Bears took softening economic data as their opportunity to pounce, with the S&P 500 recording its worst week since March 2023 and the Nasdaq 100 having its worst since 2022. Shortly after the close, the White House accused Iran of sending weapons to Russia, and stocks continued to fall over fears of a weekend escalation overseas. 👀

Today's issue covers why the Fed is unlikely to cut 50 bps, big trouble at Big Lots, Roaring Kitty’s potential return to GameStop, two under-the-radar earnings breakouts, and a recap of the S&P 500’s quarterly reconstitution. 📰

Here’s the S&P 500 heatmap. 1 of 11 sectors closed green, with real estate (+0.00%) leading and technology (-2.59%) lagging.

And here are the closing prices: 

Most bullish/bearish symbols on Stocktwits at the close: 📈 $MCRB, $CLS, $VOR, $GWRE, $IOT 📉 $ZUMZ, $PRKR, $MBLY, $VTLE, $SCLX*

*If you’re a business and want to access this data via our API, email us.

This morning was the latest ‘most important jobs report’ in a series of ‘most important jobs reports ever,’ as investors and the Fed try to determine whether a 25 bp or 50 bp cut is coming on September 18th.

First, let’s discuss what happened and then try to interpret the action. 👇

Nonfarm payrolls rose 142,000 during August, up from 89,000 in July but below the 161,000 expected by analysts. Additionally, the July numbers were revised down by 25,000, and June was revised down by 61,000.

Average hourly earnings rose 0.40% MoM and 3.80% YoY, 10bps higher than expectations for both measures. Hours worked inched higher to 34.30. 🔺

The headline unemployment rate ticked down to 4.2% when rounded, but it barely budged when taken to two decimals, falling from 4.25% to 4.22%.

So, clearly, the labor market is continuing to cool, and the risks to the economy outweigh the risks of inflation re-accelerating. But is the economic risk enough to warrant the Fed cutting 50 bps instead of 25?

I shared today on Stocktwits what I believe is an important perspective being discussed by several Wall Street analysts including Callie Cox and Jeffrey Rosenberg. And that is what’s driving the unemployment rate. 🔍

Below is a quote from today’s jobs report, followed by my commentary.

Overall, it seems that many on Wall Street believe the Fed should cut 50 bp but will not because doing so could send a signal that the economy is at risk of a serious recession…even though the data says it’s only cooling. ⚠️

Clearly, the market has not gotten a good enough read on the Fed’s next move because we’re continuing to see pressure on risk assets heading into the Fed meeting. So we’ll have to wait and see.

A good place to leave this discussion is with a poll we’ve got up on Stocktwits right now asking if you’d rather own bonds (nearing a breakout) or Bitcoin (nearing a breakdown) for the next twelve months. 💸

Go check out the chart and leave your response. If the team likes your thesis enough, you could win a t-shirt. 😉

Unleash your trading potential with our new Edge subscription plan—featuring unique social data, an ad-free experience, and more!

With troubles brewing at retailers with low to middle-income customers, all eyes were on Big Lots’ earnings report scheduled for today. But when investors woke up this morning expecting to read their report, they learned that the company was postponing its release until next week.

The stock treaded water before the next shoe dropped after hours. This time, it was news that the struggling retailer was preparing for bankruptcy. 🙃

The stock's journey from an all-time high during the pandemic to bankruptcy in about three years is truly impressive. It reiterates the often ridiculous relationship between market expectations and actual business fundamentals, which were clearly disconnected for quite some time.

Time will tell if and how it emerges from this process. But investors have been absolutely cooked for now, with shares falling another 44% on the news. 📉

GameStop recently regained some momentum on the bag of its ‘retro gaming’ initiative, with investors excited to learn more during the company’s earnings release on Tuesday after the bell.

However, in the usual ‘meme stock’ fashion, nothing can ever be simple for GameStop watchers. That’s because Roaring Kitty returned to the scene after not posting since June 27th, dropping his latest cryptic tweet. 😐

The picture seemingly shows the ‘dog’ from his previous tweets being let go in famous Toy Story fashion, implying to investors he could be moving on from Chewy and back to other ‘meme stocks.’

That’s at least how the market interpreted it, with GameStop and AMC Entertainment jumping and Chewy dumping (initially). 🤷

Why he’s back remains to be seen, but next week’s GameStop earnings are expected to be an interesting event to say the least… 🙄

When I initially wrote this post title in the morning, I intended to highlight two underfollowed stocks breaking out to new all-time highs. This afternoon, one of the two still meets that criteria, so let’s take a look. 😅

Below are charts of Brady Corporation, a mid-cap industrial that manufactures and supplies identification solutions (IDS) and workplace safety (WPS) products, and its peer ABM Industries, a mid-cap providing integrated facility solutions in the U.S. and abroad.

