U.S. will release key data on gross domestic product and initial jobless claims, which are highly anticipated by market watchers. Economic concerns intensified on Wednesday when former New York Fed President William Dudley advocated for lower borrowing costs, ideally at the upcoming meeting. Analysts have expressed worry that such a move might signal a sense of urgency among officials to stave off a potential recession.

European markets experienced a downturn amid a wave of corporate earnings reports. Notably, results from Nestle SA and Gucci owner Kering SA indicated a reduction in consumer spending across various sectors, from essential food items to luxury handbags. This trend reflects growing economic caution among consumers. Additionally, upcoming data releases on German consumer confidence and business activity in the euro zone and the U.K. are anticipated.

China’s central bank recently reduced the medium-term facility lending rate from 2.5% to 2.3%, following a prior cut in loan prime rates earlier in the week. This move aims to stimulate economic activity amid ongoing challenges. Meanwhile, South Korea’s GDP grew by 2.3% year-on-year, falling short of the 2.5% growth anticipated by economists polled by Reuters. On a quarterly basis, South Korea’s economy contracted by 0.2%, contrary to the expected 0.1% increase.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include, ABBV, ARCH, AZN, BFH, BC, CBRE, CMCSA, CFR, DAR, DOW, DTE, EME, XPRO, FCN, HOG, HAS, HNI, HOM, IMAX, ITGR, KDP, LAZ, LEA, LKQ, MAS, MHK, NDAQ, NOC, NVCR, POOL, PDS, RS, RPM, RTX, R, SNY, SBSI, LUV, STM, FTI, TECK, TSCO, TW, TRU, TPH, UNP, VLO, VLY, VC, WST, & WEX.  After the bell include AEM, ALSN, ABCB, APPF, AJG, BKR, BJRI, SAM, BYD, CINF, COLB, COLM, COUR, CUZ, CUBI, DECK, DXCM, DLR, EMN, EIX, EXPO, FHI, FFBC, FBIN, GLPI, HIG, DOC, JNPR, KNSL, LHX, TREE, LPLA, MGRC, MTX, NOV, OLN, PECO, PFG, PFS, SIGI, SKX, SKYW, SPSC, SSNC, TEX, TXRH, TFII, UCTT, VLTO, VRSN, WSBC, WY, WTW, & WSFS.

News & Technicals’

Unilever shares surged on Thursday morning following the company’s announcement of an increased full-year margin guidance. Additionally, Unilever confirmed that the spinoff of its ice cream business remains on schedule for completion by the end of 2025. The company reported underlying price growth of 1% in the second quarter of this year, a significant decrease from the 8.2% growth recorded in the same period of 2023. This update reflects Unilever’s strategic adjustments and market performance amid evolving economic conditions.

Ford Motor fell short of Wall Street’s second-quarter earnings expectations, despite surpassing revenue forecasts. The shortfall was primarily due to persistent warranty costs that have troubled the automaker for several years. In response, Ford raised its target for free cash flow but chose to maintain its 2024 earnings guidance. This decision left some investors disappointed, as they had anticipated an upward revision in earnings projections.

Auto giant Stellantis reported a first-half net profit of 5.6 billion euros ($6.07 billion), marking a significant 48% decline compared to the same period in 2023. Stellantis CEO Carlos Tavares attributed the disappointing performance to a challenging industry environment and internal operational issues. He acknowledged that the company’s results for the first half of 2024 fell short of expectations, underscoring the difficulties faced by the automotive sector in navigating current economic conditions.

Chipotle Mexican Grill reaffirmed its full-year outlook for same-store sales growth, signaling confidence in its ongoing performance. The restaurant chain exceeded Wall Street’s expectations for both quarterly earnings and revenue, showcasing its robust financial health. Additionally, Chipotle reported an impressive 8.7% increase in restaurant traffic during the second quarter, highlighting the brand’s continued popularity and effective customer engagement strategies.

The release of key data such as Durable Goods, GDP, International Trade and Jobless Claims will likely set the tenor of the morning.  With the data give the bulls what’s needed to inspire a relief rally, or will the bears gain energy to follow-through with yesterday’s attack?  We will soon find out but traders should plan for whipsaws and possible big point moves so plan your risk accordingly.

Trade Wisely,

Doug

U.S. futures indicated a lower opening on Wednesday as investors reacted to disappointing reports from major tech companies Alphabet and Tesla. Shares of Alphabet, Google’s parent company, dropped by 3.4%, while Tesla’s stock saw a more significant decline of over 7% due to results that fell short of expectations. This underperformance from two of the market’s leading tech giants contributed to the overall negative sentiment among investors.

