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Headlines
1.Market Decline: The stock market experienced significant drops, influenced by disappointing economic data and shifting expectations for Federal Reserve actions.
2.Sector Trends: Sectors showed varied performance, with utilities and real estate gaining while consumer discretionary and technology struggled.
3.Upcoming Reports: Key indicators include the July ISM Services PMI and upcoming earnings reports from major companies, including Wynn Resorts, Disney, and Eli Lilly.
Stocks faced a challenging week, culminating in a sharp decline on Friday after weaker-than-anticipated July jobs data.
- Market Performance Overview: The Nasdaq experienced a notable decline of 3.35% over the week, followed by the Dow Jones Industrial’s drop of 2.1%, and the S&P 500's 2.06% decrease. This downturn marked a significant change in market sentiment.
- Economic Indicators Impact: The market’s previous pattern of reacting positively to poor economic news—due to expectations of a Federal Reserve rate cut—shifted. Recent data, including a decline in U.S. manufacturing activity and a rise in initial jobless claims, caused a negative reaction. The July payroll report, showing increased unemployment and lower wage inflation, intensified these concerns.
- Future Rate Cut Speculations: The market had anticipated a series of rate cuts this year, starting in September. However, following Friday's data, there's growing speculation that the September rate cut might be adjusted to a half-percentage point rather than the initially expected quarter-percentage point reduction.
Jim Cramer suggested the Federal Reserve should have acted earlier, although he reassured that the market's reaction, particularly the retreat from tech stocks, might have been excessive. In response to the market drop, we took the opportunity to acquire shares of prominent companies. On Friday morning, we added Broadcom(NASDAQ:AVGO) to our holdings and were considering Advanced Micro Devices if not for restrictions. We also purchased Palo Alto and highlighted six additional stocks for attention in the upcoming week.
Sector Performance Insights: Within the S&P 500, utilities, real estate, and communication services sectors saw gains, whereas consumer discretionary, technology, and energy sectors faced declines. With a light economic calendar ahead, market movements are likely to be driven by earnings reports and executive commentaries.
Upcoming Focus Areas:
- Service Sector Report: The July ISM Services PMI, derived from surveys of over 400 services firms, will be released at the start of the week. Economists predict a slight expansion with a reading of 51.5, following June’s contraction. The qualitative feedback in the report will provide additional insights into sector performance.
- Earnings Reports: Approximately 75% of S&P 500 companies have reported earnings so far, with 78% surpassing earnings expectations and 59% achieving better-than-expected revenue results. In our portfolio, over 60% of companies have released their results, including 14 firms in the past week. We anticipate reports from three more companies next week.
- Company Highlights:
- Wynn Resorts: Analysts expect revenue declines in Boston but growth in Las Vegas and Macau. Monitoring occupancy rates will be crucial given recent weaknesses in China and potential slowdowns in the U.S.
- Disney: Management previously indicated losses in the direct-to-consumer segment due to Disney+ Hotstar but projected a return to profitability by September. We will assess current demand for Disney’s parks and cruise experiences amid broader market concerns.
- Eli Lilly: Key areas of focus will be sales and performance of diabetes and weight-loss drugs Mounjaro and Zepbound. Additionally, updates on Kisnula (donanemab) will be important following FDA approval for early Alzheimer’s symptoms.
