More stocks, less risk: This rally is broadening, not breaking

And the highs keep coming! Think Energizer Bunny -

The rally is broadening out — and that’s exactly what you want to see at this stage of the cycle. The Dow closed at a record. The S&P closed at a record. Transports hit a record. And most importantly, the Equal Weight S&P also closed at a record.

Interestingly, both the Nasdaq, the Mag 7 and the Russell failed to check that box — and that is exactly the point that you need to understand and why it matters. Leadership is rotating, not breaking.

The Equal Weight S&P hitting new highs tells us this rally is no longer dependent on a handful of mega-cap tech names. More stocks (think the other S&P 500 names) are participating. Capital is finding opportunities in other places. For me, that suggests a more durable bull market.

Understand that Equal weight strength equals lower concentration risk. Overall market risk is actually falling. The market is less vulnerable to a single narrative (think tech) breaking down. This is how bull markets mature, not how they end.

The fact that Nasdaq is not making new highs is not a flaw.

You see, after the extended, AI-driven rally we’ve been witnessing, the mega-cap tech names are simply digesting gains. That pause is healthy — and it’s exactly what allows investors, traders, and algos to rotate into other sectors.

And that rotation is already showing up in the numbers. Over the past week:

Industrials +4.4%, Financials +3.0%, Energy +2.0%, Healthcare +2.1%, and Basic Materials +1.8%. Compare that to Tech +1.8%, while the Mag 7 are actually DOWN 1.2%.

So yes — it’s early in the game (2026), I get it. But this is an important and interesting development. Leadership is broadening, participation is expanding and that is the ‘take away’.

At the closing bell – this is what it looked like - The Dow rallied hard (again) – rising 485 pts or 1%, the S&P up 42 pts or 0.6%, the Nasdaq rose 151 pts or 0.7%, the Russell added 34 pts or 1.7%, the Transports gained 295 pts or 1.7%, the Equal Weight S&P up 96 pts or 1.2% while the Mag 7 lost 123 pts or 0.4%. Just a side note – the SMID’s (Russell small & midcaps) are in the lead so far this year – up 4.1%.

The moves higher I think come from expectations of more rate cuts – I mean Stevey Miran was on with Maria Bartiromo (Fox Business) yesterday and HE is talking about another 100 bps in cuts….that a full 1% which would take the FED Funds rates to 2.5% - 2.75% - something I clearly DO NOT see….and something that 3 or 4 other members of the FOMC committee do not see. I mean – are there two sets of economic data, is someone playing ‘I’ve got a secret’?

Yesterday’s ISM Services report is NOT pointing to an economy circling the drain….it came in at 52.5 – well into the EXPANSIONARY zone and let me remind you, the US is currently a SERVICES economy, so this is important.

Eco data today will further clarify that report.. Because at 10 am – we will get the ISM SERVICES PRICES PAID component and it tells you one very important thing - where inflation pressure is headed in the largest part of the U.S. economy and is one of the KEY metrics that you should consider when talking about monetary policy.

Here’s how to think about it. It measures cost pressure in services. Think about wages, rents, insurance, transportation, utilities, professional services. Since services make up ~73% of the U.S. economy, this matters MORE than almost any manufacturing price metric.

It’s a leading indicator for “sticky” inflation – something we have discussing for months now. Services inflation doesn’t move like goods prices. It’s slower to fall and harder to reverse. When ISM Services Prices Paid is rising or stays elevated, it tells you inflation pressures are persistent, not transitory — especially in labor-heavy areas.

Now this is where I have to ask – is Stevey looking at a set of different numbers because – this metric should feed directly into Fed policy expectations. An elevated or rising reading says the Fed’s job is NOT done. It argues AGAINST aggressive rate cuts and supports a “higher-for-longer” or at least “not cutting yet” stance while a falling reading gives the Fed cover to ease rates.

Ok – so then you ask – define the parameters for me…..

– Above 55 inflation pressure is accelerating.

– 50–55 inflation still present, but easing.

– Below 50 deflationary pressures.

And it is expected to be 64.9 – a full 10 pts above the easing band – yes lower than last month but still well with the ‘inflation pressure is accelerating’ band. It is nowhere near the ‘inflation is present but easing’ band yet…..

The December ADP Employment report comes out at 8:15 am and that is expected to show a gain of 50k jobs and at 10 am – look for the November JOLTS report…which I would caution you to take it with a grain of salt.

Thursday brings us the December Challenger Job Cuts report while Friday brings us the all-important December NFP report, and that’s the data point investors will be laser-focused on. Expectations call for a gain of 65k new jobs, Average Hourly Earnings growth of +0.3% m/m and +3.6% y/y and an Unemployment rate of 4.5%.

Now bonds churned and ended the day a bit lower. The TLT down 0.25% while the TLH lost 0.1%. The 10-yr ended the day yielding 4.16% while the 30 yr was yielding 4.85%. This morning – yields are a bit lower – but my sense is that that is a vote of confidence – confidence that growth is steady, and inflation cooling, wages are rising and Fed Funds rates are ‘neutral’.