European markets experienced a downturn as the earnings season intensified. Major indexes across the region, along with nearly all sectors, saw declines. Household goods stocks were particularly affected, dropping by 1.55%. In contrast, the travel and leisure sector was the only one to buck the trend, posting a modest gain of 0.62%. Additionally, flash purchasing managers’ index (PMI) data revealed that business activity in the euro zone had stalled in July.

Asia-Pacific markets experienced a downturn as traders evaluated the latest business activity data from Japan and Australia. The technology and electric vehicle (EV) sectors were notably impacted, with stocks in these areas seeing significant declines. In Australia, the private sector’s growth decelerated in July, as indicated by the composite purchasing managers index (PMI) which fell to 50.2 from 50.7 in June, according to Juno Bank.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include ALKS, ALLE, APH, T, BSX, CHKP, CHE, CME, EVR, FSV, FI, FTV, GEV, GD, GPI, HCSG, IPG, IP, KBH, LW, LII, NAVI, NEE, NEP, ODFL, PPBI, BPOP, PRG, RCI, ROP, SLAB, THMC, TEL, TDY, THC, TMO, TSEM, TNL, UCBI, VRT, WNC, & WFRD.  After the bell include ACI, ALGN, AMP, CP, CSL, CLS, CMG, CHDN, CYH, CLB, EW, EPRT, FAF, FLEX, F, GL, GGG, HP, IBM, ICLR, PI, INVH, KALU, KLAC, KNX, MXL, MTH, MEOH, MC, MOH, NEM, OII, ORLY, CASH, PEB, PEGA, PLXS, QS, RNR, RSG, ROL, SLM, NOW, SSB, TER, TYL, URI, UHS, VMI, VKTX, WCN, WM,  & WH.

News & Technicals’

Shares in LVMH declined on Wednesday following the release of the luxury group’s earnings for the first half of 2024. The company reported quarterly sales of 20.98 billion euros ($22.7 billion) for the second quarter, which fell short of analysts’ expectations as surveyed by LSEG. Additionally, LVMH disclosed that sales in Asia, excluding Japan, dropped by 14% in the second quarter compared to the same period last year. This underperformance in a key market contributed to the overall negative reaction from investors.

Tesla CEO Elon Musk recently posted an informal poll on social network X, inquiring whether his publicly traded automaker should invest $5 billion into his latest startup, xAI. Established in March 2023 and first publicly discussed in July 2023, xAI focuses on developing large language models and AI products designed to compete with offerings from Google, Microsoft, and OpenAI. Musk’s companies have a history of collaboration and financial interactions, making this potential investment a continuation of his integrated business strategy.

In a Tuesday interview with CNBC’s Jim Cramer, Mattel CEO Ynon Kreiz expressed optimism about the Barbie maker’s success as an independent company. Meanwhile, a Reuters report revealed that private equity firm L Catterton, backed by luxury goods giant LVMH, has approached Mattel with a potential deal. This development highlights the ongoing interest in Mattel’s business and confidence in its prospects.

The ride-hailing company announced that Sverchek’s departure is not due to any disagreements within the company, its board of directors, or management, nor is it related to Lyft’s operations or policies. Despite the exit, Sverchek will receive severance benefits, including a cash payment of $650,000. This clarification aims to reassure stakeholders that the departure is amicable and unrelated to any internal conflicts or operational issues.

Anticipation may have become a little concern after disappointing reports from GOOG and TSLA roused the bears this morning.  With a huge number of earnings reports today and tomorrow expect volatility to remain high. Add in the heavy hitting economic reports on the horizon and the stage it set for very challenging market conditions.

Trade Wisely,

Doug

U.S. Equity Futures showed mixed trading as market participants shifted their attention from political developments to the ramp up earnings and beginning of big tech reports. Notably, tech giants Tesla Inc. and Alphabet Inc. are set to release their earnings reports later Tuesday, which could significantly influence market sentiment. Additionally, traders are keeping a close eye on economic indicators, with key data on nonmanufacturing activities and existing home sales expected to be released on Tuesday morning.

Europe’s Stoxx 600 Index experienced fluctuations as gains in technology and travel company shares were counterbalanced by declines in the chemicals and mining sectors. Investors are also anticipating Hungary’s latest interest rate decision, which could influence market dynamics. Additionally, upcoming data releases on Dutch and Irish consumer confidence.

