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July 18th Market Overview

July 18th Market Overview

July 18th Market Overview (no fluff)

J.L. Bernstein
July 18, 2024

Happy Thursday, everyone. We are seeing a good bit of choppy waters in the markets this week. I want to remind everyone that just because the indices go down doesn’t mean longs cannot work or you have to go full defense. With elections coming up we will continue the chop imo.

Keep risk tight and uses hard stops aligned with days closing below key moving averages. That’s how I take emotions out of trading in a down trending mkt.

Sometimes the best position is cash, seriously!

Lets dig in…

Executive Summary

Market Rotation Insight: Goldman Sachs advises taking profits amid market rotation, with stretched AI valuations and potential trade conflicts with China.
Strong Earnings for TSM: Taiwan Semiconductor Manufacturing Company (TSMC) reported solid earnings, beating expectations and raising full-year guidance.
UAL Weak Guidance: United Airlines (UAL) reported mixed earnings, with weak guidance indicating potential challenges in the upcoming quarter.
Amazon Prime Day Record: Amazon reported record online sales during Prime Day, although stock influenced by tech sector volatility.

Market Overview

The market is in choppy waters. While TSMC is riding high on strong earnings, United Airlines is bracing for turbulence with a shaky outlook. Meanwhile, Goldman Sachs advises traders to bank their profits with trade tensions and AI valuations bubbling up. Tech titans like Amazon aren't immune to market jitters, facing volatility despite a record Prime Day. With China tightening reins on AI firms and political uncertainties looming, it's a tricky course for us to navigate.

Key Market Drivers

Goldman Sachs Market Rotation Guidance: With rate cuts being repriced and AI valuations reassessed, Goldman Sachs suggests taking profits on momentum gains.
TSMC Earnings Beat: Strong performance driven by smartphone and AI demand with a revenue beat and raised guidance for the next quarter.
UAL’s Weak Guidance: Despite a beat on EPS, United Airlines reported weak guidance for the next quarter, signaling potential oversupply easing post-August.

Stock Spotlight

Taiwan Semiconductor Manufacturing Company (TSM)

Earnings Beat: EPS of 1.48 vs 1.42 expected; Revenue of $20.8B vs $20.1B expected, up 40% YOY.
Key Metrics: Gross margin at 53.2%, operating margin at 42.5%, 3nm contributed 15% of revenue.
Future Guidance: Raised full-year guidance and CAPEX expectations. Strong demand for AI and smartphones.

United Airlines (UAL)

Mixed Results: EPS of 4.14 vs 3.97 expected; Revenue of $15B, in line with expectations.
Guidance: Next quarter EPS projected at 2.75-3.25 vs 3.38 expected, indicating potential challenges.
Outlook: Predicts an inflection point in August with easing industry-wide oversupply.

CrowdStrike (CRWD)

Downgrade: Deburn double downgrades CrowdStrike to sell from buy, lowers PT to 275 from 380 due to anticipated slowdown in endpoint market growth.

Fortinet (FTNT)

Upgrade: TD Cowen upgrades to buy from hold, sets PT at 75. Optimistic outlook based on solid channel checks and bottoming cycle for security appliances.

Amazon (AMZN)

Prime Day Record: Shoppers spent a record $14.2B online during Amazon Prime Day. However, stock affected by broader tech sector volatility.

Other Magnificent 7 Updates

Apple (AAPL)

Goldman Reiterates Buy Rating: Price target at $265. Predicted EPS beat in Q3 driven by iPhone shipments and new product innovations.

Other Notable Company News

Beyond Meat (BYND): In talks with bondholders for debt restructuring due to weakened liquidity.
GitLab (GTLB): Wolfe reiterates outperform, PT of 56. Potential sale news with Datadog as a potential fit.
Intel (INTC): Highlighted as an alternative to TSMC if Trump imposes tariffs.
ASML: CEO optimistic about China opportunities despite US pushing for stricter curbs.

Sector Watch

Semiconductors: Recovery in chip stocks following TSM earnings after a dip due to ASML guidance and potential tougher trade rules on China.
Cybersecurity: Mixed outlook with CRWD downgraded but FTNT upgraded, showing divergent analyst opinions within the sector.
Airlines: Weak guidance from UAL impacted sector sentiment, despite notes on strong summer demand and potential inflection points.

Bond Market

Inactive due to focus on equity markets…

Policy Watch

Biden’s COVID-19 Positive Test: President Biden tests positive for COVID-19, self-isolating.
Student Debt Relief: Biden canceled $1.2B in student debt for 35,000 borrowers.
China AI Regulations: China’s cyberspace administration enforces stricter reviews of AI models by companies like Bytedance and Alibaba.

I hope you have a wonderful rest of your week!

- JB

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July 18th Market Overview