August 5th Market Overview

August 5th Market Overview (no fluff)

Author

J.L. Bernstein
August 05, 2024

In partnership with

Happy Monday everyone!

An intense start this week on the price action side. Watching the VIX rocket at opening was something else. The volatility in this market is overwhelming but it’s important to be objective when looking at the markets. With all the hype and headlines being doom and gloom , keep in mind how positive the headlines were just a few weeks ago.

We went full greed to full fear in less then 3 weeks!

Lets dig in…

Executive Summary

  1. We witnessed the Dow plummet over 1,000 points today, marking its worst day in nearly two years.

  2. Tech giants, particularly Nvidia. Meta, Amazon, and Apple, led the market decline, with Apple’s drop fueled by Berkshire Hathaway halving its stake.

  3. Fears of a U.S. recession triggered a global market sell-off, sending investors flocking to bonds for safety.

  4. The Federal Reserve’s stance on interest rates came under intense scrutiny as market volatility spiked. People are hoping for an emergency rate cut.

Market Overview

Significant market downturn:

  • Dow Jones: 38,673.30, -1,063.96 (-2.68%)

  • Nasdaq Composite: -3.9%

  • S&P 500: -3.2%

The broader market experienced a sharp sell-off, driven by recession fears and a dramatic shift away from high-growth tech stocks. Concerns over the Federal Reserve not acting promptly to cut rates contributed heavily to the sell-off.

Key Market Drivers

  • Friday’s disappointing July jobs report sparked intense U.S. recession fears.

  • The Federal Reserve’s decision to maintain high interest rates fueled concerns about economic slowdown.

  • Japan’s stock market entered bear territory, with the Nikkei posting its worst day since the “Black Monday” of 1987.

  • Investors sought safety in U.S. bonds, driving the 10-year yield down to 3.76%, its lowest level since June 2023.

Stock Spotlight

  1. Nvidia (NVDA): Down 7.2% as investors retreated from tech stocks amid broader market concerns.

  2. Apple (AAPL): Down nearly 6% after Warren Buffett’s Berkshire Hathaway cut its stake by half, further dampening sentiment around tech giants.

  3. Super Micro Computer (SMCI): Dropped 3%, showing vulnerability amid the tech sell-off and global market anxiety.

  4. Tyson Foods (TSN): Rose over 3% post-earnings, beating expectations with adjusted earnings of 87 cents on $13.35 billion revenue.

  5. Kellanova (K): Up more than 14% on reports of a potential sale to Mars, maintaining gains despite broader market turmoil.

Other Magnificent 7 Updates

  • Advanced Micro Devices (AMD): Defied the negative trend, rising over 1%, boosted by a temporary stabilization in key market indicators.

  • Meta Platforms (META) and Amazon (AMZN): Both dropped 8% as recession fears led to a broad market sell-off.

  • Microsoft (MSFT) and Alphabet (GOOGL): Saw declines of about 6% each, reflecting broader tech sector volatility.

Other Notable Company News

  • Charles Schwab: Resolved a technical issue that had disrupted user access earlier in the day.

  • Wells Fargo: Strategist Scott Wren views the pullback as a buying opportunity, advising patience and strategic acquisitions.

Sector Watch

Sector

Symbol

% Change

Consumer Discretionary

XLY

-3.45%

Consumer Staples

XLP

-2.06%

Energy

XLE

-1.68%

Financials

XLF

-2.77%

Healthcare

XLV

-2.52%

Industrials

XLI

-1.81%

Materials

XLB

-2.14%

Real Estate

XLRE

-2.04%

Technology

XLK

-4.75%

Communication Services

XLC

-3.42%

Utilities

XLU

-2.08%

Bond Market

We saw the 10-Year Treasury Yield fall to 3.76%, its lowest level since June 2023. Investors flooded into bonds, driving prices up and yields down, in search of safety amid the market volatility.

Policy Watch

Chicago Fed President Austan Goolsbee suggested current interest rates might be too restrictive. He indicated the Fed would act if economic conditions worsened, though he avoided committing to immediate rate cuts. These comments have put the Federal Reserve’s next moves under intense scrutiny, with potential significant impacts on market dynamics.

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- JB

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Note: This newsletter is intended for informational purposes only.