Stocks closed lower yesterday across the board led by the small-cap Russell 2000 and Nasdaq, giving up -1.23% and -1.03% respectively.

With earnings season officially over, there was bound to be some profit taking after a strong earnings-led rally. Even after yesterday's decline, YTD the S&P 500 is up 11.5%, the Nasdaq is up 12.3%, and the Russell 2000 is up 17.7%. And I'm expecting a lot more upside to go.

But historically, September is usually a weak month. However, the S&P bucked that trend last year gaining 3.53%. It was also up in September 2024 by 2.02%. In 2023 it was down -4.87%. But went on to erase those temporary losses and close up 24.2% for the year. Those three years, not surprisingly, coincided with the AI boom. And I'm expecting another trend-bucking performance this year. And for the rest of the year.

Increasing tensions in the Middle East with the U.S. striking Iranian targets and Iran firing on tankers and their Gulf neighbors sent oil up more than 5% yesterday. That in turn exacerbated inflation concerns.

That also contributed to rising yields. U.S. Treasuries saw the 10-yr rise to its highest levels since Jan 2025, and the 30-yr hitting multi-year highs. And it wasn't just U.S. yields, but global yields. Japan, for example, saw their 10-yr hitting a 30-year high. The 30-yr hit record levels.

In other news, yesterday's PMI Manufacturing Index came in at 53.9, in line with last month's 53.9 and above views for 53.2.

And the Job Openings and Labor Turnover Survey report (or JOLTS for short) showed 7.271 million job openings in July vs. June's 7.182M and forecast for 7.358M.

But the jobs report that everybody is really waiting for is Friday's always important Employment Situation report by the Bureau of Labor Statistics (BLS). Last month's report showed headline jobs down -23,000 for July (although private payrolls rose by 30K, but was offset by -53,000 in the public sector). The consensus for Friday is expected to show August jobs up 55,000 (up 53K in the private sector and 2K in the public sector). The unemployment rate is forecast at 4.2% vs. last month's 4.1%.

In the meantime, there's plenty of other reports coming out before Friday's BLS report, including the ADP Employment report today, which is often looked at as a barometer of what the BLS report will say two days later.

Even though earnings season is officially over, we're still getting earnings coming in. After the close yesterday we heard from Dell Technologies. They posted a positive EPS surprise of 41.6% and a positive sales surprise of 3.60%. That translated to a quarterly EPS growth rate of 203% vs. this time last year, and a sales growth of 57.7%. They also raised full-year rev guidance by $25B to $192B from $167B. That would represent a 70% growth rate if they hit those numbers. They also reported a record backlog of $95B. Dell credits the AI boom and increased server demand for their record quarter and bullish outlook. They were off -6.80% in the regular session before earnings, but were up 7% in after-hours trade following earnings. YTD, Dell is up 237%.

Only 99 companies on deck to report today, but three well-known AI-related names in queue with Broadcom, Snowflake and Hewlett Packard all reporting after the close.

The market will be watching for any new news out of the Middle East.

And we'll see if the market can regroup today after yesterday's pullback.

See you tomorrow,