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- August 9th Market Overview
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The weekend is here, it smells like rain where I’m at 😅
The week has been a mixed bag. Credit default swaps are normalizing, boosting market liquidity, while markets reacted to initial jobless claims with a bout of excessive volatility.
Meanwhile, BCA Research is sounding the alarm, predicting a potential 30% drop in the S&P next year as recession clouds gather(pretty excessive if you ask me). With long-term breadth indicators still showing strength, there's plenty of fodder for investors and traders.
Lets dig in…
Executive Summary
Despite volatility, long-term market breadth remains strong with the majority of S&P 500 stocks above their 200-day moving averages.
Credit default swaps are normalizing, contributing to improved market liquidity.
BCA Research predicts a 30% crash in the S&P 500 as the U.S. approaches a potential recession in 2024.
Stocks opened slightly lower on Friday, with the Dow, S&P 500, and Nasdaq all heading towards weekly losses.
Market Overview
Markets faced a turbulent week, with key indices falling due to a mix of economic data, underwhelming earnings reports, and predictions of a looming recession. The S&P 500 index is currently trading at 5,336.03, up 0.31%, but still showing signs of instability.
Key Market Drivers
Fed’s Jackson Hole Retreat: Investors await comments from Fed Chair Jerome Powell, which are expected to provide guidance for the September meeting.
Credit Default Swaps: The normalization of credit default swaps has increased market liquidity and supports a backstop for a strong market push.
Initial Jobless Claims: Markets may have overreacted to slightly higher jobless claims, indicating heightened market sensitivity to economic news.
Long-Term Indicators: Despite short-term volatility, long-term technical indicators remain strong, with more than two-thirds of S&P 500 stocks standing above their 200-day moving averages.
Stock Spotlight
Sociedad Quimica y Minera de Chile (SQM): Upgraded by Goldman Sachs to ‘buy,’ citing stabilized lithium prices and optimistic future sales projections.
E.l.f. Beauty (ELF): Shares slid 7% despite an earnings beat and revised upward guidance, with concerns over conservative future growth estimates.
Taiwan Semiconductor (TSM): Stock rose 1% on the back of strong July revenue, showing nearly 45% year-over-year increase.
Expedia (EXPE): Shares climbed nearly 8% following a Q2 earnings beat but were tempered by cautious future outlook due to macroeconomic challenges.
Paramount (PARA): Reported an earnings beat and announced significant job cuts, leading to a 4.5% rise in premarket trading.
Other Magnificent 7 Updates
No significant updates today, but markets are closely monitoring these tech giants for any signs of market shifts, particularly in light of high volatility and earnings.
Other Notable Company News
Take-Two Interactive (TTWO): Stock gained over 7% after maintaining its full-year guidance despite a slight revenue miss for Q1.
UBS on Market Volatility: Urges investors not to overreact to market swings and sticks to its S&P 500 year-end target of 5,900.
Sector Watch
Sector | Symbol | % Change |
|---|---|---|
Consumer Discretionary | XLY | -0.92% |
Consumer Staples | XLP | -1.08% |
Energy | XLE | +1.28% |
Financials | XLF | +0.89% |
Healthcare | XLV | -0.09% |
Technology | XLK | -2.06% |
Communication Services | XLC | -0.01% |
Utilities | XLU | -0.01% |
Bond Market
10-Year Treasury Yield: Expected to fall to 3% as BCA Research foresees economic slowdown and recessionary pressures.
Policy Watch
Interest Rates: Discussions around Jackson Hole signal potential guidance for future rate decisions. The Fed’s approach to inflation and unemployment remains a focal point.
Economic Insight: Higher interest rates aim to dampen spending, control inflation, and restore economic equilibrium. Conversely, lower rates boost spending and growth, particularly beneficial for tech and growth stocks.
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- JB
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