Wall Street is poised to wrap another week of gains, with the S&P 500 index surpassing the 5,000 mark and the Nasdaq approaching 18,000 points. For the two indices, this marks the fifth consecutive week in the green, the 14th positive week out of the last 15, indicative of the impressive rally fueled by optimism surrounding artificial intelligence. Shares of NVIDIA Corp. (NASDAQ:NVDA) are already up nearly 50% since the beginning of the year, with the semiconductor giant surpassing the $1.8-trillion market capitalization mark. Overall, the Magnificent Seven rose to a combined market cap of $13.2 trillion, almost half the size of the rest of the 493 stocks within the S&P 500. The Russell 2000 index of small caps has again reached the 2,000 mark, outperforming large-cap peers. Data-wise, no major headline emerged from the Consumer Price Index ...Full story available on Benzinga.com

The office real estate market has entered a challenging year, grappling with significant challenges represented by disruptive industry trends and upcoming financial maturities. As highlighted by recent data from Trepp, an astounding $2.77 trillion of commercial real estate debt, accounting for half of all outstanding commercial real estate debt, is set to mature between 2023 and 2027. Of this, nearly $500 billion is due in 2024 alone. This looming maturity cliff, coupled with declining property values and high-for-longer interest rates, presents a daunting challenge for both lenders and borrowers in refinancing this volume of debt. Commercial Mortgage Maturities by Lender Type Year Total Due ($ Billion) Banks ($ Billion) CMBS ($ Billion) Life Cos ($ Billion) GSE ($ Billion) Other ($ Billion) 2023 $541.2 $270.4 $107.7 $42.5 $58.4 $62.2 2024 $544.3 $277.2 $81.7 $46.7 $68.9 $69.7 2025 $533.2 $283.1 $53.3 $49.1 $82.3 $65.3 2026 $561.4 $298.3 $40.7 $52.3 $102.3 $67.9 2027 $602.0 $313.8 $40.7 $55.9 $120.4 $71.2 2028 $565.9 $293.3 $35.7 $57.1 $113.3 $66.5 Total (2024-2028) $2,806.7 $1,465.8 $252.1 $261.1 $487.2 $340.5 Source: Trepp Inc., based on Federal Reserve Flow of Funds Data Office Real Estate Industry Confronts Major Hurdles Dr. Stephen Buschbom, the research director at Trepp, stated in a recent note that higher interest rates and tighter liquidity created significant challenges for new transactions and refinancing maturing loans. He compared the current situation in the commercial real estate (CRE) and CRE debt markets to past economic cycles. “Maybe the office delinquency rate hits 7%, and I think if you're talking about urban office, non-defeased, that still is a reality,” he wrote. Buschbom noted an increase in ...Full story available on Benzinga.com

To gain an edge, this is what you need to know today. Better Inflation Data Please click here for a chart of SPDR S&P 500 ETF Trust (ARCA:SPY) which represents the benchmark stock market index S&P 500 (SPX). Note the following: The chart shows the stock market has bounced from the bottom band of the top support zone. The chart shows the stock market is at the top band of the top support zone. RSI on the chart shows the stock market is oversold. As we have been sharing with you, oversold markets tend to bounce. The chart shows that the oversold stock market is bouncing on better inflation data from the U.S. and Europe. PCE is the Fed’s favorite inflation gauge. The data came slightly better than expected. Headline PCE came at 0.4% vs. 0.4% consensus. Core PCE came at 0.1% vs. 0.2% consensus. In The Arora Report analysis, core PCE is very important; however, core PCE does not include energy and food. The rising price of oil has a significant impact on lower income consumers.  For this reason, prudent investors should not disregard the rising price of oil, even though that is exactly what the market is choosing to do this morning.  Eurozone inflation has cooled to its lowest point in two years. Eurozone CPI came at 4.3% year-over-year vs. 4.5% consensus. CPI came at 0.3% month-over-month vs. 0.5% prior. Eurozone core CPI came at 4.5% year-over-year vs. 4.8% consensus. Core CPI came at 0.2% month-over-month vs. 0.3% prior. The potential government shutdown drama continues in Washington. As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band. Japan Bank of Japan engaged in unscheduled bond purchases. The amount was not significant. However, the operation was designed to send a message to speculators to stop short selling yen. As ...Full story available on Benzinga.com

