Market Recap - Rebounding After Last Week's Slump

The stock market rebounded following last week's big declines.

Buy-the-dip interest was a support factor, along with upside momentum acting as its own catalyst by the end of the week. Many stocks participated, but mega caps and semiconductor shares had an outsized impact on index gains.

The PHLX Semiconductor Index (SOX) surged 10.0%. NVIDIA (NVDA) was a standout performer, bouncing 15.8% following last week's slide.

Things looked a little shaky on Wednesday after the August Consumer Price Index stoked selling interest due to the understanding that core-CPI, which excludes food and energy, remained above the Fed's 2.0% target at 3.2% year-over-year.

Stocks quickly recovered, though, when the S&P 500 held above last Friday's low (5,402) on Wednesday's initial retreat. The strength in NVIDIA also helped get stocks back on a winning track.

Other data this week garnered muted responses from stocks and bonds. Initial jobless claims were little changed and remain below recession-like levels at 230,000 and the August Producer Price Index reflected moderating inflation at the wholesale level.

Selling interest in recent weeks was partially predicated on concerns about economic growth, but this week's price action signaled a shift in that thinking. Small and mid cap stocks outperformed their larger peers by the end of the week, reflecting the belief that the U.S. economy will enjoy a soft landing and that the Fed will cut rates to secure that soft landing.

Market participants also see a higher likelihood of a 50 basis points rate cut at next week's FOMC meeting compared to one week ago. The fed funds futures market now shows a 45.0% probability of a 50 basis points rate cut in September, up from 30.0% last Friday, according to the CME FedWatch Tool.

The 2-yr yield, which is most sensitive to changes in the fed funds rate, dropped seven basis points this week to 3.58% and the 10-yr yield dropped six basis points to 3.65%.

Only one S&P 500 sector settled lower -- energy (‐0.7%) -- while the information technology sector led the pack by a wide margin, climbing 7.3%.

• S&P 500: +4.0% for the week / +18.0% YTD

• Nasdaq Composite: +6.0% for the week / +17.8% YTD

• Dow Jones Industrial Average: +2.6% for the week / +9.8% YTD

• S&P Midcap 400: +3.2% for the week / +9.1% YTD

• Russell 2000: +4.4% for the week / +7.7% YTD

Market Recap - Short Week, Sizable Losses

September started on a downbeat note for the stock market.

The major indices all registered sizable decline on this holiday‐shortened week. Broad selling activity led the S&P 500 to fall below its 50‐day moving average.

The downside bias was related to normal consolidation activity after a big run. This was sparked by fears about a weakening labor market and economic growth prospects. Friday's release of the August Employment Situation report added to the market's emerging fears.

Hiring activity was lighter than expected in August and there were downward revisions to July and June that left employment 86,000 lower for those months than previously reported. The report also showed that the unemployment rate declined slightly and average hourly earnings increased a stronger than expected 0.4% month‐over‐month.

This week's labor market data included the ADP Employment Change Report for August, which was weaker than expected, and the weekly initial jobless claims report, which was better than expected. Other influential data included the revised Q2 productivity report that showed an upward revision to productivity and a downward revision to unit labor costs, and the ISM Services PMI for August, which was better than expected but little changed from July.

Weakness in the semiconductor space also contributed to the negative bias. The PHLX Semiconductor Index (SOX) dropped 12.2% this week. Broadcom (AVGO) was among the notable names in the space, sliding 15.9% after relatively disappointing guidance that piled onto current fears that the pace of growth is slowing for many richly‐valued semiconductor stocks.

The aforementioned price action led the S&P 500 information technology sector to close 7.1% lower on the week. It was the worst performing sector followed by energy (‐5.6%), communication services (‐5.1%), and materials (‐4.8%).

The only sectors to close higher this week were the rate‐sensitive real estate sector (+0.2%) and the consumer staples sector (+0.6%).

The 10‐yr note yield settled 20 basis points lower at 3.71%. The 2‐yr note yield settled 28 basis points lower at 3.65%.

• S&P 500: ‐4.3% for the week / +13.4% YTD

• Nasdaq Composite: ‐5.8% for the week / +11.2% YTD

• S&P Midcap 400: ‐4.9% for the week / +5.7% YTD

• Dow Jones Industrial Average: ‐2.9% for the week / +7.1% YTD

• Russell 2000: ‐5.7% for the week / +3.2% YTD

Market Recap - Dow Jones Industrial Average Closes Week & Month with a New Record

The Labor Day weekend has arrived.