China’s CSI 300 Index led declines in Asia amid mixed trading across the region. Market participants are also closely watching India, which is set to unveil its first budget under Prime Minister Narendra Modi’s third five-year term, a significant event that could shape economic policies and investor sentiment. Meanwhile, Singapore’s consumer price index for June rose by 2.4% year-on-year, surpassing Reuters’ expectations of a 2.7% increase, indicating a slightly slower pace of inflation than anticipated.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include AOS, ACI, AVY, BANC, KO, CBU, CSTM, DHR, FDP, FELE, FCX, GATX, GE, GM, GPC, HCA, HRI, IVZ, KMB, LMT, MCO, MSCI, NWBI, ONB, PCAR, PNR, PM, PII, PHM, DGX, SHW, SPOT, UPS, & WBS.  After the bell include APHM, BDN, CALM, CNI, AOF, CB, CSGP, EWBC, EGP, ENVA, ENPH, EQT, FCF, GOOGL, MTDR, MAT, NBR, PKG, PFSI, RRC, RRR, RNST, ROIC, STX, TSLA, TXN, TRMK, VBTX, VIXR, V, & WFG.

News & Technicals’

Wiz has decided to walk away from a $23 billion acquisition deal with Google, which would have marked the search giant’s largest-ever acquisition. Instead, Wiz informed its employees that it will proceed with its initial plan to pursue an IPO. A person familiar with the company’s decision-making process cited concerns over antitrust issues and investor apprehensions as key factors in abandoning the potential deal. This move highlights the growing scrutiny of large tech acquisitions, and the strategic considerations companies must weigh in such high-stakes decisions.

Six senators have urged the Justice Department and the Federal Communications Commission to challenge a deal that would permit T-Mobile to utilize part of U.S. Cellular wireless spectrum. In a new letter, the lawmakers expressed concerns that such a deal could lead to higher costs for consumers, as it might result in the combination of lower-priced carriers with higher-priced ones, potentially charging consumers billions more. Additionally, the senators have requested that the Justice Department consider unwinding the merger between T-Mobile and Sprint, highlighting ongoing apprehensions about market competition and consumer pricing.

Best Buy unveiled a comprehensive strategy on Tuesday aimed at reigniting sales growth. This plan includes dedicating staff to key areas within its stores, producing more engaging videos to spark customer interest, and launching a new marketing campaign. The consumer electronics retailer is looking to capitalize on the anticipated replacement cycle of pandemic-era purchases and a surge of new innovations. In an interview with CNBC, CEO Corie Barry emphasized the company’s focus on reintroducing fresh and exciting products to attract customers and drive sales.

Shares in automaker Porsche declined on Tuesday following the company’s announcement of a reduced outlook for 2024. Porsche attributed this adjustment to a shortage of special aluminum alloys affecting several of its suppliers. This shortage is expected to impact production, potentially leading to shutdowns for certain Porsche vehicle series. The company’s revised forecast has raised concerns among investors about the potential disruptions in its manufacturing processes.

Traders will temporarily set aside political uncertainty to focus earnings, specifically the big tech reports from GOOG and TSLA coming after the bell today. Plan on high drama with these massively anticipated reports and be prepared for wild price gyrations and big morning gaps to challenge even the most experienced trader.  Plan your risk carefully.

Trade Wisely,

Doug

Traders enter a new week with more election uncertainty as Biden is pushed out and Harris gets the nod with just four months to make her case.  Although markets hate uncertainty S&P 500 futures saw a modest increase of 0.5%, following a challenging week where the index experienced its steepest losses since April. The shift came as investors moved away from Mega-cap technology stocks, opting instead for smaller-cap names. Meanwhile, futures for the Dow Jones Industrial Average and Nasdaq-100 also showed gains, rising by 0.2% and 0.7%, respectively. This movement indicates a cautious optimism among investors, despite recent market volatility.

On Monday, European stocks experienced an upward trend, with the pan-European Stoxx 600 index rising by 1.06% as of 11:29 a.m. London time. This positive movement was broad-based, with most sectors showing gains. However, the travel and leisure sectors were an exception, declining by 1.73%, making it the only sector in negative territory. This divergence highlights the varying performance across different industries within the European market.

Asia-Pacific markets experienced a downturn, influenced by unexpected monetary policy changes from China’s central bank. The People’s Bank of China reduced the short-term 7-day reverse repurchase rate from 1.8% to 1.7%. Additionally, the one-year and five-year loan prime rates were both lowered by 10 basis points, now standing at 3.35% and 3.85%, respectively. These rate cuts, aimed at stimulating economic activity, reflect ongoing concerns about China’s economic growth, which in turn impacted market sentiment across the region.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include BOH, IQV, TFC, & VZ.  After the bell include AGYS, AGNC, ARE, BOKF, BRO, CADE, CDNS, CALX, CATY, CLF, CCK, ELS, HSTM, MEDP, NUE, NXPI, RLI, SSD, WRB, & ZION.

