Market Rebound
The stock market rebounded following last week's significant declines. Buy-the-dip interest supported the market, and upside momentum acted as a catalyst by the end of the week. Many stocks participated, but mega caps and semiconductor shares had an outsized impact on index gains.
The Vanguard Mega Cap Growth ETF (MGK) jumped 5.5%, and the PHLX Semiconductor Index (SOX) surged 10.0%. NVIDIA (NVDA) was a standout performer, bouncing 15.8% following last week's slide.
Mid-Week Volatility
On Wednesday, the market looked shaky after the August Consumer Price Index (CPI) stoked selling interest. Core-CPI, which excludes food and energy, remained above the Fed's 2.0% target at 3.2% year-over-year. Stocks quickly recovered when the S&P 500 held above last Friday's low (5,402) on Wednesday's initial retreat. The strength in NVIDIA (NVDA) also helped get stocks back on a winning track.
Other data this week garnered muted responses from stocks and bonds. Initial jobless claims were little changed and remain below recession-like levels at 230,000, and the August Producer Price Index reflected moderating inflation at the wholesale level.
Economic Sentiment and Rate Cut Expectations
Selling interest in recent weeks was partially due to concerns about economic growth, but this week's price action signaled a shift in that thinking. Small and mid-cap stocks outperformed their larger peers by the end of the week, reflecting the belief that the U.S. economy will enjoy a soft landing and that the Fed will cut rates to secure that soft landing.
Market participants now see a higher likelihood of a 50 basis points rate cut at next week's FOMC meeting. The fed funds futures market shows a 45.0% probability of a 50 basis points rate cut in September, up from 30.0% last Friday, according to the CME FedWatch Tool. The 2-yr yield, which is most sensitive to changes in the fed funds rate, dropped seven basis points this week to 3.58%, and the 10-yr yield dropped six basis points to 3.65%.
Sector Performance
Only one S&P 500 sector settled lower—energy (-0.7%)—while the information technology sector led the pack by a wide margin, climbing 7.3%.
Today's News
Trump Media & Technology Group (DJT, Financial) surged 25% on Friday afternoon after former President Donald Trump announced he would not sell his shares in the company. The stock closed up 11.8%, despite sliding 60% over the past six months. This comes ahead of a key lockup expiration, allowing insiders to sell or borrow against their shares. Trump's decision suggests his preference to maintain control over his social media platform, Truth Social.
Vistra (VST, Financial) saw a 6.3% rise in Friday's trading after Jefferies named it the top pick in the power sector. The analyst highlighted Vistra's strategic acquisitions and effective risk management, positioning it well for current power markets. The acquisition of Energy Harbor's nuclear portfolio in 2023 was particularly noted as a significant strategic advantage.
Boeing (BA, Financial) fell 4.2% on Friday after Moody's placed all of its ratings on review for downgrade. This follows a strike announcement by Boeing's aircraft mechanics and assemblers. A prolonged strike could severely impact Boeing's liquidity and the recovery of its Commercial Airplanes business, potentially leading to a downgrade if the strike extends and affects liquidity significantly.
Azul S.A. (AZUL, Financial) rallied over 30% on Friday amidst reports that the airline is close to a deal with lessors to pay off $600M in debt, potentially avoiding bankruptcy. The deal would involve offering lessors an equity stake of around 20%. Azul is also exploring other options, including a potential tie-up with rival carrier Gol and using Azul Cargo as collateral for additional funds.
Summit Therapeutics (SMMT, Financial) reported that its lead asset ivonescimab outperformed Merck's (MRK, Financial) Keytruda in a late-stage trial for lung cancer, leading to a spike in its stock. This announcement also boosted similar biotech stocks like Instil Bio (TIL, Financial) and BioNTech (BNTX, Financial), which develop comparable therapies.
Broadcom (AVGO, Financial), Lowe's (LOW, Financial), and Palantir (PLTR, Financial) were highlighted by BofA Analyst Stephen Suttmeier for their bullish breakout potentials. Broadcom is on a “bullish triangle breakout” watch, while Lowe's and Palantir are forming big base breakouts, indicating potential upward trends.
Electronic Arts (EA, Financial) will hold its Investor Day next week, while Stellantis (STLA) will host a press conference. These events are expected to provide insights into their future strategies and potential market impacts.
AGNC Investment (AGNC) declared a $0.12/share monthly dividend, maintaining its forward yield at 13.92%. The dividend is payable on October 9, for shareholders of record as of September 30.
KKR (KKR) entered an agreement to purchase 11.62M shares of BrightSpring Health Services (BTSG) from Walgreens (WBA) in a private transaction. BrightSpring stated it will not issue or sell any shares as part of this transaction, which is expected to close around September 16, 2024.
CoreWeave, a cloud provider backed by Nvidia (NVDA), is considering a share sale ahead of a potential IPO next year. The startup, which provides access to Nvidia's GPUs for AI applications, has nearly tripled its valuation in less than a year and is now valued at $23B.
AGNC Investment Corp. (AGNCL) declared a $0.4844/share quarterly dividend, maintaining a forward yield of 7.96%. The dividend is payable on October 15, for shareholders of record as of October 1.
Altria (MO) declared a $1.02/share quarterly dividend, payable on October 10, for shareholders of record as of September 16.
Equity Residential (EQR) declared a $0.675/share quarterly dividend, maintaining a forward yield of 3.46%. The dividend is payable on October 11, for shareholders of record as of September 24.
GuruFocus Stock Analysis
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