Weekly Market Overview
Most major indices closed this volatile week with little change from last Friday. The S&P 500 was fractionally lower, the Nasdaq Composite declined 0.2%, the Dow Jones Industrial Average settled 0.6% lower, and the Russell 2000 dropped 1.4%.
Monday
The week opened with a continuation of the global sell-off that began last week due to fears about US economic growth following last Friday's jobs report. Japan's Nikkei slumped 12% on Monday, triggering a significant sell-off in US equities. This downturn was related to the unwinding of the yen carry trade as the yen strengthened rapidly against the dollar. The S&P 500 flirted with correction territory, experiencing a 10% decline from its recent high.
Key economic data from Monday:
- July S&P Global US Services PMI - Final: 55.0 (Prior: 56.0)
- July ISM Non-Manufacturing Index: 51.4% (Consensus: 51.3%, Prior: 48.8%)
The key takeaway from the report is that overall activity in the largest sector of the U.S. economy rebounded strongly, with indices for Business Activity and Employment jumping back into expansionary territory after contracting in June.
Tuesday
Stocks staged a recovery after Monday's sharp declines. The major indices turned slightly lower ahead of the close but still logged gains ranging from 0.8% to 1.2%. The Dow Jones Industrial Average won back nearly 300 points after slumping more than 1,000 points on Monday. The S&P 500 settled nearly 100 points lower than Friday's close.
The yen weakened slightly against the dollar, supporting US equities and helping drive a 10% move higher in the Nikkei. Positive responses to earnings news from Uber (UBER, Financial) and Caterpillar (CAT, Financial) also aided the upside bias.
Key economic data from Tuesday:
- June Trade Balance: -$73.1 billion (Consensus: -$72.8 billion, Prior: -$75.0 billion revised from -$75.1 billion)
The key takeaway from the report is that both exports and imports increased in June, which is a constructive trade dynamic for the global economy.
Wednesday
The stock market started strong but gains quickly faded, and the major indices settled with declines. The initial upside bias was driven by momentum and dissipating concerns about further unwinding of carry trade positions after the Bank of Japan's Deputy Governor Uchida said the bank would not raise rates during market instability. The yen weakened against the dollar (USD/JPY +1.9% to 147.10).
Key economic data from Wednesday:
- Weekly MBA Mortgage Applications Index: 6.9% (Prior: -3.9%)
- Weekly EIA Crude Oil Inventories: -3.73 million barrels (Prior: -3.44 million barrels)
Thursday
Stocks rallied, leaving the major indices with sizable gains. The S&P 500 climbed 2.3%, the Russell 2000 gained 2.4%, the Nasdaq Composite settled 2.9% higher, and the Dow Jones Industrial Average logged a 1.8% gain.
The upside bias followed a pleasing weekly jobless claims report at 8:30 ET. Initial claims decreased by 17,000 to 233,000, supporting the notion that recession concerns were overblown. Gains in mega caps, growth stocks, and semiconductor shares had an outsized impact on index performance. Eli Lilly (LLY, Financial) was a standout after its blowout earnings report and much better-than-expected FY24 guidance.
Key economic data from Thursday:
- Weekly Continuing Claims: 1.875 million (Prior: 1.869 million revised from 1.877 million)
- Weekly Initial Claims: 233K (Consensus: 242K, Prior: 250K revised from 249K)
- June Wholesale Inventories: 0.2% (Consensus: 0.2%, Prior: 0.5% revised from 0.6%)
The key takeaway from the report is that the downturn in initial jobless claims is helping to quell recession concerns.
Friday
The stock market exhibited mixed action to close out the week. The three major indices ultimately settled with gains, driven by gains in the mega cap space. Small and mid-cap stocks lagged their larger peers. There was no notable US economic data on Friday.
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Today's News
Intel (INTC) faced a significant setback as Moody's Ratings downgraded its senior unsecured ratings to Baa1 from A3 and changed its outlook to negative from stable. The downgrade reflects expectations of weaker profitability over the next 12 to 18 months due to higher costs, unfavorable product mix, and continued market share losses. This comes on the heels of a shareholder lawsuit alleging Intel misled them regarding its foundry business.
Cisco Systems (CSCO, Financial) is preparing for another round of layoffs, potentially affecting thousands of employees. This would be the second round of cutbacks this year, following a reduction of 4,000 employees in February. The layoffs are expected to be announced alongside Cisco's fiscal fourth-quarter results, where analysts anticipate earnings of $0.85 per share on $13.54 billion in revenue.
Nvidia (NVDA, Financial) saw a boost as Mizuho Securities increased its price target to $132 from $127.50 ahead of its fiscal second-quarter results. The upgrade is driven by strong demand for Nvidia's H100 and H200 GPUs and the upcoming Blackwell line, despite potential delays in mass production. Nvidia's shares were up 1.4% in premarket trading.
General Dynamics (GD, Financial) received an upgrade from Morgan Stanley to Overweight with a price target of $345, up from $293. The upgrade is attributed to a strong balance sheet and promising earnings growth potential, driven by new Gulfstream aircraft and robust demand for defense products. Conversely, L3Harris Technologies (LHX, Financial) was downgraded to Equal Weight with a price target of $257, down from $275.
Pacira Biosciences (PCRX, Financial) experienced a dramatic 48% plunge after a judge ruled that a patent for its best-selling drug, Exparel, is invalid. The ruling opens the door for generic drug maker eVenus Pharmaceuticals to launch a generic version of Exparel. Pacira is considering its legal options, including an appeal.
Warner Bros. Discovery (WBD, Financial), Micron Technology (MU, Financial), and Advanced Micro Devices (AMD, Financial) are among the tech stocks down more than 20% from their 52-week highs but are seen as long-term winners by BofA Securities. Other notable names include CrowdStrike Holdings (CRWD), Jabil Inc. (JBL), and Walt Disney Co. (DIS), all of which have experienced significant declines but are expected to recover.
Harley-Davidson (HOG, Financial) is reevaluating its corporate policies following accusations from filmmaker Robby Starbuck that the company has embraced a "woke agenda." The backlash has led to a diminished presence at the Sturgis motorcycle rally, prompting the company to reconsider policies that may have alienated its core customers.
Symbotic (SYM, Financial) acquired substantially all assets of Veo Robotics for $8.7 million. The acquisition includes the FreeMove 3D depth-sensing computer vision system for industrial workcells and related intellectual property, aiming to enhance Symbotic's technological capabilities.
SoundHound AI (SOUN, Financial) surged 21% after announcing the acquisition of Amelia, an enterprise AI software company. The acquisition is expected to nearly double SoundHound's revenue in 2025, adding $45 million through recurring AI software revenue and other fees. Cantor Fitzgerald upgraded SoundHound to Overweight and raised its price target to $7 from $5.
Archer Aviation (ACHR, Financial) fell 7.77% after reporting a Q2 adjusted EBITDA loss of $93.8 million. The company also announced a contract manufacturing relationship with Stellantis (STLA), which plans to invest up to $390 million in manufacturing labor and capex to support Archer's goals.
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