News & Technicals’

On Sunday, the Atlanta-based airline faced significant operational challenges, canceling over 600 mainline flights, which accounted for approximately 17% of its schedule. This disruption was more extensive than any other U.S. airline. While most other carriers have managed to recover from similar issues, Delta continues to experience persistent disruptions, highlighting ongoing challenges within its operations.

On Monday, Ryanair shares plummeted by 12.2% as of 8:57 a.m. London time, following the company’s announcement of a 46% drop in quarterly profit after tax for the three months ending in June. The budget airline also projected lower-than-expected fares in the upcoming months, contributing to the negative market reaction. This downturn in Ryanair’s shares had a ripple effect on other European airlines, with EasyJet losing over 6%, Jet2 falling by 4%, and Hungarian airline Wizz Air sliding by more than 6%. The widespread decline underscores the broader concerns within the airline industry.

Bank of Japan officials are facing a challenging decision regarding potential interest rate hikes at their upcoming policy meeting, due to observed weaknesses in consumer spending. According to sources familiar with the matter, some officials believe that raising rates could send an overly hawkish signal, which they are keen to avoid. This internal debate highlights the delicate balance the BOJ must strike between supporting economic growth and managing inflation expectations.

In a seven-day period we had an attempted presidential candidate assassination attempt and the sitting president bow out of the run highlighting the extreme election uncertainty we face this November.  Toss in the earnings season and we have the makings for very turbulent price action.  GOOG will kick of the big tech reports on Tuesday with a looking GDP Thursday followed by the CORE PCE numbers Friday.  Fasten your seatbelt it may prove to be a bumpy ride.

Trade Wisely,

Doug

DIA futures rose by 36 points, or approximately 0.1%, while S&P 500 and Nasdaq 100 futures also saw gains of 0.1% as the small cap rotation continues. This follows a strong performance on Monday, where the Dow advanced to record levels, and both the S&P 500 and Nasdaq posted gains. However, the rally has quickly become very extended with the T20 indicators suggesting the odds of a little rest or pullback have grown.

By 11:17 a.m. London time, the pan-European Stoxx 600 had declined by 0.39%, with all sectors and major bourses experiencing losses. Mining stocks were the hardest hit, dropping 1.89%, followed by the insurance sector, which fell by 1.12%.

Asia-Pacific markets exhibited mixed performance on Tuesday, influenced by a series of political and economic updates from the United States. Investors are also keenly observing China’s Third Plenum, where discussions are expected to focus on addressing high local government debt and promoting advanced manufacturing.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include BAC, MS, PNC, PGR, STT, & UNH.  After the bell include FULT, HWC, IBKR, JBHT, OMC, & PNFP.

News & Technicals’

President Biden expressed regret over his use of the phrase “put Trump in the bulls-eye,” which he mentioned to donors in a private call shortly before an attempted assassination of Donald Trump. Several Republican lawmakers have criticized Democratic campaign rhetoric, including Biden’s comment, for potentially inciting the incident. Biden clarified that he has never intended to incite political violence, emphasizing what he perceives as a stark contrast to Trump’s approach.

Apple has unveiled a preview version of its upcoming iPhone update, iOS 18. This beta version, available ahead of the official fall release, allows Apple enthusiasts and developers to explore and test the latest features. Notably, this year’s most significant new service, Apple Intelligence, is not included in the public beta. Apple has announced that users will have the opportunity to try out Apple Intelligence later this summer, adding to the anticipation surrounding the new update.

Federal Reserve Chair Jerome Powell highlighted that central bank policy operates with “long and variable lags,” explaining why the Fed would not wait for its inflation target to be fully achieved before taking action. Powell emphasized that the central bank seeks “greater confidence” that inflation will return to the 2% level. The Fed’s next policy meeting is scheduled for the end of July, where further decisions on monetary policy will be discussed.

As tech tensions between the U.S. and China escalate, vast networks of underwater cables have emerged as a new point of contention in international relations. These subsea cables, which carry 99% of the world’s data traffic, are crucial to the global internet infrastructure. The U.S. government has reportedly cautioned tech giants like Google and Meta about the potential vulnerability of undersea cables in the Pacific to Chinese espionage. This development underscores the growing complexities and security concerns in the digital age.

As we ramp up in earnings expect price volatility to continue to expand and the small cap rotation to continue.  Keep in mind we have a major distraction over the next two days due to Prime day shopping events across many retailers.  This at times create choppy market conditions so plan accordingly.

