Stock market today: Dow closes above 40,000, paces weekly gains as stocks rebound from tech sell-off
07/13/2024 03:16
Another week of gains followed volatile trading on Wall Street as inflation data cemented September rate hikes and big Wall Street banks kicked off second quarter earnings season.
US stocks finished the week in rally mode, with all three major indexes logging gains on Friday and the Dow closing above 40,000 for the second time ever, though the Blue Chip index settled just over 2 points away from a record high.
A gain of 0.5% for the S&P 500 (^GSPC), 0.6% for the Nasdaq Composite (^IXIC), and 0.6% for the Dow Jones Industrial Average (^DJI) on Friday was enough to see each finish higher for the week, with the Dow's 1.6% weekly gain pacing the field.
Thursday's sharp sell-off among many of this year's tech leaders kept the Nasdaq's weekly advance to a more modest 0.2%, while the S&P 500 split the difference, rising 0.9% for the week.
Friday's move higher followed results from Wall Street banks, which got earnings season going in earnest before the bell.
JPMorgan Chase's (JPM) profit surged 25% in the second quarter, buoyed by rising investment banking fees and an $8 billion one-time gain linked to Visa, but shares slipped.
Wells Fargo (WFC) stock sank nearly 6% after it posted a drop in profit as it missed estimates for interest income. And Citi (C) stock lost more than 1% after the firm reported a 10% rise in profit, but maintained its 2024 outlook for modestly lower net interest income.
Read more: Inflation fever breaking? Price hikes on everyday expenses finally ease up.
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Stocks rise again, Dow comes up just short
An eventful week for investors came to a close Friday with all three major indexes logging weekly gains and the Dow finishing just over two points away from a record close.
Still, the Blue Chip index settled north of 40,000 for the second time ever and goes into next week's trading needing just the slightest of bumps to clinch a record high, which it hasn't done since May.
In the week ahead, four Dow members will report quarterly results.
Thursday's tech sell-off ultimately kept the S&P 500 and Nasdaq from record highs to finish the week, but weekly gains in 11 of the 12 weeks for the Nasdaq — as well as a record close for each on Wednesday — will keep investor spirits high as the heart of second quarter earnings season approaches.
Tesla stock downgraded as 'unidentifiable premium' remains unidentified
Tesla stock was downgraded by analysts at UBS on Friday on a pure valuation call.
"TSLA has always traded with a premium attached to it for other, future growth initiatives," UBS analyst Joseph Spak wrote in a note. "However, at current levels, we believe that unidentifiable premium is too significant."
As Yahoo Finance's Ethan Wolff-Mann noted elsewhere, the stock trades at a huge premium to its auto peers and its forward P/E is also double that of Nvidia's, a company that — though it has seen its stock run — is growing at a much faster rate right now.
And while all company valuations involve an analysis of what investors can touch and feel today combined with what possibilities tomorrow might bring, the unexplained part of Tesla's valuation now appears to comprise the bulk of what investors are betting on.
"Given the lack of visibility and the risk that these growth opportunities materialize on a longer time horizon (or don’t materialize at all), we rate the stock Sell," Spak wrote.
Of course, Tesla finding support among the investor community when the math has trouble mathing for many analysts is nothing new.
But after a 40% slump to start the year and a surge back to breakeven for 2024 in recent weeks, the pencils are out again on Wall Street with folks trying to make sense of just what they're paying for the biggest piece of the extended Muskiverse right now.
Tesla trades at a significant premium not only to its peers in the auto industry, but the other six stocks in the "Magnificent Seven." The GLP-1 trade is much bigger than the GLP-1 trade
Ozempic-maker Novo Nordisk (NVO) saw shares rise about 2% on Friday after news that a study linked the drug to lower dementia rates.
Novo and Eli Lilly (LLY) have been the primary beneficiaries of the GLP-1 trade to date.
And the GLP-1 trade is pretty straightforward: Does your company make a drug that is or could be marketed as a weight loss treatment?
Initially formulated to treat diabetes, GLP-1s are now synonymous with weight-loss drugs. And while the medical details are more nuanced than that statement, the exploration of how else these drugs might offer benefits to patients suffering from a variety of ailments continues.
We've already seen some companies that make sleep apnea devices under pressure as lower obesity rates may lower rates of this ailment. And last fall, several food-related names came under pressure after a Walmart exec suggested they were seeing a change in behavior from customers taking GLP-1s.
This week, Yahoo Finance asked Pepsi's CEO if they were seeing any impact from GLP-1s in their results.
The answer was no... at this point.
But the reason I continue to harp on this trade as one of the most interesting secular trends in consumer behavior is that for multiple generations now American consumer habits have gone one direction: more. And should these drugs gain the mass adoption some investors believe is possible, one of the foundational tenets of US consumer behavior could be reversed.
