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A relief rally the morning after, Microsoft's blowout is dragging tech higher and clawing back a chunk of the Fed-day plunge, but yields are up and the bounce is earnings, not rate relief
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The session flipped between 4:37 a.m. and 9:30 a.m., and the mechanism is worth naming precisely. Futures were positive on a Dow up 0.3 percent and an S&P up 0.2, set up to snap a three-day losing streak. The 8:30 producer price report landed in line at 0.4 percent monthly but hot at 5.4 percent annually against 5.3 expected, with July revised up. Crude then ran through 100 dollars. The cash market opened down 0.59 percent on the S&P and 1.32 on the Russell 2000. It has since stabilized, with the S&P near 7,597 and the Nasdaq recovering relative ground, but this would still be a fourth consecutive decline and the longest losing streak since March. Breadth is meaningfully better than yesterday and still negative. Roughly 60 percent of US issues are lower, against about 70 percent yesterday, and the Russell 2000 is again losing about twice what the S&P is, for a fifth straight session. The small-cap underperformance is the most reliable single read on this tape, because it is the part of the market that has to refinance at whatever the long end says. The composition is a rotation, not a flight. Managed care is leading the S&P, with UnitedHealth, Centene, Humana and Elevance bid as money leaves technology. Utilities and consumer cyclicals showed the largest sector gains at midday. Basic materials are the worst, with the copper complex liquidated on the White House’s continued indecision over refined copper tariffs. Gold is down 1.37 percent and silver 3.4 while a shooting war escalates. In a genuine fear trade none of that is true. Regime read: risk-off in the rate channel, orderly in the equity channel, and volatility still underpriced. The VIX at 17.48 is up 6.2 percent, which is not much against CPI tomorrow morning, an FOMC on the 16th with a hike priced near 70 percent, Oracle and Adobe reporting tonight, and a thirty-year Treasury approaching a 2007 high. Whatever your directional view, convexity is not expensive here.
How the session is trading
What changed since the pre-market read is that the market got its inflation number and its oil number in the same hour, and only one of them was in line. The August producer price index rose 0.4 percent for the month, exactly matching consensus, and that part was a relief. The annual rate was not: 5.4 percent against 5.3 expected and up from 4.8 in July, with July’s figures revised higher as well. Core PPI rose 0.2 percent monthly against 0.3 expected, but the annual core hit 4.6 percent, the highest since June. More than three quarters of the goods increase came from a 4.2 percent monthly rise in energy prices, with diesel up 24.1 percent. That is the war showing up in the data rather than in the headlines. Then crude did the rest. WTI ran 5.9 percent to about 101.75 and Brent traded above 106, the highest since July, after the biggest spike in attacks on shipping since the conflict began. Most traffic through the Strait of Hormuz, which carried about a fifth of the world’s oil before the war, remains halted. President Trump said Wednesday that prices likely will not come down until after the midterm elections and that he expects the war to end shortly afterward. The rate channel did the visible damage. The ten-year jumped 7.8 basis points to above 4.92 percent, its highest since July 2023, and the thirty-year is within one percent of its 2007 peak. Rate-hike odds for September 16 moved to roughly 70 percent from 62 before the data. Equities are competing with the highest risk-free return in nearly two decades and the market is repricing accordingly, which is why the Russell 2000 is down almost twice the S&P and why semiconductors led the early selling. Underneath, money rotated rather than fled. Managed care is leading the S&P, with UnitedHealth, Centene and Humana bid alongside Elevance, which is up about 4 percent after saying it will reaffirm full-year earnings and benefit expense guidance in upcoming investor meetings. Utilities and consumer cyclicals posted the largest sector gains at midday. Basic materials are the worst group: Freeport-McMoRan is down about 8 percent and Southern Copper about 7 after reports the White House has not yet decided on refined copper tariffs, weighing higher manufacturing costs against encouraging domestic mining. Copper was at record highs a week ago. Two other data points landed and were largely ignored. Weekly jobless claims fell to 206,000 from 207,000, which keeps the labor market off the table as a reason to hold. August existing home sales fell 2 percent to a 3.98 million annual pace, the slowest since June 2025, with inventory at 4.9 months of supply, the highest in more than a decade, and the median price still up 1.6 percent to 429,100 dollars. Rising supply against a rising price is a standoff, and standoffs resolve on the price. In Europe the same problem is a quarter ahead of us. The European Central Bank raised its deposit rate 25 basis points to 2.5 percent, its second hike this year, and lifted its 2026 inflation forecast to 3.0 percent with euro zone inflation running above 3 against a 2 percent target. Two major central banks are now tightening into an energy shock rather than looking through it. The single-stock tape was led by defense and punished in specialty. AeroVironment is up roughly 10 percent to 154.51 on record fiscal first quarter revenue of 480.5 million and adjusted EPS of 59 cents against 25 expected. Skyworks added about 9.7 percent, Reddit about 5 on Piper Sandler data showing an 8 percent monthly increase in users, and Charter 4.5 on a rebound. On the other side, SkillSoft fell about 25 percent on a cut fiscal 2027 revenue outlook, Biohaven about 15 after the FDA placed a partial clinical hold on the BHV-7000 program, Cooper Companies about 14 on a revenue miss and guidance cut, American Eagle about 11 as Aerie strength was offset by flagship softness, Lovesac about 8 on weak guidance, and Intel about 5.7 as traders took profits on a multi-session rally. Oracle is down about 3.6 percent into its own results tonight. Macy’s is the one to sit with. It beat at 63 cents against 37 expected, raised the full-year outlook, and fell about 4 percent, because 23 cents of the quarter came from tariff refunds. American Eagle did the same thing last night. That is two consecutive sessions where a headline beat carried by a non-operating item got sold.
