August 1st Market Overview

August 1st Market Overview (no fluff)

Author

J.L. Bernstein
August 01, 2024

Boom the first of the month is here! Happy Thursday everyone.

We are in Kangaroo land with how much volatility there has been this week, incredible opportunities on the small time frames…scary holds on the longer time frames.

Lets dig in…

Executive Summary

  • The Dow faces its worst day of the year, dropping 659 points.

  • Initial jobless claims rise, stoking fears of a recession and delayed Fed rate cuts.

  • Utility stocks surge as money seeks safe havens amidst declining Treasury yields.

  • Nvidia shares decline nearly 8%, leading semiconductor industry’s losses.

Market Overview

Major US indices experienced significant declines, with the Dow Jones Industrial Average dropping 659 points, or 1.6%, and the S&P 500 and Nasdaq Composite shedding 1.8% and 2.8% respectively. Small-cap benchmark Russell 2000 also dipped 2.8%. Weak economic data, including a rise in initial jobless claims and a disappointing ISM manufacturing index, added to recession fears. The 10-year Treasury yield dipped below 4% for the first time since February, driven by expectations of future rate cuts.

Key Market Drivers

  • Economic Data: Initial jobless claims rose sharply, ISM manufacturing index fell to 46.8%.

  • Federal Reserve: Fed Chair Jerome Powell hinted at potential rate cuts in September, despite maintaining current rates.

  • Investor Sentiment: Fears of recession have increased, affecting market stability.

Stock Spotlight

  • Meta Platforms: Started the day strong with a 4% rally due to better-than-expected Q2 results but failed to maintain the momentum.

  • Eli Lilly & Procter & Gamble: These stocks gained over 3%, buoyed by positive drug study results for Lilly and strong earnings for P&G.

  • Shake Shack: Saw a 15% rise following better-than-expected Q2 earnings.

  • C.H. Robinson: Shares jumped around 14% on strong Q2 earnings.

  • Mobileye Global: Dropped around 21% after reducing its full-year revenue forecast.

Other Magnificent 7 Updates

  • Nvidia: Fell nearly 8%, leading the semiconductor sector’s decline amidst broad market sell-off.

  • Lam Research & Qualcomm: Declined 11% and 10.5% respectively within the semiconductor sector.

Other Notable Company News

  • Utility Stocks Surge: Companies like Consolidated Edison, Southern Company, and more reached 52-week highs as investors sought stability.

  • NYSE and Nasdaq Volume: High trading activity with declining volume dominating both indices.

Sector Watch

Sector

Symbol

% Change

Consumer Discretionary

XLY

-2.53%

Consumer Staples

XLP

+1.06%

Energy

XLE

-2.67%

Financials

XLF

-1.67%

Healthcare

XLV

+1.06%

Industrials

XLI

-2.09%

Materials

XLB

-0.64%

Real Estate

XLRE

+0.87%

Technology

XLK

-3.66%

Communication Services

XLC

+0.47%

Utilities

XLU

+1.73%

Bond Market

The 10-year Treasury yield has broken below 4% for the first time since February, currently at 3.975%.

Policy Watch

Markets are pricing in an aggressive path for interest rate cuts starting in September. Economist Claudia Sahm suggests the Fed needs to start gradually reducing interest rates. DoubleLine CEO Jeffrey Gundlach warns that the Fed risks recession by holding a hard line on rates.

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My book on how I approach swing trading

Note: This newsletter is intended for informational purposes only.