Oil – oh boy…Overnight Donny announced that Delcy Rodriguez (Venezuela’s interim leader) is sending 30 – 50 million barrels of oil to the US – put that in dollar terms, it’s about $2.8 billion worth. Now before you go screaming and yelling – the oil will be sold at current market prices, and the proceeds will benefit BOTH the US and Venezuela – the details are still a bit murky – but the headline is what is important –

When the markets hear “extra barrels,” they start to price in even MORE supply. And even if Venezuela needs years of investment to restore production at scale, the perception of new supply is the dynamic that plays out quickly in futures markets. That’s why, even with this news, crude remains trading in the same range we’ve been discussing for months - $55/$58.60.

Look - OPEC+ is keeping a production discipline, US is producing at record levels and global demand remains resilient and that will continue to support prices here. The market is just reacting to a big geopolitical headline and in the end - the key takeaway - Donny just spanked Xi Xi, Vlad AND the Ayatollah.

Gold — which had been pushing higher on the weekend’s geopolitical news — added another $45, closing yesterday at $4,495. This morning, some trader types are taking profits, and gold is down about $30, trading near $4,465.

Let’s be clear - this move is negligible. Up $45, down $30 — in the end, nothing has changed. We remain firmly within the range we’ve been discussing for weeks: trendline support near $4,200 with upside resistance around $4,550.

In my opinion, the next meaningful move in gold will be driven by the next geopolitical headline.

Good news? Gold eases.

Bad news? Gold pushes higher.

Yes, you can point to Fed commentary — but remember, I do not expect, nor does the market expect any rate changes until a new Fed Chair takes the seat. Until then, Fed talk is just noise around the edges.

The VIX remains in the complacent zone.

European markets are slightly negative with the exception of Germany which is up 0.7% and btw is in the lead – up 2.35% ytd. Defense stocks are catching a bid because Donny is once again considering a ‘range of options to acquire’ the autonomous territory of Denmark.

Acquire is the wrong word….and the media knows that…..What we should be discussing is work with the allies and ‘partner up with Demark to make the region more secure – ‘harden the flank’ as they say. Lock in a formal ‘security partnership’, upgrade ‘warning’ systems, outcompete them (Russia and China), increase coastal patrol, and encourage Western investments so that Denmark does not go looking for capital in ‘other places. But those headlines don’t create chaos – Acquire a foreign territory does! Especially during a mid-term election season.

Look - Russia is building up/modernizing its military infrastructure just across the arctic – think bases, airfields, and naval assets. China wants their mineral wealth – and views Greenland as ‘strategically important’ for them. And we know that Vlad and Xi Xi are in bed together, so let’s pull back the sheets and see what’s going on.

US Futures are digesting the recent moves higher. The Dow up 25, the S&P’s down 5, the Nasdaq is down 65 and the Russell is flat.

The S&P 500 closed at 6,944, up 43 points and is just 1 pt below the 2025 high of 6,945. Now, we pierced it at 3:15 to trade at 6,948, pulled back, pierced it again and then ended just below. You can now feel the excitement – S&P 7000 is only 56 pts away – that’s less than 1%.... Will we get there before earnings season begins next week? And then what happens when bank earnings begin? Will guidance support the ongoing rally, or will we get a breather?

Just to be clear – we are expecting a solid quarter for the major banks and are expecting to see strong profits and strong guidance. But look – the sector – XLF is trading at all-time highs – the big banks think JPM. GS, C, MS, even WFC are trading at all-time highs…so could we see a ‘buy the rumor/sell the news’ event? Of course – from traders, not from investors.

S&P trendline support sits near 6,815, I am not concerned that today, but we might if Friday’s NFP report is markedly different than the expectation and/or if earnings season creates any hesitation.

In the end – Stay disciplined. Stay focused, Stick to your plan and don’t get drawn in the fray.

Dover sole piccata

So easy and always a winner in my house.

For this you need: Sole filets, flour, s&p, butter, olive oil, capers, dry white wine (I use pinot grigio Santa Margherita) and the juice of 2 lemons.

Start by rinsing and patting dry the filets. Set aside.

In a side plate – add the flour and season with s&p.

Heat up a dollop of butter and a splash of olive oil over med heat in a large sauté pan.

Dredge the filets in the flour on both sides and shake off the excess. Now add to the sauté pan…. Make sure the butter and oil are hot first.

Cook on one side until golden brown and then flip and repeat.

Next – add another dollop of butter – allow to melt. Add the drained capers and about ½ c of white wine and the lemon juice. Lower the heat to med low and spoon the sauce over the filets.

Place the filets on the plate – use a spatula so that you don’t break it up.

When ready- spoon the sauce over each filet and serve. This dish works well with a green veggie – think French cut green beans, broccolini or even peas.

You can pour yourself a glass of Pinot Grigio Santa Margherita to finish it off for a delicious weeknight meal.