Dear Trader,
Mark and Tim go live today, and the news cycle did them a favor.
Start with the Fed: A sitting bank president spent Monday making the case that one hike won't cut it, which is a strange thing to hear in a year when everybody's been waiting for cuts.
Then look at where the money's actually going. The biggest names in tech have yanked more than $200 billion out of the bond market this year to build data centers, and buyers are finally starting to gag on it.
And sitting on top of all of it: an S&P 500 priced richer than anything since the dot-com peak, throwing off the smallest dividend yield on record.
Three stories, one question running underneath them. Who's funding the AI buildout, and what does the money cost them?
Mark and Tim take that up live today. Room link and calendar link are below, and Garrett's I'd Trade That runs right before if you want to get in early.
This link adds State of the Market to your calendar.
The Daily News Breakdown
SIREN: Cleveland Fed President Beth Hammack doesn't want one rate hike. She wants several. She dissented in July when the FOMC sat on its hands, and she told Yahoo Finance on Monday that a single quarter-point move "probably doesn't do a whole lot" for the economy.
Her read: rates at 3.5% to 3.75% aren't restraining anyone. Businesses tell her they're still spending like nothing's wrong. Core PCE sat at 3.3% in June while core CPI ran 2.6%, and she'd rather tap the brakes now than stomp them later.
Wednesday's CPI print either backs her up or leaves her the loudest hawk in an empty room.
SNEAKER: Wall Street has AI debt indigestion, and the bond desks are the ones burping. Bloomberg reports BlackRock hand-picked pension and insurance buyers for a $12.5 billion Meta data center deal, then had to dangle a 7.5% yield to clear it.
Why the choreography? Nvidia, Amazon and SpaceX each raised $25 billion and watched the paper break issue price out of the gate.
Six companies have pulled more than $200 billion from the dollar bond market this year against $13 billion for high-grade tech in the same stretch last year. Bankers see another $50 to $60 billion after Labor Day. Buyers are getting picky.
SIGN: The S&P 500 is now the second-most expensive it has ever been. That's the CAPE ratio talking, which stacks price against 10 years of inflation-adjusted earnings. It blew past 1929 a while back. The only reading above it: the dot-com peak of 44.19 in November 1999.
The dividend yield is the skinniest on record too, at 1.04%. You're paying more and collecting less.
Brian Sozzi's takeaway is that overvalued markets stay overvalued, and you'll miss upside waiting for the crash. Fair. Also fair: CAPE sank to 21 by January 2003.