These stocks have been massive under-the-radar winners and made new all-time highs after earnings, but it seems that ABM Industries got altitude sickness late in the day…because it came crashing back down. 😦

Shares were up as much as 6% in early trading but closed down nearly 9%. Brady Corporation had slightly better luck, falling but still closing green.

Stocktwits sentiment remains in ‘extremely bullish’ territory for both stocks despite the pullbacks, suggesting retail investors believe today’s weakness could prove to be a buying opportunity.

I’m crunched for time here, so I can’t fully dive into the drivers of this move, but I felt it was an interesting situation to highlight. If you like these under-the-radar investigations, let me know, and I’ll expand on this story next week! 👍

Index reconstitution time is here, with Dow Jones announcing changes to the S&P 500, S&P Mid-Cap 400, and S&P Small-Cap 600 indexes.

You should review the full list of changes this weekend, but for now, check out the six S&P 500 stocks impacted and their after-hours moves. 👇

Additions: Palantir Technologies $PLTR (+7.20%), Dell Technologies $DELL (+6.02%), and Erie Indemnity $ERIE (+2.71%)

Subtractions: American Airlines Group $AAL (-0.74%), Etsy $ETSY (-0.58%), and Bio-Rad Laboratories $BIO (-0.23%).

With the changes not taking effect until Monday, September 23rd, traders expect the usual front-running to create a bid in these names.

However, it’s important to remember that although the announcement typically adds to prices’ short-term momentum, history suggests that simply adding a stock to the S&P 500 does not guarantee long-term success. The underlying business still needs to execute, but at least its addition to the index gives investors confidence that it’s on the right track. 👍

🧑‍🏫 Level up your technical analysis skills with Chart School Live––purchase the recording now*

💾 Salesforce acquires data management firm Own for $1.9B in cash

🦞 Red Lobster off the hook? Federal judge approves restructuring plan

🧑‍⚖️ Google’s second antitrust trial could help shape the future of online ads

📍 PwC tells employees it will use location data to police ‘back-to-office’ rule

❌ 7-Eleven’s parent company rejects $38.6 billion takeover bid, says offer ‘grossly undervalues’ company

🤩 Chart Art: The best trade ideas and analysis from the Stocktwits community

*3rd Party Ad. Not an offer or recommendation by Stocktwits. See disclosure here.

Follow our social channels for great, real-time content on Stocktwits and Twitter. And check out our YouTube channel for in-depth video content! 📲

Help us deliver the best content possible by completing this brief survey. 📝

Email me (Tom Bruni) your feedback; I’d love to hear from you. 📧

Want to sponsor this newsletter and reach hundreds of thousands of passionate investors and traders? Reach us here. 👍

Securities Disclaimer: STOCKTWITS IS NOT A TAX ADVISOR, BROKER, FINANCIAL ADVISOR OR INVESTMENT ADVISOR. THE SERVICE IS NOT INTENDED TO PROVIDE TAX, LEGAL, FINANCIAL OR INVESTMENT ADVICE, AND NOTHING ON THE SERVICE SHOULD BE CONSTRUED AS AN OFFER TO SELL, A SOLICITATION OF AN OFFER TO BUY, OR A RECOMMENDATION FOR ANY SECURITY. Trading in such securities can result in immediate and substantial losses of the capital invested. You should only invest risk capital, and not capital required for other purposes. You alone are solely responsible for determining whether any investment, security or strategy, or any other product or service, is appropriate or suitable for you based on your investment objectives and personal and financial situation. You should also consult an attorney or tax professional regarding your specific legal or tax situation. The Content is to be used for informational and entertainment purposes only and the Service does not provide investment advice for any individual. Stocktwits, its affiliates and partners specifically disclaim any and all liability or loss arising out of any action taken in reliance on Content, including but not limited to market value or other loss on the sale or purchase of any company, property, product, service, security, instrument, or any other matter. You understand that an investment in any security is subject to a number of risks, and that discussions of any security published on the Service will not contain a list or description of relevant risk factors. In addition, please note that some of the stocks about which Content is published on the Service have a low market capitalization and/or insufficient public float. Such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information. Read the full terms & conditions here. 🔍

Author Disclosure: The author of this newsletter does not hold positions in any of the securities or assets mentioned. 📋