Trade Wisely,

Doug

Stock futures gap higher as the bulls continue to run after investors assessed the implications of the assassination attempt on former President Donald Trump and prepared for a significant week of corporate earnings reports. The Dow Jones Industrial Average futures increased by 204 points, or 0.51%, while S&P 500 futures rose by 0.43%, and Nasdaq 100 futures gained 0.5%. This uptick reflects cautious optimism in the market despite the political turmoil.

European declined to begin the week by 0.12%, with all major indexes and most sectors experiencing losses. Utilities were the hardest hit, dropping 0.91%, while basic resources followed closely with a 0.83% decrease. This broad-based downturn reflects widespread market challenges across Europe.

China’s economy experienced a growth rate of 4.7% in the second quarter, falling short of the 5.1% expansion forecast by Reuters and marking a decline from the 5.3% growth recorded in the first quarter. Meanwhile, Australia’s S&P/ASX 200 index achieved a historic milestone by surpassing the 8,000 mark for the first time, closing at 8,017.6 with a 0.73% increase.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include BLK, & GS.  After the bell include CFB, FBK, & SFBS.

News & Technicals’

Goldman Sachs is set to release its second-quarter earnings before the market opens on Monday. Analysts surveyed by LSEG anticipate earnings per share of $8.34 and revenue of $12.46 billion. Following the earnings release, company executives will hold a call with analysts at 9:30 a.m. ET to discuss the results and provide further insights into the financial performance and outlook.

Google is reportedly in advanced negotiations to acquire the cybersecurity firm Wiz for $23 billion, according to sources cited by The Wall Street Journal. If finalized, this acquisition would mark Google’s largest ever, underscoring its strategic push into the cybersecurity sector. The deal is expected to be completed soon, reflecting Google’s commitment to enhancing its security capabilities amid growing digital threats.

Burberry announced that if the current trading slowdown persists, it anticipates an operating loss for the first half of the year and a full-year operating profit below the current consensus. As a result, shares of the 168-year-old British luxury brand plummeted by 15.4% as of 9:54 a.m. London time. In response to these challenges, the company suspended its dividend and appointed Joshua Schulman, formerly of Michael Kors and Coach, as the new CEO, with Jonathan Akeroyd stepping down immediately.

Swatch Group reported a significant decline in first-half sales and earnings on Monday, attributing the downturn to weaker demand for luxury goods in China, including Hong Kong and Macau. Despite the overall slump, the Swatch brand managed to defy the trend, achieving a 10% increase in sales in China. This performance highlights the brand’s resilience amid challenging market conditions, even as the broader company faces headwinds in one of its key markets.

As we look ahead to a busy week as the earnings season ramps up the bulls continue to run pointing to a substantial gap up open.  Gapping to new record highs can create some big point whipsaws so plan your risk accordingly.  Expect volatility to increase over the next several weeks as the market reacts to all the earnings data coming our way.

Trade Wisely,

Doug

U.S. stock futures edged slightly lower early Thursday, with a cautious stance as traders as braced for the inflation report. The high anticipation centers around the June consumer price index and the ramifications it will have on future interest rate decisions. Economists polled by Dow Jones have set their expectations for a modest increase of 0.1% month-over-month. On an annual basis, the CPI is projected to rise by 3.1% compared to the same period last year.

European markets rallied Thursday morning, with indices across the region climbing as investors anticipate the forthcoming U.S. inflation data. The upbeat mood was bolstered by flash figures indicating that the U.K. economy expanded by 0.4% in May, a welcome recovery following a stagnant April and surpassing the modest 0.2% growth anticipated by analysts. This economic uptick was mirrored in the currency market, where the British pound appreciated by 0.21%, reaching its highest valuation against the U.S. dollar in the past four months.

The Japanese market saw significant gains, with the Nikkei 225 index climbing 0.94% to close at 42,224.02. This surge was largely attributed to a strong performance by technology stocks. Similarly, the broader Topix index also rallied, rising 0.69% to reach a new peak of 2,929.17. South Korea, the Kospi index increased by 0.75%, as the Bank of Korea maintained its interest rate at 3.5%. The tech-centric Kosdaq index modestly rose by 0.11%.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include DAL, & PEP.  After the bell we have no notable reports.

News & Technicals’

PepsiCo’s financial performance in the second quarter presented a mixed picture, as the company fell short of Wall Street’s revenue expectations. This shortfall was primarily due to a decrease in volume across its three North American business units. In light of these results, PepsiCo has adopted a more conservative stance regarding its sales forecast for the entire year, signaling a cautious approach amid uncertain market conditions. Despite the revenue setback, the company managed to surpass earnings estimates for the quarter, indicating that while sales volume may have declined, profitability metrics and cost management strategies could have yielded better-than-expected outcomes. This divergence between revenue and earnings highlights the complex challenges and operational efficiencies within PepsiCo’s business operations.