This past week had all the potential to see a revival of the great bull market of 2023. The September inflation data, Apple’s latest product announcements, and Arm’s IPO all seemed had the possibility to reignite the fire of bullishness for investors. By Friday’s close, however, the S&P 500 appeared to be limping into the weekend. Growth stocks struggled and defensive sectors thrived as the market took on a very risk-off feel to wrap the week. Now, as the market focuses on Fed policy implcations through year-end 2023, the S&P 500 chart appears to be forming a potential head and shoulders pattern. Note the peak in late July around 4600, surrounded by lower highs in June and August. If and when the SPX would break below the “neckline” formed by the interim lows in June and August, this would suggest further deterioration to at least the 200-day moving average. Let’s look at three key ETFs, all showing signs of distribution, all with further downside potential, and all with implications for further deterioration in risk assets. Semiconductors (SMH) Semiconductor stocks have done quite well since the October 2022 low, with the strong relative strength demonstrating consistent outperformance over the S&P 500 index. This ETF beautifully illustrates the dominance of large cap growth stocks over other cap tiers in 2023. In July, we noted a bearish momentum divergence, where price moved higher while the RSI trended lower. This pattern often indicates an exhaustion point during bull phases, and suggests limited upside due to weakened positive momentum. After testing resistance around $160 twice in July, the SMH (NASDAQ: SMH) registered a lower high in late August. If the price would push below $142, that would mean a new lower low as well. Given the weakened relative strength profile and negative momentum swing, there appears to be very real potential for further downside in this bellwether industry group. Homebuilders (ITB) For most of 2023, homebuilders were firing ...Full story available on Benzinga.com

As the Federal Open Market Committee (FOMC) prepares to reveal its rate decision at 2 p.m. ET on Wednesday, market watchers and economists are speculating about the Federal Reserve’s next actions. What To Expect From The FOMC The consensus view is that the Fed is likely to maintain its current interest rates in the range of 5.25%-5.5%. According to CME Group’s FedWatch Tool, which calculates interest rate probabilities based on Fed futures prices, there is a 99% chance of rates staying unchanged. Looking ahead to the Nov. 1 meeting, the market currently assigns a 70% probability of another hold. Table: Market-implied Fed Interest Rate Probabilities Fed funds target rate 09/20/2023 01/11/2023 12/13/2023 01/31/2024 03/20/2024 05/01/2024 06/12/2024 07/31/2024 09/18/2024 11/07/2024 12/18/2024 450-475 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 1.9% 8.2% 18.7% 25.7% 28.2% 475-500 0.0% 0.0% 0.0% 0.0% 0.0% 4.9% 14.1% 24.9% 31.2% 29.2% 22.3% 500-525 0.0% 0.0% 0.0% 0.0% 13.2% 28.5% 34.9% 34.9% 27.7% 19.5% 10.9% 525-550 99.0% 70.8% 59.8% 59.8% 54.4% 44.8% 34.9% 23.4% 13.0% 7.4% 3.2% 550-575 1.0% 28.9% 35.4% 35.4% 28.7% 19.4% 12.7% 6.9% 3.0% 1.5% 0.5% 575-600 0.0% 0.3% 4.7% 4.7% 3.7% 2.3% 1.4% 0.7% 0.3% 0.1% 0.0% Source: CME Group Also Read: GM Once Ignored Tesla At Its Peril, Says Nikola CEO: How Auto Industry’s Dismissal Gave The Elon Musk-Led Company A 10-Year Jumpstart Over Rivals Hawkish Vs. Dovish Divide In addition to the rate decision and statement, the Fed will unveil the “dot plot,” displaying member projections for the federal funds rate, as well as the median of these estimates. June’s dot plot showed interest rates at 5.6% at the end of 2023, implying a further interest rate hike from current levels. Analysts are divided on whether the Fed will pencil in an additional ...Full story available on Benzinga.com

The 10-year Treasury closed Tuesday at 4.37% yield, marking its highest level since Nov. 7, 2007 as investors brace for the upcoming Federal Reserve Open Market Committee (FOMC) rate announcement on Wednesday. September is poised to potentially become the fifth consecutive month of yield increases for the 10-year Treasury, a pattern not seen since late 2021 and the early part of 2022. This month alone, the yield has jumped by 25 basis points, marking the biggest uptick since February 2023. In comparison to its 50-day moving average, the 10-year yield currently stands 26 basis points higher, while there’s a 60 basis point positive gap from the 200-day moving ...Full story available on Benzinga.com

To gain an edge, this is what you need to know today. Dot Plot Please click here for the Fed’s prior dot plot. Note the following: The FOMC meeting is starting today. Tomorrow, the Fed will announce its decision at 2pm ET followed by Powell’s press conference at 2:30pm ET. The dot plot shows each FOMC participants’ projected mid point of the target for the federal funds rate. Each dot represents an FOMC participant. The chart shows that no FOMC participants projected a federal funds rate of less than 5.125% in 2023. The chart shows that one FOMC participant projected a federal funds rate above 6% in 2023. The chart shows wide dispersion in 2024. The highest projection is 5.875%. The lowest projection is 3.625%. In The Arora Report analysis, there is enough uncertainty in the economic data that the high end of the projection at 5.875% and the lower end of the projection 3.625% are both possible. This is why it is important for investors to start from Arora’s Second Law of Investing and Trading. Arora’s Second Law states, “Nobody knows with certainty what is going to happen next in the markets.” It is important to not get locked into a bullish or bearish point of view. Consider flowing with the new data points. The Morning Capsules are your best source of new data points that matter. For the most part, you can ignore new data points that are not mentioned in the Morning Capsule. The Fed is expected to release a new dot plot tomorrow. The most important information from the Fed meeting will be the dot plot. The consensus is that the Fed will have a hawkish statement but leave the rate unchanged. Regarding the dot plot, momo gurus believe the dot plot will show as many as five interest rate cuts. This is the reason momo gurus are giving to urge their followers to aggressively buy stocks. The historical record is clear – momo gurus have consistently been wrong, yet being wrong does not stop momo gurus from making new projections and pretending that they know what the market will ...Full story available on Benzinga.com

