‑point increase. A firm headline inflation reading and a crude oil spike do not create a clear backdrop for a hike, especially as labor market data show signs of softening. Should oil prices stay elevated and the 10‑year yield push above 5%, equity multiples could become harder to defend, and the narrow leadership that supported markets all summer might give way as September moves toward the midterm election cycle.
Long‑term Trend Concerns
Ned Davis Research highlighted that the market, when plotted on a logarithmic scale, now sits above the upper boundary of its long‑term trend—a level not seen since early 2000. That chart, together with a break in a 90‑year earnings trend, suggests the current optimism may be testing historical limits.
Earnings Surge Beats Expectations
Second‑quarter earnings for the S&P 500 rose about 31% year‑over‑year on an adjusted basis, far exceeding the 23% analysts had forecast. Bloomberg labeled the growth the strongest non‑recession‑recovery profit expansion in its data dating back to 1992. AI infrastructure shouldered most of the lift, with AI‑related stocks accounting for roughly 60% of the index’s earnings gain and three hyperscalers projected to deliver about 70% of analysts’ full‑year expectations. Even after stripping out energy, AI, and other contributors, the remaining roughly 490 companies still posted a 14% earnings increase—a figure that would headline most years on its own. This broadening of profit growth finally appears in the data, not merely in hopeful commentary.
Source: zerohedge.com · 2026-09-12