The U.S. Treasury Department and the Internal Revenue Service (IRS) have reported a significant milestone in tax collection efforts, having recovered over $1 billion in tax debt from high-income individuals in the past year. This achievement underscores the government’s intensified focus on ensuring tax compliance among the wealthy. In a strategic move to bolster these efforts, the IRS announced in September its intention to heighten scrutiny on individuals earning in excess of $1 million per year who have substantial tax debts exceeding $250,000. This initiative represents a concerted push to enhance the integrity of the tax system and address the tax gap by targeting those with the highest earning brackets and significant outstanding tax obligations. The announcement serves as a reminder of the IRS’s commitment to fair tax enforcement and the importance of compliance with tax laws.

In a landmark decision, EU antitrust regulators have endorsed a set of commitments from Apple, marking a significant shift in the tech giant’s approach to its contactless payment technology. This development paves the way for competitors to access Apple’s tap and go payment system, potentially altering the landscape of digital payments in Europe. EU antitrust chief Margrethe Vestager highlighted the move as a pivotal change that promises to enhance competition and consumer choice. This announcement follows the European Commission’s initiation of an antitrust probe concerning Apple Pay back in 2020, reflecting the EU’s ongoing efforts to ensure fair competition in the digital market. The acceptance of these commitments by Apple indicates a willingness to comply with regulatory standards and could set a precedent for other tech companies operating within the EU.

The highly anticipated inflation report and the jobless claims with likely set the tenor for today’s trading. Will the reaction follow-though with the bullish surge the ended the Wednesday session or, will the bears find reason to whipsaw the indexes back down?  Buckle up we will soon find out so plan your risk carefully.

Trade Wisely,

Doug

U.S. stock futures took a downward turn on Tuesday morning in yesterday’s volatile price action where the bulls were once again unable to hold early gains. Federal Reserve Chair Jerome Powell is scheduled to address a policy panel at the European Central Bank Forum at 9:30 a.m. ET. Additionally, the release of the May job openings and labor turnover report will provide further clarity on the state of the U.S. labor market. Investors are also looking ahead to Friday, when the June jobs report.

The European markets trade red this morning, with the Stoxx 600 index declining by 0.57% as of 11 a.m. in London. Inflation data from the euro area provided a mixed picture; while headline inflation experienced a decrease to 2.5% in June, as reported by the European Union’s statistics agency, core and services inflation figures remained elevated at 2.9% and 4.1% respectively.

Asian markets, the Nikkei 225 surged past the 40,000 thresholds, a peak it hadn’t reached in the previous three months. Conversely, the Topix index narrowly missed setting a record for its all-time closing high. The Japanese yen experienced a significant dip, sliding down to 161.67 against the US dollar, marking its weakest position in nearly four decades. Meanwhile, in South Korea, the Kospi index closed 0.84% lower. Across the waters, Hong Kong’s Hang Seng index saw a modest rise of 0.33, and the Australian market witnessed a slight downturn, with the S&P/ASX 200 dropping by 0.42%.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include MSM, & RDUS.  After the bell include SLP.

News & Technicals’

The U.S. stock market has witnessed a significant shift in its composition over the past decade, with the 10 largest companies now representing more than a third of the S&P 500 stock index, compared to just 14% a decade ago. This change has been largely fueled by the meteoric rise of technology giants, often referred to as the “Magnificent Seven”: Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla. Their combined market capitalization has soared, driven by widespread tech enthusiasm and their increasing influence on consumers and businesses alike.

This concentration has sparked a debate among market observers. Some experts express concern that such a heavy weighting towards a handful of tech behemoths could expose investors to heightened risks, particularly if these companies face regulatory challenges, shifts in technology, or changes in consumer behavior. On the other hand, some analysts argue that this concentration is not worrisome, pointing to the companies’ robust earnings, solid growth prospects, and the fact that they are at the forefront of innovation and market trends.

The divergence in opinion highlights the complexity of market dynamics and the challenges in predicting the impact of market concentration. While the dominance of these tech giants is clear, the long-term implications for the market and investors continue to be a subject of intense scrutiny and debate. Whether this concentration is a harbinger of risk, or a non-issue will likely depend on future market conditions, regulatory environments, and the companies’ continued ability to innovate and adapt.

