Vikki Zhao
PUBLISHED September 2, 2024, 5:00 PM EST. 6 min read
While the recent performance of the cap-weighted S&P 500 appears calm, with the index consolidating in a tight pattern under resistance, there’s significant activity beneath the surface. A sharp change in leadership tone is evident.
The Tech/AI sector has shown weakness, consolidating or stalling, whereas the equal-weight index has been broadening out, reaching new highs. Since the CPI report on July 11, the S&P 500 has remained relatively flat, the Magnificent 7 stocks are down over 6.5%, while the “average stock” in the equal-weighted S&P 500 has risen by more than 4%.
Certain technical indicators keep us optimistic and suggest that the recent pullback’s lows might be established. The S&P 500 managed to gap through resistance at the 50-day moving average (50-DMA) with ease a few weeks ago.
Additionally, following Fed Chairman Powell’s Jackson Hole speech, there was a notable breadth thrust, with a strong advance/decline ratio of 8:1 and 92% up-volume, the highest since October 2022, which we interpret as a bullish signal.
Fed Chairman Powell’s Jackson Hole speech provided the clearest signal yet that the Fed might begin its rate-cutting cycle in September. The market currently anticipates a near-certain 25 basis point cut, with a 36% chance of a 50-basis point cut.
While AimStar analyst views rate cuts as ultimately positive for the markets, we caution that sharp drawdowns should not be ruled out. In the near term, earnings reports from mega-cap technology companies will likely serve as the next directional catalyst for the market. Additionally, we will be closely monitoring the labor market, as it remains a significant concern for the Fed.
The latest consumer confidence survey indicates that more respondents are finding jobs hard to get, while fewer believe jobs are plentiful.
Looking ahead, we may see some back-and-forth trading within the current uptrend. Key resistance levels to watch are at the prior highs of 5669, followed by 5694 and 5927.
With important earnings reports upcoming, along with
*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.