Transports and Industrial Commodity Prices Show Breakout Signs

The sharp rally in Transportation stocks could signal strength in the broader economy.

Key Takeaways

• November Data Will Resolve Uncertainty: The great debate over the Fed, inflation, and the labor market should be resolved with the coming week’s barrage of lagged economic data — especially the November data on nonfarm payrolls.

• Investors Concerned Over AI Spending: The AI bubble may not have popped, but the air is clearly coming out of the balloon. The situation has changed in recent months as investors grow appropriately concerned over cash-flow drain, massive debt issuance, all of the circular arrangements, and now, apparent delays of hundreds of billions of dollars in pledged spending on artificial intelligence.

• Record Market Highs Amid Sector Rotation: A variety of stock market indexes managed to hit new highs last week, including the S&P 500’s market cap and equal-weighted measures, the Dow, and the small-caps as well, as investors rotated into the Banks, Industrials, and Materials — seemingly placing bets that lower interest rates and fiscal stimulus will ignite the cyclical parts of the economy.