What Wall Street is missing
Five things at midday, in order of how underpriced they look. One: the president has told you the energy premium is a two-month position and models are still assuming mean reversion. Trump said Wednesday that oil prices likely will not come down until after the midterm elections, and that he expects the war to end shortly afterward because Iran cannot hold out past the vote. Whatever you make of the forecast, it is an explicit statement that the administration will not spend political capital resolving this before November. Elevated crude through the fourth quarter is now the stated base case rather than the tail. Every 2027 earnings estimate that assumes a normalized oil price has to assume something, and it is currently assuming something the person with the most influence over the outcome has publicly declined to deliver. Two: the composition problem in earnings has now repeated on consecutive nights and it is spreading. American Eagle beat and fell 11 percent. Macy’s beat, raised the full-year outlook, and fell about 4 percent, because 116 million dollars of tariff refunds contributed 23 cents to the quarter and about 18 cents of that is inside the raised guide. Both are the same trade: the market refusing to capitalize a one-time legal recovery as a run rate. Roughly 86 percent of S&P 500 reporters have beaten this season against a long-run average near 67.5 percent. When almost everyone beats, the beat stops being information, and any screen ranking on surprise magnitude is ranking on noise. Three: the thirty-year is the number that matters and the ten-year is getting all the attention. The ten-year at 4.92 percent is being discussed everywhere. The thirty-year sitting within one percent of its 2007 peak of 5.34 is barely mentioned, and it is the more consequential level, because it prices mortgages, pension liabilities, infrastructure project finance and every long-duration cash flow in the equity market. The drivers the market itself names are the energy pass-through and record corporate supply, with AI issuers selling north of 1.5 trillion dollars of paper this year. If the datacenter buildout is genuinely large enough to move the cost of capital for the whole economy, then the AI trade and the rate trade are one trade, and small caps, housing and commercial real estate are paying for it. Four: the copper tariff indecision is a bigger signal than the copper move. The miners fell 7 to 8 percent today because no decision was made. The reason no decision was made is that the administration cannot square protecting domestic mining against raising manufacturing input costs during an energy shock in an election year, and that tension has no clean resolution. Every industrial with copper in its bill of materials carries exposure to a policy that does not exist yet. The market has priced the producers and has not priced the consumers, which is the wrong half. Five: a VIX at 17.48 is still not paying for the calendar. CPI tomorrow at 8:30 where one tenth of a point on core decides a Fed meeting, an FOMC on the 16th with a hike near 70 percent from a chair who never promised one, Oracle’s cloud backlog and Adobe’s retention numbers tonight, Brent above 106 with the strait effectively closed, and a thirty-year approaching 2007 levels. Volatility is up 6.2 percent today. That is not much against that list. This is not a directional call, it is an observation that insurance is cheap relative to a distribution that has widened in both tails. The through-line: this is not a market in retreat, it is a market repricing the cost of energy and the cost of money simultaneously, rotating from technology into defensives while the headline index gives up half a percent. That process stays orderly right up until a scheduled catalyst forces it to happen at once, and there are three of them inside the next four sessions. Size matters more than direction this week.
What is "The Great Rotation"?
When big investors move money out of one group of stocks and into another. Right now they're leaving expensive tech and buying cheaper, steadier sectors (industrials, materials, healthcare). Spotting where money flows next is how you stay ahead of the crowd.
A stock dropped 50%, is that automatically a bargain?
