July 12th Market Overview

July 12th Market Overview (no fluff)

Author

J.L. Bernstein
July 12, 2024

Happy Friday everyone. That weekend air is right outside, go get it!

Lets dig in…

Executive Summary

  • The IWM reached its 52-week high gernal resistance in premarket this AM, signaling in a point of interest.

  • CPI data and unemployment figures increase likelihood of a September rate cut by the Fed.

  • Market witnessed rotation yesterday from Mega Caps into interest rate-sensitive small caps following soft inflation print.

  • Traders remain bullish on gold and oil, with improved positioning post-CPI.

Market Overview

Dow Jones: Currently at 39,800 in pre-mkt with a confirmed breakout, targeting 40,000.
S&P 500: Witnessed profit-taking, dropping to 5,577 before slight recovery to 5,592.
NASDAQ: Larger sell-off due to heavy weighting in the Magnificent 7, dropped to 20,200, now flat.
VIX: Spiked slightly but majority volume still short, indicating possible future sell-off.

Key Market Drivers

  • Inflation Trends: CPI print was the lowest Y/Y since March 2021, supporting a potential September rate cut. Noteworthy M/M decrease (-0.1%) contradicts the expected 0.1% increase.

  • Earnings Reports: JPM reported strong earnings despite lower-than-expected deposits, with adjusted revenue surpassing estimates.

  • Consumer Sentiment: Michigan Consumer Sentiment Numbers and Inflation expectations will be released after market opens.

Stock Spotlight

IWM and TNA

  • IWM: Reached 52-week high resistance of 211.88. Calls are building on the 215 and 220 levels. Holding this level could push it higher past 215.

  • TNA: Leveraged small cap ETF, mirroring IWM’s strength but with higher risk.

JPMorgan Chase (JPM)

  • Reported an EPS of 4.4 against an estimate of 4.28 with adjusted revenue at 50.99B, beating the estimate of 50.21B. Deposits were lower than expected, but tangible book value per share and net charge-offs beat estimates.

Tesla (TSLA)

  • Announced delays in robotaxi unveiling to October and added to Wedbush’s best ideas list. On the flip side, UBS downgraded TSLA to sell citing overvaluation due to AI investment enthusiasm.

Other Magnificent 7 Updates

Microsoft (MSFT): Reaffirmed buy rating from Citi, price target of 520.

Amazon (AMZN): Jeff Bezos continued stock selling, unloading $420M worth of shares.

Apple (AAPL): BoA raised its price target to 256 from 230, driven by confidence in a multi-year iPhone upgrade cycle.

Other Notable Company News

  • Teck Resources (TECK) up significantly on potential bid by Rio Tinto.

  • Carvana (CVNA): Initiated with a buy rating by BTIG, PT of 155.

  • PayPal (PYPL): Benefits from Apple/EU settlement requiring Apple to open NFC tech to competitors.

  • Lockheed Martin (LMT): Resuming F35 deliveries to the Pentagon.

  • Dollar General (DG): Agreed to pay a $12M fine for workplace safety violations.

  • VinFast (VIn): Jumped 18% on global expansion plans.

Sector Watch

  • Stocks in the small cap and interest rate-sensitive sectors are benefiting the most from the current economic environment.

  • Magnificent 7 stocks saw profit-taking but remain fundamentally strong, with selective bullish outlooks specifically - NVDA, MSFT, AAPL.

Bond Market

  • Credit default swaps plunged indicating bullish market conditions. No panic observed as traders rotated positions in response to soft inflation prints.

Policy Watch

  • The softer CPI and unemployment data signal possible Fed rate cuts in September.

  • Market participants should watch for updates from the US PPI and Michigan Consumer Sentiment.

I hope you have a wonderful weekend!

- JB

Note: This newsletter is intended for informational purposes only.