The stock market put in a lot of work this week, thinking about and reacting to NVIDIA's (NVDA) earnings report, thinking about and reacting to the July Personal Income and Spending Report, thinking about and reacting to results from leading retailers and other high-profile technology companies, and, well, thinking about weekend plans.

It all culminated with the indices closing the week mixed and looking up at the Dow Jones Industrial Average, which settled the week and month at a new record high.

A summation of this week's market action is below.

• S&P 500: +0.2% for the week.... +18.4% YTD

• Nasdaq Composite: ‐0.9% for the week... +18.0% YTD

• S&P Midcap 400: ‐0.1% for the week... +11.1% YTD

• Dow Jones Industrial Average: +0.9% for the week... +10.3% YTD

• Russell 2000: ‐0.05% for the week... +9.4% YTD

Market Recap - Growth Concerns Dissipate, Fueling Strong Rally

The stock market logged solid gains since last Friday.

The Dow Jones Industrial Average and Russell 2000 each closed 2.9% higher, the S&P 500 jumped 3.9%, and the Nasdaq Composite climbed 5.3%.

The volatile action exhibited thus far in August was precipitated by a July jobs report that stirred concerns about a weakening economic environment and labor market. So, this week's release of economic data that had the market feeling good about the economic environment and labor market invited strong buying activity.

The pleasing economic releases included the Producer Price Index for July, which showed disinflation in total and core PPI, the Consumer Price Index for July, which was in-line with expectations, the Retail Sales report for July, which was much better than expected, and the weekly jobless claim report, which reflected ongoing strength in the labor market.

A disappointing housing starts and building permits report for July on Friday didn't deter the strong rally this week.

Solid earnings results and commentary about the consumer from Walmart (WMT), along with Cisco's (CSCO) solid fiscal Q4 operating performance, contributed to the upside bias this week.

In other corporate news, Dow component Home Depot (HD) closed 3.9% higher this week despite reporting below-consensus guidance.

Starbucks (SBUX) was in the headlines after news that CEO Laxman Narasimhan has stepped down and will be replaced by Chipotle (CMG) CEO Brian Niccol.

Kellanova (K) also made news after Mars confirmed it will acquire Kellanova for $83.50/share in cash, or total consideration of $35.9 billion, including debt.

Alphabet (GOOG) settled slightly lower in the week despite other mega caps outperforming after a Bloomberg report that the Department of Justice may be looking at breaking up the company following last week's court ruling that Alphabet violated search-related antitrust laws.

All 11 S&P 500 sectors closed higher led by consumer discretionary (+5.2%), information technology (+7.5%), and financials (+3.2%).

• Nasdaq Composite:+17.5% YTD

• S&P 500: +16.5% YTD

• S&P Midcap 400: +8.3% YTD

• Dow Jones Industrial Average: +7.9% YTD

• Russell 2000: +5.7% YTD

Market Recap - Volatile week ends flattish

Most of the major indices closed this volatile week little changed from last Friday.

The S&P 500 was fractionally lower on the week, the Nasdaq Composite declined 0.2%, the Dow Jones Industrial Average settled 0.6% lower, and the Russell 2000 underperformed, dropping 1.4%.

The week opened with a continuation of the global sell-off that began last week on fears about US economic growth following last Friday's jobs report. Japan's Nikkei slumped 12% on Monday, precipitating a big sell-off in US equities. This huge downturn was related to an unwinding of the yen carry trade as the yen strengthened rapidly against the dollar. 

Monday's sharp moves lower had the S&P 500 flirting with correction territory (i.e. 10% decline from its recent high).

The carry-trade unwinding settled down and the Nikkei jumped over 10% on Tuesday as the yen weakened against the dollar. The market was still worried about the unwinding of carry trades revving back up given how entrenched it had become with Japan holding rates below zero, or near zero, for so long.

The market was also concerned about the U.S. economy slowing more quickly than it had previously believed it would; and it is also concerned about the Fed making (or having already made) a policy mistake by keeping the target range for the fed funds rate unchanged at 5.25-5.50%.

This thinking kept the market in check, yet there were signs that recession fears started to moderate by the end of the week. The Atlanta Fed GDPNow model estimate for real GDP growth in the third quarter was 2.9% in the latest estimate, up from 2.5% on August 1.

A pleasing weekly jobless claims report, which showed initial claims decreasing by 17,000 to 233,000, supported the notion that concerns about a recession were overblown. Market rates jumped in another reflection of moderating recession worries.