No. A big drop just means it's cheaper than before, not that it's cheap. Some fell because they were wildly overpriced; others are great businesses on sale. The job is telling them apart, look at whether the company still makes good money, not just how far it fell. "Cheap" can always get cheaper.
Why does cheaper oil matter for stocks?
Oil feeds into the price of almost everything, fuel, shipping, plastics. When it falls hard, inflation cools, which can eventually let the Fed ease up on interest rates. Lower rates tend to help stocks (especially growth names). The catch: cheaper oil also hurts energy companies' profits, so the same news helps one part of the market and hurts another.
What do the badges mean?
Lean Buy / Momentum Buy, the research sees a favorable setup. Watch / Buy dips, good but wait for a better price or more proof. Caution / Value trap?, looks cheap but may be cheap for a reason; steer clear.
How do I read the Stock Search numbers?
P/E = how many years of profit you're paying for (lower can mean cheaper). P/S = price vs sales. Margins = how much profit the company keeps per dollar of sales (higher = stronger). Growth = how fast sales/earnings are rising. The "typical range" beside each tells you if a number is normal, high, or low.
What are 2× / inverse ETFs (NOWL, TSLQ, MSTU)?
Funds that amplify or flip a single stock's daily move. A 2× long ETF (NOWL = 2× ServiceNow, MSTU = 2× MicroStrategy) aims to rise ~2% for every 1% the stock gains that day. An inverse ETF (TSLQ = short Tesla) rises when the stock falls. The catch: they reset every day, so over weeks they "decay" and can lose money even if the stock ends flat. They're high-risk trading tools, not buy-and-hold, and they have no P/E or margins because they're funds, not companies.
What's the VIX, and "risk-on vs risk-off"?
The VIX is the market's "fear gauge." Low (under ~20) = calm; high (30+) = fear; spiking = panic. Risk-on means investors are confident and buying riskier stuff (tech, crypto). Risk-off means they're nervous and hiding in safer things (gold, bonds, staples). Knowing which mode you're in tells you whether to expect dip-buying or more selling.
How should a beginner use this?
As a starting point for your own research, not a to-do list. Understand what a company does before buying, only risk money you can afford to lose, and spread your bets. A low-cost index fund is the boring-but-sensible default many beginners start with.
First, what is an option, in plain English?
An option is a contract about a stock’s future price. A call is the right to buy a stock at a set price; a put is the right to sell it at a set price. That set price is the strike, and every option has an expiration date.
Whoever buys the option pays a fee called the premium. Whoever sells (or “writes”) it collects that premium up front. One contract usually covers 100 shares. The two strategies below are about being the seller, the one who gets paid.
Selling a put (“cash-secured put”), getting paid to maybe buy
You promise to buy 100 shares of a stock at a strike price you choose, and you collect a premium up front for the promise. “Cash-secured” just means you set aside enough cash to actually buy those shares if you have to.
If the stock stays above your strike at expiration: the option expires worthless, you buy nothing, and you keep the premium as pure profit.
If the stock drops below your strike: you must buy the 100 shares at the strike, even though the market price is now lower. The premium softens the cost, but a big crash is a real loss.
Why beginners like it: it pays you to wait to buy a stock you already wanted at a lower price. Example: a stock trades at $95. You sell a $90 put and collect $2/share ($200 total). Above $90 at expiry → keep the $200. Below $90 → you buy 100 shares at $90, but your real cost is about $88 after the premium.
Selling a call (“covered call”), getting paid on stock you own
You already own 100 shares, and you promise to sell them at a higher strike price if the stock climbs there, and you collect a premium up front for the promise. “Covered” means you own the shares, so you can always deliver them.
If the stock stays below your strike: the option expires worthless, you keep the premium and keep your shares. You can do it again next month.
If the stock rises above your strike: your shares get sold (“called away”) at the strike. You keep the premium plus the gain up to the strike, but you miss any upside beyond it.
Why beginners like it: extra income on stocks you already hold and would be happy to sell at your target. The trade-off is a capped upside. Example: you own a $100 stock and sell a $110 call for $3/share ($300). Below $110 → keep the $300 and your shares. Above $110 → you sell at $110 and still keep the $300, but you give up gains above $110.
Selling options, the risks a beginner must know
This is not free money. A cash-secured put can force you to buy a falling stock; a covered call caps your gains and still loses if the stock drops (the premium only cushions the fall). Only sell options on cash or shares you can genuinely afford to commit.
Never sell “naked.” Selling a call without owning the stock exposes you to theoretically unlimited losses if the stock soars. Beginners should stick to covered calls and cash-secured puts only.
Understand assignment (being forced to buy or sell) and expiration before you start. This is education, not advice, do your own research and never risk money you can’t afford to lose.