Tech Giants Stumble as Market Sees Mixed Performance (Weekly Cheat Sheet)

The stock market put on a rollercoaster performance this week, serving up a smorgasbord of surprises that would make even the most seasoned traders raise an eyebrow. The S&P 500 and Nasdaq Composite took a bit of a nosedive, shedding 0.8% and 2.1% respectively, as if they’d suddenly remembered their fear of heights[1][4].

Meanwhile, the Russell 2000 decided to play the rebel, bucking the trend with a jaw-dropping 3.5% leap. Not to be outdone, the Dow Jones Industrial Average managed to squeak out a 0.8% gain, proving that slow and steady can indeed win the race.

What’s behind this financial feast of ups and downs? Well, it seems the mega-cap and semiconductor spaces decided it was time for a diet, engaging in some serious profit-taking. The PHLX Semiconductor Index took a 3.1% haircut, while the Vanguard Mega Cap Growth ETF slimmed down by 2.8%.

Alphabet and Tesla, usually the life of the party, found themselves wallflowers this week. Their earnings reports hit a sour note, falling flat against the market’s sky-high expectations. Alphabet stumbled with a 6% drop, while Tesla skidded into an 8.1% pothole.

Visa, playing the role of economic fortune-teller, raised eyebrows by noting that lower-income consumers have tightened their purse strings. Despite this ominous forecast, Visa shares managed to end the week unchanged, displaying the balance of a tightrope walker.

In the sector performance arena, communication services, information technology, and consumer discretionary played the part of party poopers, declining 3.8%, 2.5%, and 2.3% respectively. These drops were largely thanks to their mega-cap components deciding to sit this dance out. On the brighter side, materials and utilities stepped into the spotlight, gaining 1.4% and 1.5% respectively, proving that sometimes it pays to be the wallflower.

This whirlwind week in the markets serves as a reminder that in the world of stocks, the only constant is change. So buckle up, investors – it’s sure to be an interesting ride ahead!

The bond market put on quite a show this week, with Treasury yields performing a graceful swan dive. The 10-year note yield pirouetted down four basis points to 4.20%, while its shorter-lived cousin, the 2-year note, took a more dramatic plunge, shedding 12 basis points to land at 4.39%. This choreographed descent was inspired by a flurry of economic data releases, with the June Personal Income and Spending Report taking center stage.

The report’s PCE and core-PCE price indexes played it cool, maintaining their composure on a year-over-year basis. This steady performance only fueled the market’s conviction that the Fed might soon be ready to cut rates, with September emerging as the favored month for this financial plot twist.

Meanwhile, in the political theater, a surprising turn of events unfolded. President Biden, in a move that would make Shakespeare proud, exited stage left from the 2024 presidential race, passing the torch to Kamala Harris. Yet, in a twist worthy of a Broadway production, this political bombshell barely caused a ripple in the usually dramatic world of equity and bond markets.

The 10-year note yield, seemingly unimpressed by the political drama, inched up a mere two basis points to 4.26%. Not to be outdone, the 2-year note yield followed suit with a modest one basis point climb to 4.52%. It appears that in this week’s market performance, economic data stole the spotlight, leaving political maneuverings to play second fiddle.

This week’s bond market saga serves as a reminder that in the grand theater of finance, sometimes the most anticipated plot twists can elicit nothing more than a polite golf clap from the audience. As we roll the credits on this week’s performance, one can’t help but wonder what surprises the next act might bring to this ever-evolving financial spectacle.

US Market Highlights

Let’s take a closer look at some of the key developments in the US market:

• The US economy flexed its muscles in the second quarter, growing by 2.8% and surpassing expectations. Consumer spending remained resilient, and business investment was strong. Plus, inflation eased to 2.6% during the quarter. Not too shabby!
• June’s PCE inflation cooled to 2.5%, down from 2.6% in May. This has many folks, myself included, thinking a Fed rate cut in September might be on the horizon. However, it’s worth noting that personal income rose just 0.2%, while the average savings rate decreased to 3.4%. This could be a sign that consumers are feeling the pinch.
• The housing market continues to be a wild ride. Home prices hit a new record high of $426,900 in June, up 4.1% from last year. But here’s the kicker – inventory surged 23%, while sales volume dropped 5.4%. Those higher mortgage rates are definitely making their presence felt.
• In the world of economic indicators, the S&P composite PMI hit a 27-month high of 55%, marking an acceleration in growth. But don’t pop the champagne just yet – all of these gains came from the service sector, with the Services PMI jumping to 56% while the Manufacturing PMI slumped to 49.5%. It’s like watching a seesaw in action.
• In the gig economy world, Uber and Lyft scored a major victory in California. The state’s Supreme Court ruled that Proposition 22 was constitutional, allowing these companies to continue treating drivers as independent contractors. This decision could have far-reaching implications for the gig economy as a whole.
• Lastly, we saw the biggest IPO of 2024 with Lineage beginning to trade under the ticker “LINE”. As the world’s largest global temperature-controlled warehouse REIT, they raised funds at an implied valuation of $18 billion. Now that’s what I call a cool debut!