The 10-yr note yield rose 15 basis points to 3.94% and the 2-yr note yield jumped 18 basis points to 4.05%. This week's action put some renewed pressure on the 2s10s spread, compressing it by three basis points to -11 basis points.

Earnings season continued this week. Eli Lilly (LLY) was a winning standout, gaining 10.8% in response to blowout earnings and guidance. 

Only four S&P 500 sectors closed with gains. The energy (+1.2%) and industrials (+1.2%) sectors logged the biggest gains followed by communication services (+0.8%) and financials (+0.6%). The materials sector was the worst performer, dropping 1.7%, followed by the consumer discretionary (-1.0%) and utilities (-0.9%) sectors. 

• S&P 500: +11.5% YTD

• Nasdaq Composite:+11.0% YTD

• S&P Midcap 400: +5.6% YTD

• Dow Jones Industrial Average: +4.7% YTD

• Russell 2000: +2.8% YTD

Market Recap - Growth Concerns Overshadow Influential Earnings News

The stock market logged solid declines this week.

There were some winning sessions in the first half of the week, but growth concerns pushed to the fore during Thursday's session and sparked a strong sell‐off. The S&P 500 and Dow Jones Industrial Average each declined 2.1%, the Nasdaq Composite settled 3.4% lower than last Friday, and the Russell 2000 reversed its recent outperformance, dropping 6.7%.

The market learned Wednesday that the FOMC voted unanimously to leave the target range for the fed funds rate unchanged at 5.25‐5.50%, as expected.

Fed Chair Powell's subsequent press conference was largely what the market expected to hear. He didn't pre‐commit the FOMC to cutting rates at the September meeting, although he suggested more than once that the discussion of a rate cut would be on the table if the Fed gets the data it hopes it will get.

There was a muted response to these developments on Wednesday, but Thursday's economic releases had the market feeling like the economy is headed for a deeper slowdown while the Fed remains on pause.

Weekly initial jobless claims ‐‐ a leading economic indicator ‐‐ increased to 249,000 (Briefing.com consensus 233,000) from 235,000 last week, reflecting some softening in the labor market that may weaken discretionary spending. The ISM Manufacturing Index showed weakening in the manufacturing sector, dropping further into contraction territory to 46.8% in July (Briefing.com consensus 48.5%) from 48.5% in June.

Friday's release of the July Employment Situation report seemed to corroborate that the labor market is weakening. Nonfarm payrolls increased by just 114,000 (Briefing.com consensus 170,000), the unemployment rate jumped to 4.3% from 4.1%, and average hourly earnings decelerated on a year‐over‐year basis to 3.6% from 3.8%. A labor market that softens more than anticipated could translate into lower spending, which would impact earnings growth.

Treasuries surged in terms of price and plunged in terms of yield. The 2‐yr note yield, which is most sensitive to changes in the fed funds rate, settled 52 basis points lower at 3.87%. The 10‐yr note yield settled 41 basis points lower at 3.79%.

Market participants also repriced rate cut expectations in response to the data. The CME Fed Watch Tool now shows a 71.5% probability of a 50‐basis points rate cut at the September FOMC meeting versus 11.5% a week ago.

Earnings news from mega cap names was largely overshadowed by the slowdown worries. Meta Platforms (META) and Apple (AAPL) received positive responses to their reports, settling 4.8% and 0.9% higher, respectively. Microsoft (MSFT) and Amazon.com (AMZN) slid 4.0% and 8.0%, respectively, in response to their reports.

• S&P 500: +12.1% YTD

• Nasdaq Composite:+11.8% YTD

• S&P Midcap 400: +6.0% YTD

• Dow Jones Industrial Average: +5.4% YTD

• Russell 2000: +4.1% YTD

Market Recap - Mixed Week After Busy Earnings and Economic Calendar

The stock market had a mixed showing this week.

The S&P 500 (-0.8%) and Nasdaq Composite (-2.1%) logged declines since last Friday while the Russell continued its recent action, jumping 3.5% this week. The Dow Jones Industrial Average also higher, up 0.8%.

The underperformance of the S&P 500 and Nasdaq Composite was due to ongoing profit-taking activity in the mega cap and semiconductor spaces. The PHLX Semiconductor Index (SOX) declined 3.1% this week.

This price action followed earnings results from Alphabet (GOOG) and Tesla (TSLA) that did not live up to high expectations. GOOG logged a 6.0% loss and TSLA fell 8.1%.