A look at the week ahead
The big Wall Street banks kicked off earnings season and next week will continue the rush of quarterly reports.
On the financial service front, Goldman Sachs (GS), Bank of America (BAC), and Charles Schwab (SCHW) are set to report early in the week. Other big names like Netflix, Dominos, and Alaska Air are on deck to disclose earnings in the coming days.
Investors will get fresh insight from Federal Reserve Chair Jerome Powell, who is scheduled to speak on Monday. The Fed Beige Book is also set to be published soon after.
Other economic indicators, including retail sales and industrial production, will offer new snapshots for Wall Street to parse.
Yahoo Finance's Brent Sanchez has a graphical breakdown of what to watch next week:
Markets are saying what Powell can't
Fed Chair Jerome Powell has for months — feels like years, frankly — reiterated the need for “more data.”
On Capitol Hill this week, he nodded to the risks of waiting too long to ease rates, with an eye out for a cooling labor market. Wall Street took his remarks as another optimistic sign that cuts are on the way. And now with Thursday’s encouraging inflation data, which arrived with the unambiguous glee of a birthday party blower, has the Fed finally gotten what it needs to make a move?
Markets are saying what Powell can’t: Yes.
Last week brought the latest evidence that the Fed should turn to mind its full employment mandate. The June jobs report showed the unemployment rate ticked up for the second month in a row to 4.1%, the highest level since November 2021. The figure is not historically high, but in the pandemic-era tightening cycle, it’s getting up there.
As jobs data downsides are piling up, a streak of favorable inflation data is shaping into a trend. Things finally seem like they are falling into place.
“A September rate cut should be a done deal at this point,” said Lazard chief market strategist Ron Temple. "Given the increasing evidence of slowing economic growth, it’s time for the Fed to refocus on the dual mandate and ease monetary policy.”
Powell’s critics have hammered his leadership for being too reliant on backward-looking data. But when the good news is resoundingly good and the bad news starts to turn ugly, that may be when enough is enough.
Stocks trending in afternoon trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during afternoon trading on Friday.
Snowflake (SNOW): Shares of the cloud provider fell 2% Friday after telecom giant AT&T (T) said a hacker infiltrated and downloaded "nearly" all customer call and text records during a sixth-month period in 2022, and indicated Snowflake was the provider the hacker targeted.
Carvana (CVNA): The online used car retailer rose 7% after BTIG initiated coverage of the stock with a Buy rating and a $155 price target. The firm cited potential further upside ahead for the used car-buying platform.
JPMorgan Chase's (JPM): Profits for the financial services company surged 25% in the second quarter, buoyed by rising investment banking fees and an $8 billion one-time gain linked to Visa, but shares slid 2% as a host of big Wall Street banks kicked off summer earnings. Wells Fargo (WFC) stock sank 7% after it posted a drop in profit as it missed estimates for interest income. And Citi (C) lost 2% after reporting a 10% rise in profit but maintained a 2024 outlook with modestly lower net interest income.
Tesla (TSLA): Shares of the EV leader bounced back after snapping its 11-day winning streak following reports of the company pushing back its robotaxi unveiling date from August to October. But shares still have not recovered to earlier levels. Adding to the negative pressure, UBS downgraded Tesla stock to Sell from eutral, pointing to limited automotive growth and uncertainty over the market's AI enthusiasm.
Stocks rebound in afternoon trading
US stocks gained ground Friday afternoon as investors digested earnings reports from big Wall Street banks and seemed to shake off a Producer Price Index reading that came in hotter than expected.
The S&P 500 (^GSPC) gained about 0.8%, just off the benchmark's recent record high. The Dow Jones Industrial Average (^DJI) and the tech-heavy Nasdaq Composite (^IXIC) also added on 0.8%.
AT&T says hacker stole data on nearly all of its wireless customers
A hacker downloaded call and text message data from nearly all AT&T (T) wireless customers, the company disclosed Friday.
The stolen material doesn't include the content of the messages and calls themselves, or sensitive information like birthdays or Social Security numbers, the company said. But the records do include phone numbers and the duration of calls.
AT&T first learned of the theft in April. The company said it does not believe that the phone records have been made publicly available, and that at least one person has been apprehended.
The material downloaded by the hacker includes interactions that occurred between May 1 and Oct. 31, 2022, as well as on Jan 2, 2023.
AT&T shares fell by about 1% Friday morning. Snowflake (SNOW) is also moving lower as AT&T indicated the third-party cloud provider was the source targeted by the hacker.
Whatever Jay Powell does in September will be viewed as political
Fed Chair Powell insists that the central bank will make interest rate decisions without political considerations. But that hasn't stopped Capitol Hill from viewing his decisions through a partisan lens.