To gain an edge, this is what you need to know today. No Fear Please click here for a chart of volatility index VIX . Note the following: VIX is the fear gauge of Wall Street. The chart shows that VIX has fallen to the lowest level in two years. The fall in VIX is on the longest streak since 2017 – 118 consecutive days without back to back closes over 20. The VIX has closed under the 200 day moving average for 123 days in a row. This is the first time this is happening since 2009. $3.4 trillion notional value of options are expiring today. This is the largest September option expiration ever. The momo crowd aggressively started buying Arm Holdings American Depositary Shares (NASDAQ: ARM) shares after the regular session close yesterday and has continued to aggressively buy ARM shares in the IPO.  Why is the momo crowd buying ARM so aggressively? The reason is that they believe that ARM is an AI play on par with NVIDIA Corp (NASDAQ: NVDA).  Nothing could be farther from the truth. From yesterday’s Morning Capsule: In The Arora Report analysis, ARM is not an AI company, but facts do not matter in the stock market when investors are excited.  ARM is being marketed as an AI company, and the momo crowd does not know any better. ARM is attempting to pivot to become an AI company. It has yet to be seen if they can succeed.   Thank you for all of your emails requesting a podcast on ARM. We are starting work on a podcast on ARM. The podcast will be available in Arora Ambassador Club. Wall Street is driven by fear and greed. Historically, it pays to sell when fear is sucked out of the stock market and to buy when greed is sucked out of the stock market. In The Arora Report analysis, the lack of fear is a reason to be cautious at this time.   New ...Full story available on Benzinga.com

With the Fed funds rate at 5.5%, its highest level since the early 2000s, the temptation of cash-like investments has never been more appealing, pushing investors to reconsider riskier assets such as stocks. While the Fed may opt to press the hold button this month, the end of rate hikes has not been yet declared. Indeed, the possibility that interest rates could remain high for far longer than many predicted only a few months ago appears to be becoming more realistic. The resilience of the U.S. economy in recent times has left many economists and analysts scratching their heads, prompting them to adjust their growth projections. This, in turn, has made the prospect of a looming recession seem even more remote. Consequently, we’ve witnessed a spike in U.S. Treasury yields, with the 2-year yield recently breaking the 5% barrier once more. Read Also: Fed Scrambles To Revise 2023 Projections As US Economy Surges Beyond Expectations Chart: 2-Year Treasury Yield & Fed Funds Rate

The R-star And Shoplifting Issue Lots of interesting news this week where we address these important questions: Jerome Powell is again more hawkish than the market expected or hoped. Rates to 6%? More bank downgrades. One bank index shows no shareholder value creation in 25 years. Nvidia (NASDAQ: NVDA) has a fantastic quarter and the stock fell. What do you do when the best possible news doesn’t make you money? What’s R-star? What’s the right level for this measure? We’ll help you form an opinion on whether the experts are right or wrong. Will retail companies like Dick’s Sporting Goods (NYSE: DKS) change their issue advocacy when theft is causing them billions of dollars in market cap and putting their employees at risk? Ready for the week? Let’s dive in: Powell Speaks: Fed Chairman, Jerome Powell, spoke at a conference in Jackson Hole, WY. He immediately said there’s a “long way to go” to get inflation under control. He also noted that “two months of good data are only the beginning” and “there’s still substantial ground to cover”. For the doves, he said he believes the current (fed funds) rate is “restrictive”. Fed Chairman, Powell, telling us what’s coming next. DKI Takeaway:  We’re not so sure that the current real rate of approximately 2% is so restrictive, and even Powell had to acknowledge the consumer continues to spend. Overall, we think the speech was more hawkish than many expected or hoped complete with a stated commitment not to raise the inflation target. All together now: “Higher for longer”. S&P Downgrades More Banks: We recently noted ratings agency downgrades on multiple small and mid-sized banks. This week, S&P added to the list by downgrading five banks and lowering the outlook on others. KeyCorp (NYSE: KEY) and Comerica (NYSE: CMA) were the most noteworthy of the group. The KBW Bank Index is back at the level it was in early 1998. Graph from Yahoo Finance. DKI Takeaway: Higher interest rates have reduced the value of these banks’ assets on the balance sheet while demands for higher interest on deposits by customers is putting pressure on the income statements. The banks are responding by offering ...Full story available on Benzinga.com