Market Overview
September started on a downbeat note for the stock market. The major indices all registered sizable declines during this holiday-shortened week. Broad selling activity led the S&P 500 to fall below its 50-day moving average. This downside bias was related to normal consolidation activity after a big run, sparked by fears about a weakening labor market and economic growth prospects. Friday's release of the August Employment Situation report added to the market's emerging fears.
Labor Market Data
Hiring activity was lighter than expected in August, with downward revisions to July and June leaving employment 86,000 lower for those months than previously reported. The report also showed that the unemployment rate declined slightly and average hourly earnings increased a stronger-than-expected 0.4% month-over-month.
This week's labor market data included the ADP Employment Change Report for August, which was weaker than expected, and the weekly initial jobless claims report, which was better than expected. Other influential data included the revised Q2 productivity report that showed an upward revision to productivity and a downward revision to unit labor costs, and the ISM Services PMI for August, which was better than expected but little changed from July.
Sector Performance
Weakness in the semiconductor space also contributed to the negative bias. The PHLX Semiconductor Index (SOX) dropped 12.2% this week. Broadcom (AVGO, Financial) was among the notable names in the space, sliding 15.9% after relatively disappointing guidance that piled onto current fears that the pace of growth is slowing for many richly-valued semiconductor stocks.
The aforementioned price action led the S&P 500 information technology sector to close 7.1% lower on the week. It was the worst-performing sector, followed by energy (-5.6%), communication services (-5.1%), and materials (-4.8%). The only sectors to close higher this week were the rate-sensitive real estate sector (+0.2%) and the consumer staples sector (+0.6%).
Treasury Yields
The 10-year note yield settled 20 basis points lower at 3.71%. The 2-year note yield settled 28 basis points lower at 3.65%.
Guru Stock Picks
Warren Buffett has made the following transactions:
- Reduce in BAC by 2.12%
Today's News
Bitcoin (BTC-USD) experienced a challenging week, falling 9% and slipping away from the $60K mark. The cryptocurrency traded within a narrow range of ~$58K-$53K from Tuesday to Friday. Despite a brief rally on Wednesday, Bitcoin could not maintain its gains, reflecting a broader risk-off sentiment in the market.
Coinbase Global (COIN) extended its losing streak to nine sessions, dropping 7.7% on Friday. The stock has been under pressure due to increased regulatory scrutiny. The U.S. Securities and Exchange Commission (SEC) recently asked a New York court to deny Coinbase's subpoena for documents related to crypto regulation. This ongoing legal battle has significantly impacted Coinbase's stock performance.
Tesla (TSLA, Financial) stands out among the "Magnificent Seven" stocks, as it is the only company expected to see continued EPS growth in the third quarter. According to Ned Davis Research, while other mega caps like Amazon (AMZN, Financial), Nvidia (NVDA, Financial), Meta (META, Financial), Alphabet (GOOGL, Financial), Microsoft (MSFT, Financial), and Apple (AAPL, Financial) are facing decelerating EPS growth, Tesla remains an exception, showcasing its robust financial health.
Starbucks (SBUX, Financial) shares fell for the seventh consecutive day, closing down 0.45% at $91.15. Despite facing headwinds, there is optimism about the company's future with the incoming CEO, Brian Niccol, who previously led Chipotle to success. Analysts hold a mixed outlook, with some recommending a Hold and others a Strong Buy.
Vale (VALE, Financial) and BHP (BHP, Financial), along with their Samarco joint venture, are nearing a settlement with Brazilian authorities to pay approximately 100B reais ($17.87B) in compensation for the 2015 Mariana dam collapse. This settlement exceeds their previous offer and aims to address the extensive damages caused by the disaster.
Zoom Video Communications (ZM, Financial) continued its downward trend, losing 8% over the past seven sessions. The stock's performance remains weak compared to the broader market, with a year-to-date decline of 2.96%. Analysts have mixed ratings on Zoom, reflecting concerns about its growth and valuation.
Applied DNA Sciences (APDN) shares surged 17% following U.S. officials' announcement to enhance surveillance of the mpox virus due to an outbreak in Africa. The increased focus on mpox testing and vaccines has positively impacted related stocks, including Co-Diagnostics (CODX).
Broadcom (AVGO, Financial) saw an 8% drop in its stock price after releasing its latest earnings report. Despite the lighter-than-expected guidance, analysts remain optimistic about the company's long-term prospects, especially with the VMware acquisition progressing well.
Super Micro Computer (SMCI) faced another downgrade, this time from JPMorgan, due to uncertainties surrounding the delay of its 10K filing. The stock has fallen 33% over the past month, driven by concerns over regulatory compliance and a short position disclosed by Hindenburg Research.
GuruFocus Stock Analysis
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