Dow component Visa (V) was another standout this week after stirring concerns about economic growth prospects following an acknowledgment that lower-income consumers have slowed their spending. Visa shares ultimately closed flat on the week.

Only four sectors logged a decline -- communication services (-3.8%), information technology (-2.5%), and consumer discretionary (-2.3%) -- due to their mega cap components. Meanwhile, four sectors gained at least 1.0%. The materials (+1.4%) and utilities (+1.5%) sectors led the pack.

A drop in Treasury yields helped the positive bias this week. The 10-yr note yield fell four basis points to 4.20% and the 2-yr note yield dropped 12 basis points to 4.39%. This price action following a slate of economic releases this week, including the June Personal Income and Spending Report, which showed some fairly steady behavior in the PCE and core-PCE price indexes on a year-over-year basis and supported the market's belief that the Fed will cut rates in September.

The market was also reacting to news that President Biden exited the 2024 presidential race and endorsed Kamala Harris for the candidacy. The news garnered muted responses in the equity and bond markets. The 10-yr note yield settled two basis points higher at 4.26% and the 2-yr note yield settled one basis point higher at 4.52%.

• Nasdaq Composite:+15.6% YTD

• S&P 500: +14.5% YTD

• Russell 2000: +11.5% YTD

• S&P Midcap 400: +10.6% YTD

• Dow Jones Industrial Average: +7.7% YTD

Market Recap - CONSOLIDATION INTEREST TAKES ROOT

It Was A Losing Week For The Stock Market, But It Wasn't Necessarily A Losing Week For The Broader Market.

The connection is that the losses were not broad based. Rather, they were concentrated among the mega-cap stocks and many of the growth stocks, namely the semiconductor stocks, that had been previously favored by the momentum crowd.

The CRSP Mega Cap Growth Index declined this week while the Philadelphia Semiconductor Index dropped 8.8%. The former was a byproduct of consolidation activity following an extended period of outperformance. The latter was also a byproduct of consolidation interest; however, selling activity was catalyzed by a report that the Biden Administration is considering tightening export restrictions to China, and former President Trump saying Taiwan should be paying the U.S. to defend it while bemoaning how much semiconductor production occurs in Taiwan versus the U.S.

Mr. Trump's remarks touched a nerve since the market entered the week on speculation that he is likely to win the presidential election in November with his popularity boosted after a failed assassination attempt over the weekend at a Pennsylvania rally.

That speculation also fostered a contention that a Trump Administration would be more market friendly given former President Trump's push for deregulation and lower corporate tax rates. Those aims were spelled out at the Republican National Convention this week, which also featured the nomination of Ohio Senator J.D. Vance for Vice President.

That upbeat view contributed to an ongoing rotation trade that boosted the small-cap stocks, the cyclical stocks, and the value stocks at the start of the week, mostly at the expense of the mega-cap stocks and growth stocks.

At its high for the week, the Russell 2000 was up 6.0%, but it would retreat in the latter half of the week along with most stocks in a consolidation trade. The Russell 2000 finished the week, which also featured the outperformance of the regional bank stocks, with a 1.9% gain.

An expectation that the Fed will be lowering rates soon spurred the continued buying interest in the bank stocks, as well as the homebuilders which are seen as beneficiaries of lower rates through the channel of lower mortgage rates.

This week's earnings news stayed true to form and was mostly better than expected, highlighted by pleasing news from Bank of America (BAC), UnitedHealth (UNH), Goldman Sachs (GS), Taiwan Semiconductor Manufacturing Company (TSM), Johnson & Johnson (JNJ), and SLB (SLB).

The market didn't get much mileage out of the reports, though, since many stocks had run up sharply in the weeks and months leading up to their results, including Netflix (NFLX) whose report was overshadowed somewhat in Friday's trade by a global IT outage that was triggered by a flaw in a technical update CrowdStrike was trying to implement and which infiltrated Microsoft's (MSFT) operating system.

The worst-performing sectors this week were information technology (-5.1%), communication services (-2.9%), and consumer discretionary (-2.7%), all of which house mega-cap components.

The earnings reporting activity will gather steam in the coming week as the Q2 reporting period kicks into a higher gear. Those reports will run side-by-side with an economic calendar that features the Existing Home Sales and New Home Sales reports for June, and the Personal Income and Spending report for June, which will include the Fed's preferred inflation gauge in the core-PCE Price Index.

