CWS Market Review – July 28, 2026

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The stock market closed higher today for the third day in a row. Despite that, this was the fourth day in a row that the S&P 500 closed below its 50-day moving average. That hasn’t happened since April, and it can be an omen of rough days ahead.

The Federal Reserve meets today and tomorrow, and this could be an interesting meeting. At least, interesting for a meeting of government economists. This time, we really have no idea what the Fed will do. The Wall Street Journal called this week’s meeting “one of the most unpredictable in years.”

Let me explain. Going into this meeting, it had been widely assumed on Wall Street and elsewhere that the Fed wasn’t going to raise rates. Well, that view suddenly changed, and traders now think there’s a decent chance of a Fed hike this week. One week ago, the odds for a rate hike were at 10%. Yesterday, the odds got to 36%. We’ll find out tomorrow afternoon when the Fed releases its policy statement.

Personally, I’m a doubter. In fact, the odds for a hike fell back to around 30% today. In plain terms, the market sees a hike as possible but not probable. That sounds about right. I’ll add that if the Fed does hike, the market will not be pleased. Not at all.

What changed? That’s hard to say but I think the market has been confused by the on-again, off-again news for a break in hostilities in the Middle East. More fighting means less oil. Last week, the price for a barrel of oil jumped back over $90. One month ago, oil was going for less than $70 per barrel. As frustrating as it is, I don’t see how higher rates will bring oil back down. Kevin Warsh, the new Fed Chairman, has taken a very tough line on inflation.

I also think it’s likely we’ll see some dissenting votes inside the Fed. The Powell Fed preferred policy by consensus. Kevin Warsh doesn’t appear to be so inclined. In fact, we really don’t have an idea which way Mr. Warsh is leading. For now, I applaud Mr. Warsh’s efforts to bring transparency to the Fed.

Some of this conflict within the Fed may be exaggerated because we’re really talking about moving a rate hike forward by a few weeks. Traders had already been expecting a rate hike in September. The odds for a rate hike by then are currently near 75%.

This means the debate is really about 25 basis points over a seven-week period. I don’t think that’s enough to do too much damage to the economy. We won’t get the next jobs report until Friday, August 7.

I’m still expecting the Fed to hold rates steady this week, but it will be interesting to see if there are any dissenting views from inside the Fed. Still, the Fed is leaning towards higher rates. There’s a good chance that rates will be 50 basis points higher by the end of the year.

An interesting fact about this earnings season is that the S&P 500 is reporting its highest net profit margins in 15 years. A lot of investors don’t realize how unusual this is. We still have a lot more earnings to get through, but the net profit margin is currently running at 15.7%. That’s the highest FactSet has on record.

This tells us that companies are operating more efficiently. The downside is that we may want to see more companies spend freely on their plans for expansion.

I should add that a lot of the big rise in margins is due to Google’s massive quarter. If we were to exclude Google, then the net profit margin for the entire S&P 500 would fall to 14.4%. For the rest of this year, Wall Street sees net profit margins around 15%. That’s quite high.

Looking at the Sector Rotation

Recently, I’ve been talking a lot about the market’s sector rotation. It’s a challenge to convey just how sharply the market has changed. From late March until early June, all kinds of high-risk stocks and sectors led the charge. This includes growth stocks, tech stocks, high beta stocks, the Nasdaq; any kind of measure of higher risk did very well.

That all came to an end on June 2. Since then, the more conservative areas are getting their revenge.

Here’s a table that helps explain what I mean. I’ve listed several indexes and ETFs. The first column shows how well they did from March 30 to June 2. The second column shows returns from June 2 to yesterday.

“So the last shall be first, and the first last.”

All the stuff that has been doing well is lagging now, and all the stuff that had been lagging is now leading. The Chip ETF (SMH) got beaten up for another loss of 3.5% today. All this has been happening even though the overall market has been fairly subdued. I noticed that SpaceX has gone from a high of $225 following the IPO to a low of $107 earlier today.

When these rotations happen, they often last a few years, but it’s not always clear that a rotation has begun. There are often false starts.

40-Fold Profits at Nathan’s Famous

I often talk about stocks that aren’t widely followed on Wall Street. One of my favorites is Nathan’s Famous (NATH). The hot dog stand is in the process of being bought out by Smithfield Foods which is a subsidiary of China’s WH Group.

Nathan’s started as a Coney Island hot-dog stand in 1916. It’s known for its annual July 4th Hot Dog Eating Contest.

The deal values Nathan’s at $102 per share or about $450 million. In 2000, Nathan’s was going for as little as $2.50 per share. That means the stock has soared more than 40-fold in about 25 years, and that doesn’t include dividends. Not a single Wall Street analyst follows the stock.

The Nathan’s deal is expected to close in the second half of this year. I have to admit that I’m a little sad to see the market lose this extraordinary performer as an independent stock.

Some investors are still hungry for stocks. The coming IPO for Jersey Mike’s (JMKE) is said to be 10 times oversubscribed. The company is looking to sell 43.5 million shares at $21 to $25 apiece. The IPO price hasn’t been determined yet. Once it starts trading, Jersey Mike’s could be worth as much as $8 billion.

This week, Apple (AAPL) was briefly worth $5 trillion, and it surpassed Nvidia (NVDA) as the most expensive company in the world.

That’s all for now. The Federal Reserve’s policy statement will be out tomorrow afternoon. On Thursday, we’ll get our first look at Q2 GDP growth. I’m expecting something low but positive. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on July 28th, 2026 at 5:41 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.