July 26th Market Overview

July 26th Market Overview (no fluff)

Author

J.L. Bernstein
July 26, 2024

Happy Friday everyone, the weekend is here! Today is my birthday, after this brief write up I’m going to go enjoy it. I’m looking to eat a good steak tonight or something delicious (maybe some good pasta).

Lets dig in…

Executive Summary

  • Indices are eyeing to close green, buoyed by PCE data that met expectations, reinforcing speculation for upcoming rate cuts from the Fed.

  • Dexcom (DXCM) shares have crashed over 40% after weaker-than-expected earnings and reduced fiscal guidance, igniting concerns (torched).

  • Strong earnings from 3M (MMM) and Bristol Myers (BMY) have led to notable green, revealing pockets of resilience amidst a turbulent market.

  • Market breadth remains surprisingly robust, with 60% of stocks trading above their 20-day and 50-day moving averages, despite recent volatility.

Market Overview

Favorable PCE data for the markets. Tech have been volatile throughout the week, investor sentiment seems to be shifting towards diversified sectors, opening potential opportunities beyond technology. However, major indices are still tracking lower for the week, even with today’s potential gains. The continued bearish positioning could result in bounces without firm conviction; caution is the word on the street.

Key Market Drivers

  • PCE Index: The core PCE index met forecasts, enhancing prospects for imminent interest rate cuts, paving the way for potential bullish scenarios.

  • Earnings Reports: Disappointing results from Dexcom are overshadowing positive surprises from companies like 3M and Bristol Myers, creating mixed market responses.

  • Sector Resilience: More than half of the stocks are performing well relative to their moving averages, suggesting underlying strength, even as some major stocks face downward pressure (market breadth).

  • Rotation from Tech: There’s an ongoing shift away from tech stocks to other sectors, which is contributing to a dynamic market environment. Going to keep reiterating this as the theme is prevalent now/

Stock Spotlight

  • Dexcom (DXCM): Shares plummeted by 40.96% after adj. EPS of $0.43 and revenue of $1.00B fell short of expectations, alongside a stark reduction in FY24 revenue guidance. This could dampen sentiment across the medical device sector.

  • 3M (MMM): Surged 21.27% on strong quarterly results, boosting their earnings forecast, showcasing robust performance across key segments—this could provide a lift for the industrial sector.

  • Bristol Myers (BMY): Gained 10.62% after reporting better-than-expected earnings and lifting their full-year EPS guidance, indicating solid drug sales and potential strength within the pharmaceutical industry.

  • Deckers Outdoor (DECK): Jumped 6.86% following impressive earnings and an increased forecast, underscoring ongoing strength in the Hoka and UGG brands—signaling resilience in the consumer discretionary sector.

  • Coursera (COUR): Exploded by 44.94% after disclosing a substantial revenue surge, driven by impressive growth in AI course enrollments—highlighting the rising importance of AI in the education technology space.

Other Magnificent 7 Updates

  • Ford (F): Saw a slight recovery with a 0.49% increase as the market is digesting the prior day’s significant decline. Not a mag 7 but notable!

  • Nvidia (NVDA): Inched up by 0.43%, yet continues to face headwinds from a broader tech sell-off.

  • Investors are keenly awaiting “Megacap tech earnings Part 2” next week, which could play a significant role in steering market direction.

Other Notable Company News

  • Skechers announced a $1 billion stock buyback, leading to a near 3% increase in shares—a move reflecting confidence in continued company performance.

  • Charter Communications (CHTR) jumped 15.02% after exceeding earnings estimates, showcasing noteworthy growth in mobile service revenue that may attract further investment.

  • Tandem Diabetes Care (TNDM) fell 1.61% amid negative sentiment stemming from Dexcom’s disappointing earnings report, showcasing concerns in the diabetes sector.

Sector Watch

Utilities and Healthcare are holding strong technical positions, providing viable safe havens for cautious investors. The Consumer Staples sector (XLP) is facing resistance around the 78.18 level; a breakout here could lead to extended gains. Additionally, strength in finance and aerospace sectors indicates diversification opportunities.

Bond Market

Anticipate stability in bond yields as the street await clear signals from the Fed, particularly regarding rate cuts stemming from inflation data and economic indicators.

Policy Watch

The Fed appears set to hold rates steady in the next meeting, with eyes on how inflation management unfolds in the upcoming months. Despite this likely hold on rates, market expectations for potential cuts remain unchanged….meh

Looking Ahead

Key events to watch include the upcoming Fed meeting and the second round of megacap tech earnings reports next week, both of which could significantly influence market direction.

- JB

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Note: This newsletter is intended for informational purposes only.