The political landscape in the UK has been dominated by a singular narrative since Conservative Prime Minister Rishi Sunak announced a general election in May — the forecast of a sweeping victory for the Labour Party. Voter polls have consistently shown a significant advantage for the Labour Party, suggesting a lead of approximately 20 points over the Conservative Party. Despite this, the Labour Party has maintained a cautious stance, refraining from commenting on these projections. Their reluctance is rooted in the understanding that polls can be volatile, with results that can “vary and fluctuate.” This measured approach reflects a broader awareness of the unpredictability inherent in political campaigns and the potential for last-minute shifts in public opinion. As the election draws nearer, all eyes will be on whether the Labour Party can convert their lead in the polls into actual votes and possibly reshape the UK’s governing body.

Iran’s political arena is set for a pivotal moment with a runoff election scheduled for Friday, July 5. This election features a stark contrast between a right wing hardliner and a reformist candidate, reflecting the nation’s deep divisions amidst severe economic, social, and geopolitical pressures. The initial round of voting saw a historically low turnout, with only about 40% of eligible voters casting their ballots. Despite the low participation, the results were telling reformist Masoud Pezeshkian emerged as the frontrunner, securing 10.4 million votes out of the 24.5 million total votes. Close on his heels was the hardline candidate, Saeed Jalili, a former nuclear negotiator, who garnered 9.4 million votes. The outcome of this runoff has the potential to significantly influence Iran’s future direction, as the two candidates offer vastly different visions for addressing the nation’s challenges.

In another day of volatile price action, the bulls were unable to hold early gains.  Although the DIA, SPY and QQQ remain in bullish patterns there are hints the bears could be waking up from a very long slumber.  However, the low volume of a holiday week adds to a lot of uncertainty on the path forward.  Plan your risk carefully and have a plan to protect yourself if the bears do suddenly decide to attack.

Trade Wisely,

Doug

As the second half of 2024 commences, investors are gearing up for a holiday shortened week. The week could be eventful, with the anticipation building towards Friday’s release of the June jobs report, which is expected to provide significant insights into the current state of the labor market. Preceding this, the S&P PMI manufacturing and ISM manufacturing data for June will be disclosed on Monday. Additionally, May’s construction spending figures are also slated for release, potentially impacting market movements.

Europe’s Stoxx 600 index experienced a modest recovery, climbing 0.45% by mid-morning and breaking a streak of four consecutive losses. This uptick was largely fueled by a surge in France’s CAC 40 index, which saw an initial spike of over 2.5%, later stabilizing to a 1.3% increase.

China’s (PMI) for manufacturing held steady at 49.5 over the weekend, mirroring the figure from May and signaling a continuation in the sector’s contraction for the second consecutive month. Meanwhile, Japan’s economic outlook has been adjusted to reflect a deeper downturn than initially reported. The country’s Gross Domestic Product (GDP) for the first quarter was revised downward, showing a contraction of 2.9% year-on-year.

Economic Calendar

Earnings Calendar

There are no notable reports on this Monday.

News & Technicals’

Google is set to make a significant leap in renewable energy investment by partnering with BlackRock to develop a 1 gigawatt solar capacity pipeline in Taiwan. This initiative, announced on Monday, is part of Google’s broader strategy to enhance energy capacity and reduce carbon emissions, particularly in light of the growing demands of the artificial intelligence industry. The collaboration involves a capital investment in Taiwanese solar developer New Green Power, pending regulatory approval, which aims to expedite the construction of a substantial solar infrastructure. A segment of this new solar capacity is designated to supply power to Google’s data centers and cloud region within Taiwan, aligning with the company’s commitment to sustainable operations and its goal of achieving net-zero emissions by 2030. This move not only underscores Google’s dedication to environmental stewardship but also reflects the tech giant’s recognition of the critical role that green energy plays in supporting the technological advancements of the future.

In a strategic move to consolidate its manufacturing process and address ongoing safety concerns, Boeing has announced its intention to acquire fuselage manufacturer Spirit AeroSystems. This decision follows a significant leadership overhaul at Boeing, which was prompted by a serious incident where a door panel detached midflight from a nearly new Boeing 737 Max 9 jet. The acquisition, valued at approximately $4.7 billion, is seen as a step towards improving the quality and safety of Boeing’s aircraft, as both companies have faced challenges in eliminating manufacturing defects on the 737 Max, Boeing’s best-selling aircraft.

