Everything to Know about Macro and Markets
Stock markets finished the volatile week mixed, with the S&P 500 (SPX) down by 0.8%, the Nasdaq Composite (NDAQ) losing 2.1%, and the large-cap tech benchmark Nasdaq-100 (NDX) falling by 2.6% for the week. The three major indexes were pulled downward by technology stocks, which had another wild week.
Tech Wreck Amid Rotation
The Nasdaq suffered its worst day of 2024 on Wednesday, tumbling by over 3%. Underwhelming results from Alphabet (GOOGL) and Tesla (TSLA) added to investor anxiety over large-cap tech companies’ high valuations versus their prospects of seeing near-at-hand returns from heavy AI investments. The Magnificent Seven pack saw their combined market cap plunge by hundreds of billions of dollars.
Meanwhile, the Dow Jones Industrial Average (DJIA) – which has little exposure to tech stocks – scored a fourth consecutive weekly gain, rising by 0.8% as the rotation trade continued to draw investor inflows. Another rotation winner was the small-cap benchmark Russell 2000, which surged 3.5% over the week.
Another Twist in the Tale
The past five trading days were quite dramatic, with many hard-to-digest twists pulling on market participants’ nerves. President Biden pulled out of the election race, endorsing Vice President Kamala Harris as the new Democratic nominee. With Harris’ odds at winning against Trump seen as higher than Biden’s, several “Trump trades” seemed to unwind.
Later in the week, the U.S. GDP print showed that economic growth accelerated in Q2 to an annualized rate of 2.8%, versus the outlook for 2% and Q1’s 1.4% rate, adding confidence that the economy remains robust. The underlying strength in consumer spending and business investment initially injected a dose of optimism into the markets, but these later returned to negativity as hotter-than-expected growth was seen as unsupportive of the September rate-cut outlook.
Looking for Guidance
Friday’s inflation numbers helped stocks regain ground, as the Fed’s preferred gauge, the Core PCE came in line with expectations, featuring the smallest increase since March 2021. That brought some relief to investors, as it testifies that the Fed is succeeding in bringing down inflation without harming the economy.
Markets are now bracing for yet another eventful week, with investor attention divided between earnings reports from prominent large caps, incoming economic data, and the Federal Reserve’s policy meeting on July 30th and 31st. According to the economist consensus, policymakers are unlikely to cut rates at the coming meeting but are widely expected to convey a clear signal for a cut at the following meeting in September. Meanwhile, further Magnificent Seven earnings reports are due this week, with their results expected to significantly affect the market’s direction.
Stocks That Made the News
¤ This week’s biggest winner was 3M Company (MMM), surging over 22% on a strong earnings beat. The second runner-up to the past week’s crown was Bristol-Myers Squibb (BMY) with a gain of almost 19%, as it also strongly surpassed earnings estimates. Third-best results were seen at Molina Healthcare (MOH), for the same reason. These results reflect the low expectations held until recently for non-technology stocks and are now helping cement the rotation trade away from tech leaders to other sectors.
¤ The worst performer last week was Dexcom (DXCM), whose shares plunged by 43% on the week after the medical device company reported disappointing revenue and lowered its full-year guidance.
¤ CrowdStrike Holdings (CRWD) continued to strongly trend down after the previous week’s plunge on the back of the global computer system crash, caused by CRWD’s faulty software update. The cybersecurity company’s report that 97% of the systems affected now function properly did little to assuage investors, as the damage from the largest IT outage in history is expected to cost billions of dollars in direct losses alone.
¤ Tesla (TSLA) was the worst performer among the Magnificent Seven with an almost 11% weekly drop. TSLA’s shares declined as it reported weak earnings results and said this year’s growth would be “significantly lower” than anticipated. Additionally, Alphabet (GOOGL) dropped over 7% on the week after releasing its quarterly report. The Google parent beat revenue and earnings estimates, but the extent of the beat was seemingly not large enough amid great expectations from one of the Magnificent leaders. In addition, the vast capital spending growth, related to AI, spooked investors.
Upcoming Earnings and Dividend Announcements
This week, the Q2 2024 earnings season is going into high gear, with multiple newsworthy earnings releases scheduled for this week.
All eyes will be on reports from the Magnificent Seven members Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), and Meta Platforms (META).
Other notable releases will be published by McDonald’s (MCD), ON Semiconductor (ON), Advanced Micro Devices (AMD), PayPal (PYPL), Starbucks (SBUX), Qualcomm (QCOM), Mastercard (MA), ARM Holdings (ARM), Lam Research (LRCX), Intel (INTC), Coinbase Global (COIN), Cloudflare (NET), Exxon Mobil (XOM), Chevron (CVX), and many other prominent firms.
Ex-dividend dates are coming this week for ASML Holding (ASML), Blackstone Group (BX), Delta Air Lines (DAL), Enterprise Products Partners (EPD), Morgan Stanley (MS), Realty Income (O), and other dividend-paying firms.
For more exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.
