Last week was a short one with Labor Day unofficially ending Summer and kickstarting Fall. The S&P 500 rose modestly. Employment data was a big story, specifically the nonfarm payroll report, which came in well below estimates and drove a drop in yields. It was also a nice use of foreshadowing. The Russell 2000 outperformed the S&P 500 by 80bp, while the equal-weight was about in line. Labor Day usually brings the closure of pools and abandonment of lifeguard stands but technically we still have until September 22 to enjoy Summer. This week the S&P 500 kept the pool party going, replacing one all-time high with another on Thursday. The AI narrative continued to be the story, including Oracle's blowout bookings number. The S&P 500 gained ~2% as AI strength drove outperformance in large caps and Tech. Small caps benefited from the fall in rates last week but didn’t get that help this time. The Russell 2000 underperformed but still finished higher. There was significant outperformance in some of the riskier parts of the equity market. Numerous crypto-related companies- brokerages, treasury companies, miners- were up over 20%. The market closed the week out uninspiringly on Friday, with S&P flat but the Russell and equal weight lower as Tech and Discretionary sectors propped things up. For the week every sector was higher aside from Consumer Staples which saw broad weakness after some disappointing food and beverage updates. Tech was the leading sector, and in particular AI and semi-related stocks. Utilities were also a leading sector and continue to attract a lot of attention as an AI infrastructure story. While the record-setting summer party rolls on in the S&P, the labor market may be getting the sweaters out of the closet. The employment story has been one where companies are not laying-off workers but also are not hiring. That storyline could be changing like an approaching George R.R. Martin wedding scene (hopefully not that dramatically). This week’s payroll revision and jobless claims (discussed below) doubled down on last week’s NFP report, clearly showing a labor market that was not as strong as once thought. Lower rates should benefit equities overall and areas like housing and more speculative areas, but this has already been priced in to varying degrees. The main event next week will be the Federal Reserve’s interest rate decision and Chair Powell’s follow-up press conference.

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