Review & Preview: Too Much Good News

September Swoon Arrives. Stocks were looking unseasonably strong for much of September, but the month’s typical bearish pattern seems to have arrived with the official start of fall. The major indexes fell for a third straight session Thursday, with the Dow Jones Industrial Average shedding 174 points, or 0.4%. The S&P 500 and Nasdaq Composite both fell 0.5%. The three indexes are down from 0.9% to 1.8% over the last three days, though they’re all still up in September, including a 4.3% rise for the Nasdaq.

As stocks slip, they are suddenly facing a new problem: too much good news. The latest economic data suggest the recent slowing—and the hope for more interest rate cuts—might have been a mirage. For one, the U.S. economy grew at 3.8%, according to the final estimate of second-quarter GDP. That’s a half-point better than prior figures.

Additionally, fewer Americans were asking for unemployment in the recent week, with jobless claims falling to 218,000, down from last week’s 232,000.

As the economy powers along, investors are dialing back their expectations for rate cuts. The odds of two quarter-point cuts by the end of the year now stand at 60%, down from 82% last week. Higher rates mean investors are generally less willing to pay higher multiples for stocks. Recent outperformers like Oracle, Tesla, and Micron Technology all fell hard today.

The day’s hardest hit stock was CarMax. The used-car dealer tumbled 20% after earnings disappointed and sales came in weaker than expected. “It’s a warning for investors that car markets might be weakening after a period of unexpected strength,” my colleagues Nate Wolf and Al Root write.

Company

Last

Chg

Chg%

Dow Jones Industrial Average

46,091.83

144.51

0.31%

S&P 500 Index

6,616.26

11.54

0.17%

NASDAQ Composite Index

22,365.17

-19.53

-0.09%

Market Data as of

The Hot Stock: Intel +8.9%
The Biggest Loser: CarMax -20.1%

Best Sector: Energy +0.9%
Worst Sector: Healthcare -1.7%

Created with Highcharts 9.0.1Thursday, Sept. 25Index performanceSource: FactSetAs of Sept. 26, 4 p.m. ET

Created with Highcharts 9.0.1Sept. 26-0.4-0.200.20.40.60.81.0%Dow industrialsS&P 500Nasdaq Composite

The Calendar

The Bureau of Economic Analysis releases the personal consumption expenditures price index for August tomorrow. The consensus estimate is for a 2.7% year-over year increase, one-tenth of a percentage point more than in July. The core PCE price index, which excludes food and energy prices, is expected to rise 2.9%, matching the July figure.

What We’re Reading Today

• Former Fed Chairs and Treasury Secretaries Tell Supreme Court: Don’t Let Trump Fire Lisa Cook
• Shareholder Yields Are Better Than Dividend Yields. 10 Stocks That Fit the Bill.
• China’s AI Boom Could Outlast the U.S. Why Alibaba’s Bet Is Just the Start.
• Alibaba Stock’s AI-Powered Run Isn’t Done
• There’s a New Tax Break for ‘Concierge Medicine.’ Should You Go for It?

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