Meta, the parent company of Facebook, has come under scrutiny from European Union regulators. On Monday, it was accused of not adhering to the EU’s stringent antitrust regulations concerning its new ad-supported social networking service. This accusation marks a significant challenge for Meta, as it navigates the complex regulatory environment of the EU. The bloc’s antitrust rules are designed to ensure fair competition and prevent any single company from dominating the market to the detriment of consumers and competitors. Meta’s alleged non-compliance could have serious implications, including the possibility of hefty fines and mandatory changes to its business practices. The situation underscores the increasing tension between large tech companies and regulatory bodies, as governments seek to rein in the influence of these digital giants.

As the premarket bulls try to shake off Friday’s whipsaw to kick-off this holiday shortened week, we should expect volume to decline with the early close on Wednesday.  However, expect bursts of price volatility with a Powell speech, FOMC minutes and of course the Friday employment situation report.

Trade Wisely,

Doug

Thursday’s trading session began on a subdued note as stock futures as the market’s reacted earnings reports and market-moving data anticipation. Today investors face a busy morning of earnings and economic reports. Traders are poised to assess the latest data on weekly jobless claims, durable goods orders, pending home sales figures and the latest reading on GDP.

European markets exhibited a cautious stance on Thursday. The pan-European Stoxx 600 index saw a modest decline, edging down by 0.2% as of 11:15 a.m. London time. Media stocks managed to buck the trend, gaining 0.44%, which could suggest a shift in investor focus towards more defensive sectors. On the other hand, the retail sector faced a significant pullback, dropping 1.78%, possibly due to the impact of inflationary pressures on consumer spending and sentiment.

In a significant shift in the currency market, the Japanese yen experienced a substantial depreciation, reaching a nearly 38-year low. Late Wednesday, it plummeted to 160.82 against the U.S. dollar, marking a notable milestone as reported by FactSet. Despite the yen’s weakening, Japan’s domestic economic indicators painted a more robust picture. Retail sales in May outperformed expectations, registering a 3% year-on-year growth, surpassing the anticipated 2% forecasted by a Reuters poll of economists. Meanwhile, China’s economic landscape also showed signs of strength, with industrial profits witnessing a 3.4% increase from January to May.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include AYI, APOG, LNN, MCK, SMPL, & WBA.  After the bell include NKE, & ACCD.

News & Technicals’

Micron Technology, a leading chipmaker, experienced a surprising 7% drop in its share value on Wednesday, despite reporting quarterly results that surpassed expectations. This decline occurred even though the company’s revenue guidance met analysts’ estimates, suggesting that other factors may be influencing investor behavior. Over the past year, Micron’s stock has seen a remarkable surge, more than doubling in value, largely attributed to the burgeoning demand for chips in the artificial intelligence sector. This sector’s rapid growth has been a significant driver for the semiconductor industry, with Micron being one of the beneficiaries of this trend. However, the recent dip in share price indicates that even companies at the forefront of technological advancements are not immune to market volatility.

Levi Strauss, the iconic denim brand, encountered a slight setback as it narrowly missed Wall Street’s sales expectations, despite denim’s growing popularity. The company’s Chief Financial Officer expressed concerns, noting that consumers are exercising caution with their spending, particularly regarding discretionary items. This cautious consumer behavior could reflect broader economic trends or a shift in spending priorities. In response to the evolving retail landscape, Levi Strauss has been strategically reducing its dependence on department stores. The brand is expanding its direct-to-consumer channels, including enhancing its own website and brick-and-mortar stores. While this move aims to establish a more direct relationship with customers, it also presents its own set of challenges, such as increased competition in the digital space and the need for strong online user experience.

Wall Street is poised with anticipation for the release of May’s personal consumption expenditures (PCE) price index on Friday, a key indicator of inflation. Investors are hopeful that the report will reveal a softening of inflationary pressures, which could reinforce the possibility of the Federal Reserve reducing interest rates later in the year. Amidst this backdrop, there is an ongoing debate among investors regarding the sustainability of the artificial intelligence (AI) sector’s influence on market performance. As the year progresses, questions arise about whether the AI-driven market rally can maintain its momentum or if a broader range of sectors will need to contribute to market growth. According to strategists surveyed by CNBC Pro, there is a tempered expectation that the S&P 500 will conclude the year with a marginal increase, potentially less than 1% above the current levels. This forecast reflects a cautious outlook on the market’s trajectory in the face of various economic uncertainties.

As we wait with massive data anticipation, remember it doesn’t really matter what the data is, it’s the market reaction that matters.  Unfortunately, being unable to see the future we must be prepared for the possibility of big point gaps and whipsaws as the market tries to price in the new information.  Keep in mind we’re facing the Core PCE number Friday morning so plan for the price volatility and uncertainty to continue.

Trade Wisely,

Doug