Vikki Zhao
PUBLISHED July 19, 2024, 5:00 PM EST. 6 min read.
The underlying narrative for equities over the last year has been the concentration of returns from Tech-centric areas. But for the last week, the equity market has go through a sell-off. The S&P 500 down 0.78% on Thursday. This followed up to Wednesday’s decline of over 1% for the S&P 500, which snapped 52 consecutive sessions without such a decline. Weakness was broad based with ten of the eleven sectors finishing lower. The only sector higher was Energy. Another standout area was semiconductors, which gained 0.51% on Thursday. In total, there were four sectors that finished down over 1% this week, including: Health Care, Consumer Discretionary, Financials, and Materials.
Small-caps, which have been a major beneficiary of the rotation over the last week or so, were not able to keep the momentum rolling this week, the index traded off 1.49% on Thursday. Treasuries were weaker with the 10-year yield finishing at 4.20%.
On the macro front, initial jobless claims came in at 243K vs. consensus of 230K. Additionally, the Philly Fed Index for July was the highest reading since April at 13.9 vs. consensus of 2.9%. Finally, leading economic indicators for June saw a decline of -0.2% vs. consensus expectations of -0.3%.
Over the past week, the markets have faced challenges, but we also see potential opportunities emerging. The market rotation into underperforming areas, lower interest rates, improving inflation trends, increased likelihood of rate cuts, resilient economic data, and a failed assassination attempt—all contribute to the increased odds of a Republican victory in November’s election, which the market anticipates would be favorable for economic growth.
AimStar Analyst Believes that the equal-weight index and small-caps both saw breakouts on a price basis. First the technical outlook for small-cap stocks has improved. Recent performance and breakouts in small-cap stocks are impressive, marking the first step towards positive performance for small and mid-cap stocks.
Additionally, the increasing probability of Trump’s election, slowing inflation, and higher likelihood of rate cuts are expected to enhance the profitability of small-cap companies from an overall economic perspective.
Finally, with the development of AI applications initially leading to breakthroughs in the semiconductor and technology sectors, the use of technology will gradually extend to all industries. Sector rotation is likely to further drive the performance of small-cap stocks in the future.
*This article’s viewpoints are attributed by Tony Yuan.
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.
FOCUS ON INTERNATIONAL
JPMorgan Posts Results Above Expectations; Wells Fargo Net Interest Income Sinks
Reported on July 12 by AIMSTAR.CA – Second-quarter earnings season has arrived for the big U.S. banks, with JPMorgan Chase (JPM) and Wells Fargo (WFC) first out of the gate. JPMorgan posted revenue on a managed basis of $50.99 billion, while earnings per share (EPS) of $6.12 also came in above analysts’ expectations. Still, its shares are down 1% in premarket trading, while those of Wells Fargo are plummeting almost 6% as it reported 9.4% lower net interest income at $11.9 billion. JPMorgan Chief Executive Officer (CEO) Jamie Dimon, whose comments are always closely monitored by investors, warned that inflation and interest rates “may stay higher than the market expects” despite progress made in cooling inflation, since “there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world.”
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.
Costco Jumps on First Membership Fee Hike Since 2017
Reported on July 11 by AIMSTAR.CA – Costco Wholesale (COST) shares are rising 3% in premarket trading after the retailer hiked its membership fees for the first time since 2017 and posted a jump in June sales. Starting Sept. 1, fees will increase 8% to $65 for individuals and $130 for executive memberships. Costco also said Wednesday that June net sales came in at $24.48 billion, up 7.4% from a year earlier, indicating that the retailer’s business model of offering a wide variety of products in bulk at low prices continues to resonate with consumers amid an inflationary environment.
Apple Settles App Store Payments Probe With EU to Avoid Fine
Reported on July 11 by AIMSTAR.CA – Apple (AAPL) has settled its “tap and go” payments probe with the European Commission, the EU’s enforcement arm, opening its mobile wallet to rivals to avoid antitrust fines. “The Commission’s preliminary view is that Apple’s refusal excluded Apple Pay’s rivals from the market and led to less innovation and choice for iPhone mobile wallets users,” it said, noting that it has accepted commitments from Apple to allow rivals access to its payments technology. Last month, Apple was preliminarily found in violation of Europe’s Digital Markets Act (DMA) because users allegedly are not able to be “steered” away from the App Store to make payments and find better offers as easily as they should be. Apple shares are little changed in premarket trading.
Delta Slumps as Carrier Posts Almost 30% Q2 Profit Fall on Rising Costs
Reported on July 11 by AIMSTAR.CA – Delta Air Lines (DAL) shares are falling 9% in premarket trading after the Atlanta-based carrier reported a 29% year-over-year drop in second-quarter profit to $2.01 per share amid higher fuel costs and heavy discounting. Delta affirmed its full-year adjusted earnings per share (EPS) guidance of between $6 and $7 a share but forecast lower-than-expected adjusted earnings of $1.70 to $2 a share in the third quarter. The carrier’s shares are up 16% this year as the airline has benefited from focusing on more premium customers.
TSMC Shares Rise on June Revenue Jump
Reported on July 11 by AIMSTAR.CA – American depositary receipts (ADRs) of the Taiwan Semiconductor Manufacturing Co. (TSM) are up 2% in premarket trading after the semiconductor maker reported sharply higher year-over-year June revenue. The company, which has seen increasing growth on AI demand, reported June revenue of 207.87 billion New Taiwan dollars ($6.37 billion), an increase of nearly 33% from June 2023, albeit lower by about 9.5% from May’s sales. For the first half of 2024, TSMC reported revenue of NT$1.27 trillion ($38.81 billion), up 28% from the first half of 2023.
Bitcoin Dip Buyers Invest $438 Million in U.S. ETFs Over Two Days
Reported on July 10 by AIMSTAR.CA – Investors have poured $438 million into U.S. Bitcoin ETFs over the past two trading sessions, seizing what they see as a buying opportunity amid a recent price dip. Bitcoin has fallen about 20% since early June due to concerns over the distribution of tokens by the failed Mt. Gox exchange and sales by German police. Despite the dip, Bitcoin briefly rose 3.3% to $58,100 on Tuesday. Analysts believe the current supply overhang will soon pass, reinforcing the long-term bullish outlook for the cryptocurrency.
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.
The most anticipated earnings releases for the week of July 15, 2024 are Netflix #NFLX, TSMC #TSM, Goldman Sachs #GS, United Airlines #UAL, Bank of America #BAC, UnitedHealth Group #UNH, ASML #ASML, BlackRock #BLK, Interactive Brokers #IBKR, and Johnson & Johnson #JNJ.
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