Lawmakers from both parties made something abundantly clear this week to Jerome Powell: The Fed is likely to be criticized no matter what it decides to do at its last meeting before the November election, reports Yahoo Finance's Ben Werschkul and Jennifer Schonberger
The central bank chair indicated he is inching closer to interest rate cuts, and market watchers are now betting that will happen in mid-September following another favorable inflation reading Thursday from the Consumer Price Index. The Fed's Sept. 17-18 meeting is less than seven weeks before Election Day.
What parties signaled this week is that they would criticize the central bank if this key September decision doesn't go their way.
If Powell and his colleagues choose to keep rates at a 23-year high, a growing chorus of Democratic critics calling for cuts may reach a crescendo. But if policymakers do indeed cut, Republicans from Donald Trump on down will be sure to cast the move as caving to election-year pressure.
Stocks trending in morning trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during morning trading on Friday.
JPMorgan Chase (JPM): Profits for the financial services company surged 25% in the second quarter, buoyed by rising investment banking fees and an $8 billion one-time gain linked to Visa, but shares slid 2% as a host of big Wall Street banks kicked off summer earnings. Wells Fargo (WFC) stock sank 7% after it posted a drop in profit as it missed estimates for interest income. And Citi (C) lost 2% after reporting a 10% rise in profit but maintained a 2024 outlook with modestly lower net interest income.
Meta (META): Wall Street punished Facebook's parent company coming off the Magnificent Seven's worst day in over a year. Shares fell more than 2% Friday morning as many premier tech stocks rebounded from the prior session's pullback.
Tesla (TSLA): Shares of the EV leader bounced back after snapping its 11-day winning streak following reports of the company pushing back its robotaxi unveiling date from August to October. But shares still have not recovered to earlier levels. Adding to the negative pressure, UBS downgraded Tesla stock to Sell from Neutral, pointing to limited automotive growth and uncertainty over the market's AI enthusiasm.
AT&T (T): Shares of the telecommunications giant dropped 1% Friday morning after the company suffered a major breach of communications data. The massive hack, disclosed on Friday, included records of calls and texts for almost all of its mobile users for a six-month period in 2022.
Stocks open higher after bank earnings kick off
US stocks gained slightly Friday morning as investors digested earnings reports from big Wall Street banks and assessed wholesale inflation data that showed a higher-than-expected rise in price pressures.
The S&P 500 (^GSPC) gained about 0.3%, just off the benchmark's recent record high. The Dow Jones Industrial Average (^DJI) and the tech-heavy Nasdaq Composite (^IXIC) also added on 0.3%.
Off the phone with: JPMorgan CFO Jeremy Barnum
Just hopped off the earnings media call with JPMorgan (JPM) CFO Jeremy Barnum (hat tip to Yahoo Finance banking reporter David Hollerith for getting his question taken before mine).
Here was our exchange:
Me: We got some cautious results from various consumer companies this week, such as PepsiCo (PEP), with them calling out some consumer caution. Is there anything you're seeing in your debit or credit data that would suggest consumers are pulling back, whether because of inflation or election concerns?
Barnum: Short answer is no. So we've made a couple of these points over time, but I'll just reiterate them here. So our broad take is that the consumer spending in real terms is sort of flattish. So I'm seeing booming spending growth, but we're also not seeing, you know, any meaningful weakness there. Like with this data, you can always take a magnifying glass to it and try to go deep, and one of the things that we've seen a little bit in the spending patterns in the lower income segments, you are starting to see a little bit of evidence, some rotation of spending out of discretionary and nondiscretionary, which is traditionally, for obvious reasons, ... understood to be a little bit of a sign of weakness.
But in a world where the unemployment rate is 4.1% and GDP growth is slowing a little bit, the data that we're seeing on the consumer side is entirely consistent with that economic environment. And the big picture backdrop, whether it's spending or charge-offs or delinquency rates, cash buffers, etc., is still consistent with quite a healthy consumer. You know, it's not a concern at this point.
Of note: JPMorgan CEO Jamie Dimon was interestingly not on the call per the usual. We were told it was due to a travel conflict, as he was flying back from an event in Germany. There is nothing more to read into it, Barnum said in response to a reporter's question on Dimon's absence.
Off the phone with: BNY's CEO Robin Vince
TGIF!
I just caught up with BNY Mellon's (BK) CEO Robin Vince by phone following the company's earnings release (decent quarter). I thought my exchange with him below would be of interest. Note Vince was the former chief risk officer at Goldman Sachs (GS).
Me: How are you thinking about risk in the equity trading part of your business ahead of the election?
Vince: I think what we've seen over the history of time is that, actually, the equity market is somewhat indifferent to which party ends up controlling the White House. What it cares a little bit more about is what the mix is of control of the two houses of Congress and the White House. And so if you look on the basis of what's going on in control of the White House, the equity market history would tell us that the equity market doesn't necessarily care that much.