Global Highlights

The global markets had their fair share of excitement this week:

• China’s central bank caught everyone off guard by cutting interest rates for the first time since last summer. They’re hoping this move will give a boost to the struggling property sector and strengthen consumer demand. It’s a bold move, Cotton. Let’s see if it pays off for them.
• Over in Canada, the Bank of Canada cut its key policy rate by 25 basis points for the second month in a row, bringing it down to 4.5%. They’re hinting at more cuts if inflation continues to cool. It seems our neighbors to the north are leading the charge in monetary easing.
• Nvidia is making moves in China, working on a new AI chip that’ll be compatible with U.S. export controls. They’re partnering with Inspur, one of their major distribution partners in China, on this new chip dubbed the “B20”. It’s like watching a high-stakes game of tech chess unfold before our eyes.
• The Eurozone hit a bit of a speed bump, with economic growth grinding to a halt. The S&P Composite PMI fell to 50.1 in July, mainly due to unexpected declines in output from Germany and France. It’s a reminder that even economic powerhouses can stumble.
• In India, Apple cut iPhone prices after the country slashed smartphone import duties to 15%. Meanwhile, in China, iPhone sales dropped 7% in the second quarter while Huawei’s smartphone shipments surged 41%. It’s a tale of two markets, and Apple’s finding itself caught in the middle.
• Lastly, we saw some drama in the pharmaceutical world. Biogen and Eisai’s Alzheimer’s drug was rejected by EU regulators due to concerns about serious side effects like brain swelling and bleeding. Biogen’s shares took a nearly 8% hit following the news. It’s a stark reminder of the risks and challenges in drug development.

Commodities & Crypto Corner

In the world of commodities and crypto, things have been… interesting, to say the least.

Oil prices are feeling the pressure, with disappointing economic forecasts from China and sluggish manufacturing PMIs weighing heavily on the market. We’re looking at a third consecutive week of declines for black gold. The European benchmark is flirting with the $80/barrel mark, while WTI is trading around $77.50. It seems the market is turning a blind eye to potential positive factors like OPEC+ policy and production risks in Canada’s fire-stricken oil basin.

The industrial metals segment is also taking a beating, bearing the full brunt of concerns over demand for base metals and the return of risk aversion. Copper, often called the barometer of the global economy, has fallen by almost 5% in just a month. That’s enough to make any metals trader sweat.

Gold, usually our trusty safe-haven, isn’t living up to its reputation this time around. It’s down about 1.5% over the past five days, trading at around $2,375. It seems even the shiny stuff can lose its luster in these uncertain times

.As for crypto, well, let’s just say the launch of Ethereum Spot ETFs in the US didn’t quite live up to the hype. In fact, we’ve seen net outflows of $179 million since their launch on Tuesday. It seems institutional investors aren’t as keen on ether as they were on bitcoin earlier this year. Ether has fallen by 8.3% since Monday, hovering around $3,250.

Speaking of Bitcoin, it’s holding relatively steady at around $67,500, down just 0.89% for the week. The overall crypto market has taken a bit of a hit, though, with total valuation down 3% to $2,353 billion. It’s a reminder that even in the wild west of crypto, what goes up must sometimes come down.

Calendar – The Week Ahead

Buckle up, folks, because next week is going to be a doozy. We’ve got monetary policy decisions coming in from the Federal Reserve, the Bank of Japan, and the Bank of England. Plus, we’ll be getting the U.S. jobs report for July at the end of the week. Current forecasts are predicting a solid 215K nonfarm payroll additions, with the unemployment rate expected to hold steady.

On the corporate earnings front, the tech sector is taking center stage. We’ll be hearing from heavyweights like Microsoft, Meta Platforms, Apple, Amazon, IBM, and Intel. But it’s not just tech – we’ve also got reports coming in from McDonald’s, Merck, Procter & Gamble, Pfizer, Starbucks, Boeing, and Exxon Mobil, among others. It’s going to be a veritable smorgasbord of earnings reports!And let’s not forget about the OPEC+ ministers meeting. The expectation is that they’ll stick to their plan for an oil production increase in October, but in this market, you never know what might happen.

We’ve also got some IPO action to look forward to. Pershing Square USA Ltd. is expected to price its IPO on July 29 and begin trading on July 30. And keep an eye out for expiring IPO lockup periods for Amer Sports, Alto Neuroscience, Fractyl Health, and Pixie Dust Technologies.

For you dividend hunters out there, companies like Weis Markets, Delta Air Lines, Morgan Stanley, and J.B. Hunt have ex-dividend dates coming up next week. And we’re expecting dividend increases from Sturm Ruger, SunCoke Energy, McKesson, and Wingstop.

As the great Warren Buffett once said, “The stock market is a device for transferring money from the impatient to the patient.” In times like these, it’s important to remember that patience and a long-term perspective are key to successful investing.

Here’s a fun fact for you: Did you know that if you had invested $1,000 in the S&P 500 index 50 years ago, it would be worth over $180,000 today? That’s the power of compound interest and long-term investing, folks.

As we wrap up this week’s report, I want to remind you all to stay informed, stay diversified, and most importantly, stay calm. The markets may be unpredictable, but with the right strategy and mindset, we can navigate these choppy waters together.

Until next time, this is Irving Wilkinson signing off. Keep those portfolios balanced and your spirits high!

Here’s the list of events with their times in a table format: