AIMSTAR FINANCIAL INSIGHTS – August 26, 2024

Vikki Zhao

PUBLISHED August 26, 2024, 5:00 PM EST. 6 min read

 

The S&P 500 has experienced a notable rally, gaining 8% over the past eight consecutive days, marking its longest winning streak this year. The index broke above its 50-day moving average resistance, supported by strong advancing volume, and the advance/decline line (a measure of market breadth) reached new highs.

 

 Additionally, the VIX (volatility index) has decreased, and credit spreads remain narrow, suggesting that the recent lows may have been reached.

 

This rally was bolstered by encouraging economic data over the past week. Core CPI increased by only 0.17% month-over-month in July, marking the third consecutive month of sub-0.2% readings. This trend is favorable, as maintaining a monthly increase of around 0.2% is necessary to achieve the Fed’s inflation target of 2-2.5%.

 

 Indicators suggest that inflation moderation will continue, shifting focus to the broader economy. Although concerns about potential economic weakness have arisen due to some softness in employment, July’s retail sales growth of 1.0% month-over-month and a slight decline in jobless claims have helped alleviate these concerns.

 

AimStar analyst believes while the economy faces headwinds, a severe downturn is unlikely.

 

We anticipate potential fluctuations in trading ahead. Seasonal factors are unfavorable (with August and September typically being the weakest months of the year), quarterly earnings estimates are being revised downward (especially for Q3), and underlying sector performance has leaned towards a more risk-averse stance.

 

The S&P 500 is also nearing potential resistance around 5670 (previous highs) and may need to consolidate this rally in the short term. Nevertheless, AimStar believe the market remains in an uptrend. In the broader perspective, a soft landing is possible, and the Fed is expected to begin cutting interest rates next month.

 

 Valuations, excluding the tech sector, are relatively attractive and should benefit from lower rates, which could offset potential economic challenges. We see possible support levels at 5474 (50-day moving average) and 5100 (200-day moving average).

 

Throughout the recent volatility, there has been a subtle shift in market leadership. Since the June CPI report on July 11, which led to lower interest rates and contributed to the recent volatility, there has been broader participation across different sectors. For instance, while the equal-weighted S&P 500 has returned to its highs, the market-leading semiconductor group is still 12% below its highs and remains below the 50-day moving average resistance.

 

Defensive, interest-sensitive sectors such as Utilities, Real Estate, and Health Care have reached new highs, and cyclical sectors like Financials and Industrials have also held up well. It remains to be seen if this is a short-term rotation or a more lasting trend, but it is worth watching, given the concentration in the Tech sector.

 

 

Economic data and Fed messaging, along with a semiconductor earnings report next Wednesday, will continue to be significant market influences. The economic calendar is relatively light, but attention will be on Fed Chair Powell’s remarks at the Jackson Hole symposium on Friday.

*This article’s viewpoints are attributed by Olena Li.

Hudson’s Bay Co. Faces Store Closures Amidst Neiman Marcus Acquisition Plans

Reported on July 11 by AIMSTAR.CA – Hudson’s Bay Co. announced its intention to acquire Neiman Marcus Group LLC, aiming to become a leader in luxury goods. However, Canadian shoppers are more concerned about ongoing maintenance issues, with several Bay stores temporarily closed for repairs. Recent closures in Vancouver, Victoria, Winnipeg, and Windsor have sparked concerns about the company’s financial health and general upkeep. Analysts suggest that the closures indicate financial stress and could lead to store shutdowns. The acquisition aims to create a separate Canadian entity to enhance growth and liquidity, but its impact on resolving current store issues remains uncertain.

Sellers Return to Canadian Housing Market, Increasing Inventories and Buyer Bargaining Power

Reported on July 9 by AIMSTAR.CA – Sellers are flooding back into Canada’s housing market, boosting inventories in major cities and giving buyers more leverage. The Bank of Canada’s recent interest rate cut has encouraged some buyers, but not enough to offset the rising inventory, according to RBC economist Rachel Battaglia. New listings are outpacing sales, particularly in expensive markets like Toronto, where active listings surged 68% year-over-year in June. Despite a slight sales increase, Toronto’s home prices fell 4.6%. Similar trends are seen in Vancouver and Montreal, with rising inventories and subdued price growth. Battaglia suggests more significant interest rate cuts are needed to reignite market activity.

Mining Sector Drives Deal Surge on Bay Street

Reported on July 8 by AIMSTAR.CA – Higher commodity prices and the rise of electric vehicles have boosted the mining sector, making it the focus for Bay Street dealmakers in the first half of the year. Investors showed strong interest in companies supplying copper, with the sector involved in over half of equity and equity-linked deals. This surge led to 508 debt and equity deals worth $338.7 billion, a significant increase from the previous year. Major deals included First Quantum Minerals’ comprehensive refinancing and Capstone Copper’s equity offering. The mining boom, particularly in copper and battery-related metals, is expected to continue, driven by global trends in artificial intelligence and energy storage.

Tesla Falls Further as Reported Robotaxi Delay Weighs on EV Maker

 

Reported on July 12 by AIMSTAR.CA – Tesla (TSLA) shares are slipping more than 1% in premarket trading after suffering the steepest losses of any S&P 500 constituent Thursday with an 8.4% plunge on a report the EV maker is postponing its robotaxi unveiling by two months. The company previously indicated it would hold an event to introduce the autonomous vehicles on Aug. 8, but Bloomberg reported the presentation has been pushed back to October. Tesla shares entered Thursday on an 11-session winning streak to move into the green for the year, fueled by its better-than-expected second quarter deliveries report, but returned into negative territory for 2024 on yesterday’s plunge.

U.S. Inflation Cools, Possible Fed Rate Cut in September

 

Reported on July 11 by AIMSTAR.CA – U.S. inflation slowed in June, mainly due to reduced housing costs, raising the possibility of a Federal Reserve rate cut in September. Core CPI, excluding food and energy, increased by just 0.1% from May and 3.3% year-over-year, marking the slowest rise in over three years. Overall CPI fell 0.1% from the previous month. The labor market showed mixed signals, with high jobless benefit applications but a drop in first-time filings. Traders anticipate a rate cut in September, and Fed Chair Jerome Powell emphasized that decisions will be data-driven.

July 15 – July 19 COMING UP

  • Federal Reserve Chairman Jerome Powell speaks on Monday, with other Fed officials making remarks throughout the week.
  • Goldman Sachs, Bank of America, and Morgan Stanley are among the major bank earnings coming this week.
  • Netflix and Johnson & Johnson also report earnings this week, while Amazon hosts its annual Prime Day sales event.
  • The Republican National Convention will feature remarks from presidential candidate Donald Trump.

 

For the week of August 26, 2024, the most anticipated earnings releases span various industries, including technology, cybersecurity, cloud computing, retail, beauty, and fintech:

  • Monday: Chip giant Nvidia (#NVDA) will release its latest earnings report, with the market closely watching its performance in artificial intelligence and data centers.
  • Tuesday: Cybersecurity company CrowdStrike (#CRWD) and cloud computing company Salesforce (#CRM) are set to announce their earnings.
  • Wednesday: Tech company Dell Technologies (#DELL) and Chinese e-commerce platform Pinduoduo (#PDD) will release their earnings reports.
  • Thursday: Athletic apparel brand lululemon athletica (#LULU) and fashion retailer Abercrombie & Fitch (#ANF) will publish their earnings reports.
  • Friday: Beauty retail chain ULTA Beauty (#ULTA), pet supplies retailer Chewy (#CHWY), and fintech company Affirm (#AFRM) will report their earnings.
 

AimStar Capital Group Inc. is a Canadian full-service Investment Dealer, regulated by Canadian Investment Regulatory Organization (CIRO) and a member of Canadian Investor Protection Fund (CIPF). As an independent firm, AimStar is built on a foundation of innovation, integrity, and client-centricity. They are committed to providing unbiased advice and dedicated to the client’s needs, helping them achieve their financial goals.

AimStar is recognized as a Wealth Professionals 5-star Wealth Management Firm for 2024, this award recognized AimStar has offered exceptional client experience, a proven investment track record, continuous innovation, and stringent regulatory compliance.

Choose Our Team
Contact Us Today

AimStar also utilizes its cultural expertise to create customized investment solutions and asset allocation for clients from diverse backgrounds. We promote innovation, integrity, and teamwork to pursue clients’ interests in a fair and transparent manner.

AimStar Advisory Service

We Provide Great Solutions To Grow Your Wealth.
$100,000 IN Assets

AimStar Private Wealth

More services and lower cost.
$500,000 IN ASSETS
[next-chatbot]