Daily Market Report August 29th, 2024
Stocks closed lower Wednesday as a pullback in big technology companies outweighed gains elsewhere in the market.
The S&P 500 fell by 34 to 5592 weighed down by drops in NVDA, AAPL, MSFT and AMZN, the latter two having really been weak lately.
The Dow, which was coming off two consecutive all-time highs, fell by 159 to 41,091 hurt by declines in CRM ahead of its earnings, GS and MSFT. The Nasdaq composite, which is heavily weighted with technology stocks, closed down by 199 to 17,556 led by an awful showing in technology ahead of the NVDA earnings.
The Russell 2000 Index of small stocks did little with a 14 point decline to 2188 while the VIX loved this downside action by gaining up to 17.11
The selling came ahead of an eagerly anticipated earnings report from the semiconductor company NVDA, whose chips power AI applications. The company is one of the most influential stocks with a total market value topping $3 trillion.
It reported its second-quarter results late Wednesday as its earnings and results topped forecasts but it fell by 3.7% in after-hours trading and what else is new with this pattern? They are still up by 153% for the year and this is the problem here.
The chipmaker is one of several companies that have ridden a wave of enthusiasm over artificial intelligence developments and have been responsible for much of the broader market’s big gains over the last year.
The market’s pullback ahead of NVDA’s quarterly results may have been partly due to news about another company tied to AI, namely SCMI.
The server technology company’s stock sank 19% for the biggest decline among S&P stocks after the company said that it had delayed the filing of its annual report.
Investors also reviewed a mixed batch of earnings and corporate financial updates from other companies Wednesday. JWN gained after beating analysts’ earnings expectations and raising its financial forecasts for the year. Rival KSS also gained after also beating analysts’ earnings expectations.
PVH, which owns the Calvin Klein and Tommy Hilfiger brands, fell after giving investors a revenue forecast short of analysts’ expectations. Food producer JSM also fell after trimming its earnings forecast for the year.
The latest results from retailers and others come as investors and the Federal Reserve try to gauge the resiliency of U.S. consumers amid the squeeze from inflation and high borrowing rates. The latest updates from clothing retailers, food producers and others can help shed more light on how and where people are spending money.
Investors are also looking ahead to tomorrow, when the U.S. government releases its latest data on inflation with the PCE, or personal consumption and expenditures report, for July. The hope is that the data shows inflation easing further, or at least stagnating so that Fed officials remain comfortable cutting interest rates at their September meeting as they have strongly suggested that they would.
Economists expect the PCE, which is the Fed’s preferred measure of inflation, to show that inflation edged up to 2.6% in July from 2.5% in June. It was as high as 7.1% in the middle of 2022. The rate of inflation has been easing steadily back toward the central bank’s target of 2% since then, following the Fed’s aggressive interest rate hikes.
Traders expect the central bank to begin trimming its benchmark interest rate back from a two-decade high at its next meeting in September, with cuts totaling up to 1% by the end of the year.
The expectations for those interest rate cuts follow reports on retail sales, employment and consumer confidence that show the economy continues to remain strong. That has helped build confidence that the Fed will accomplish its goal of taming inflation without stalling the economy into a recession.
Treasury yields were mixed in the bond market. The yield on the 10-year Treasury rose to 3.84% from 3.83% on Tuesday.
Warren Buffett’s BRK unloaded BRK more of its BAC stake, selling nearly 25 million shares worth almost $1 billion over the past week. Berkshire Hathaway’s Class A stock, already the most expensive stock on Wall Street, gained enough ground to elevate the conglomerate into the club of companies valued by the stock market at over $1 trillion. It is the only company outside of the technology-related “Magnificent Seven” with that distinction.
Berkshire’s Class A shares rose $5,152.03, or 0.7%, to close at $696,502.02.
The second-quarter earnings season finally comes to an end this week with more retailers reporting, plus the big one on Wednesday afternoon. The lineup is as follows: yesterday – PVH, SJM, FL, ANF lower and BOX, CHW, KSS and JWN higher; today – NVDA, NTAP, OKTA, DG and HPQ lower and CRWD, FIVE, BBY, AFRM and Dow component CRM higher; tonight - ADSK, DELL, MBD, ULTA, LULU.
Economic reports will have: today - weekly jobless claims eased back a bit to 231K, next reading on 2Q G.D.P. rose to 3% and latest trade balance was $105 billion; Friday – July personal income and spending, final August U. of Michigan Consumer Spending estimate and then the big one here, namely the July P.C.E. beloved by the Federal Reserve.
By Don Selkin