• Nasdaq Composite: +18.1% YTD

• S&P 500: +15.4% YTD

• S&P Midcap 400: +8.4% YTD

• Russell 2000: +7.8% YTD

• Dow Jones Industrial Average: +7.0% YTD

Market Recap - BUSY WEEK BRINGS SOLID GAINS

The Stock Market Ultimately Logged Gains, But There Wasn't A Lot Of Conviction In The First Half Of The Week In Front Of Market-Moving Events.

The June Consumer Price Index and Producer Price Index were released Thursday and Friday, respectively.

Total CPI deflated 0.1% month-over-month, slowing the pace of growth to 3.0% on a year-over-year basis from 3.3% in May. Core-CPI, which excludes food and energy, decelerated to 3.3% on a year-over-year basis from 3.4%.

Total PPI was up 0.2% versus an expected 0.1% increase and Core PPI was up 0.4% versus an expected 0.1% increase.

The CPI report overshadowed the PPI report and fueled optimism about the path of inflation and Fed policy. The fed funds futures market is pricing in a 94.4% probability of a rate cut at the September FOMC meeting, up from 77.7% one week ago.

Treasury yields sank in response to the data, acting as support for equities. The 10-yr note yield fell eight basis points to 4.19% and the 2-yr note yield declined 14 basis points to 4.46%.

This week's calendar also featured the start of earnings season when JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) reported results ahead of Friday's open. Their quarterly results garnered negative responses despite beating earnings estimates.

Fed Chair Powell's semiannual monetary policy testimony before the Senate Banking Committee and the House Financial Services Committee did not garner a big response from bond or equity markets. There were no surprises in his remarks, which featured an acknowledgement that the "likely next direction" of policy will be a loosening of policy, indicating a rate hike is not likely.

Losses in the mega cap space limited gains for the S&P 500 and Nasdaq Composite this week. Money was rotating away from mega caps due to profit taking activity and moving into areas of the market that have trailed so far this year.

The Russell 2000 jumped 6.0% this week and the S&P Mid Cap 400 gained 4.3%. The top performing S&P 500 sectors included the rate-sensitive real estate (+4.4%) and utilities (+3.9%) sectors, along with the materials (+3.0%) and industrial (+2.4%) sector.

• Nasdaq Composite: +22.6% YTD

• S&P 500: +17.7% YTD

• S&P Midcap 400: +8.6% YTD

• Dow Jones Industrial Average: +6.1% YTD

• Russell 2000: +6.0% YTD

Market Recap - Record Closing Highs Amid Falling Rates and Mixed Data

Record Closing Highs Amid Falling Rates and Mixed Data

The S&P 500 (+2.0%) and Nasdaq Composite (+3.5%) set fresh all-time highs on this holiday-shortened week.

Gains in the mega cap space had an outsized impact on index gains while the equal-weighted S&P 500 closed with a 0.4% decline this week.

Tesla (TSLA) was a top performer from the mega cap space, jumping 27% on better-than expected Q2 delivery numbers.

The price action in mega cap names led the S&P 500 communication services (+3.9%), consumer discretionary (+3.8%), and information technology (+3.9%) sectors to close at the top of the leaderboard among the 11 sectors.

The S&P 500 (+2.0%) and Nasdaq Composite (+3.5%) set fresh all-time highs on this holiday-shortened week. Week Ending 7/5/2024 Growth worries were part of the story this week after the ISM Manufacturing Index for June reflected a contraction in activity (i.e. sub-50 reading) and the Employment Situation Report for June reflected a softening in labor market conditions. The main concern for stock market participants is how a slowdown in economic activity and consumer spending may impact earnings growth.

Still, the jobs report went the market’s way in terms of rate cuts and coincided with a recalibration of rate cut expectations. The likelihood of a 25-basis points rate cut at the September FOMC meeting moved to 76.3% on Friday from 64.1% one week ago, according to the CME FedWatch Tool.

Treasury yields fell this week in response to the data. The 10-yr note yield slid seven basis points to 4.27% and the 2-yr note yield declined 12 basis points to 4.60%. The drop in rates did not translate into broad support for equities due to the emerging worries about an economic slowdown and softening labor market that may lower earnings growth.

• Nasdaq Composite: +22.3% YTD • S&P 500: +16.7% YTD
• Dow Jones Industrial Average: +4.5% YTD
• S&P Midcap 400: +4.1% YTD
• Russell 2000: -0.02% YTD