Stocks closed lower yesterday with the Nasdaq shedding -0.95%, the S&P down -0.55%, and the small-cap Russell 2000 giving up -0.24%.

The markets took a breather after a spectacular rally that has lasted 7 long, nearly uninterrupted weeks. (It actually was uninterrupted for the Russell as they have been up literally 7 weeks in a row.)

There was no particular news out yesterday. It was just time for a little profit taking and position squaring.

Although, Fed Chair Jerome Powell yesterday did say that he thought stock prices were "fairly highly valued," in response to a question he was asked at the Greater Providence Chamber of Commerce 2025 Economic Outlook in Warwick, RI. The question was in regard to market prices and what role they play in their decision making. Mr. Powell said, "we do look at overall financial conditions, and we ask ourselves whether our policies are affecting financial conditions in a way that is what we're trying to achieve." And added that "by many measures, for example, equity prices are fairly highly valued."

But Mr. Powell made it clear that this is "not a time of elevated financial stability risks."

So, I would not consider this an 'irrational exuberance' moment by any stretch.

Although, would it be so bad if some thought it was? Fed Chair Alan Greenspan made that comment back on 12/5/96. The S&P then proceeded to rally even further gaining 31% in 1997; 26% in 1998; and 20% in 1999.

Coincidentally, that was during the tech boom, driven by the internet and dot-com companies, which saw the S&P rally 220% between 1995 and 1999.

We are in the midst of a new tech boom driven by AI. After 2 back-to-back years of 20%+ gains, I'm expecting another 20%+ gain this year, followed by two more after that (at least).

Funny how history seems to repeat itself. And I'm definitely expecting it to.

In other news, yesterday's PMI Composite report showed the Composite Index easing to 53.6 vs. last month's 54.6. The Manufacturing Index came in at 52.0 vs. last month's 53.3 and views for 53.0. The Services Index came in at 53.9 vs. last month's 55.4 and estimates for 54.5.

And the Richmond Fed Manufacturing Index slipped to -17 vs. last month's -7 and the consensus for -10.

Today we'll get MBA Mortgage Applications, New Home Sales, and the Survey of Business Uncertainty.

And we'll see if the market can brush off yesterday, and go for another new all-time high today. Or at least an up day.

See you tomorrow,