Relief over likely government reopening
(These are the market notes on today’s action by Mike Santoli, CNBC’s Senior Markets Commentator.) If this pop in the indexes to start the week is about relief over an expected reopening of the government, the market had an odd way of expressing it. The leadership of this rebound from last week’s downside chop is a mix of the usual mega-cap leaders, the AI food-chain names (memory chips, etc.), momentum stocks that recently broke stride and the familiar “story” stocks: ( BUZZ meme-stock ETF up 2.4% vs 1.5% for the S & P 500 ). Of course, this matches up with the groups that fell more from their highs than the broader market, last week’s bumpiness arising from a confluence of overheated AI plays after seven straight up months and continued ungenerous market responses to tech earnings — exacerbated by unease with the underlying economic trajectory which was made more urgent by the prolonged shutdown. Zooming out, it still looks fairly orderly/routine as a minor scare for the momentum players leading to a test of the S & P 500’s 50-day moving average, which has held, on a closing basis. Goldman Sachs’ trading desk reports that years such as this one when the index was up double digits through October and then fell during the first week of November have seen better-than-normal gains from that point through the end of the year, for what that’s worth. Nvidia ‘s 6% spurt accounted for more than a quarter of the S & P 500’s net upside for the day, as the dip buyers were in no mood to change horses at this stage of the year. Meantime, the consumer cyclicals and industrials that had rolled over pretty hard for weeks saw only modest relief, up less than half a percent on the day, though banks looked a bit better than that. It suggests the broader market has plenty left to prove as investors look through the fog of second-tier economic data and puzzle over the Fed’s wait-and-see rhetoric. The S & P 500 outperformed its equal-weighted version by a full percentage point. Conventional wisdom says the market might struggle with the lagged and possible poor economic data as the government agencies catch up with their reports. But there’s a good chance the market will view this as lowering the stakes on the macroeconomic releases, viewing weak numbers as shutdown-impaired or stale or due to be reversed upon reopening. What this means for the Fed in several weeks is unclear, but we have seen in the past that the market plays when it has permission to ignore inconvenient inputs. For as dominant as the AI trade has remained, it’s grown somewhat more selective and, at times, fickle. Alphabet shares are beating Meta Platforms shares by more than 40 percentage points year to date, for instance, with the disparity coming down almost entirely to investors’ current level of faith in each company’s smarts in deploying similar amounts of data-center capex. And then there’s Oracle , now more than 30% off its euphoric peak after its OpenAI deal was unveiled. Its chart vs. Nvidia is a picture of the market briefly distracted by a potential alternative way to capture the AI-infrastructure boom, only to rethink it quickly and return to the perceived sure thing. Discernment in separating potential winners from the pretenders is a positive, if sometimes manic and messy, process. Warren Buffett’s Thanksgiving letter , released today, replaces his annual shareholder missive timed for Berkshire Hathaway ‘s annual meeting in May each year. Bittersweet but characteristically classy and generous, the dispatch released today states, credibly: “Berkshire’s businesses have moderately better-than-average prospects, led by a few non-correlated and sizable gems. However, a decade or two from now, there will be many companies that have done better than Berkshire; our size takes its toll. Berkshire has less chance of a devastating disaster than any business I know.” The market understands this and has therefore treated Berkshire shares as the ultimate in stability and defensive properties — as a member of the trillion-dollar market-cap club that behaves almost inversely to the Mag7 . Here’s Berkshire vs. Nasdaq 100 over two years: Another point of contrast: When other CEOs sell chunks of their companies’ shares, they often explain it as an effort to diversify their personal holdings. Fair enough. But Buffett only ever parts with Berkshire stock to donate some to charity, having spent decades diversifying Berkshire’s business portfolio to a point of unmatched durability, so that he personally feels no need to hedge his massive exposure to the company he built.
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