Stock market today: Stocks secure best week of the year, reversing early August sell-off
08/17/2024 03:14
Stocks traded on both sides of the flat line on Friday after a strong week of gains had US stocks on pace for their best week of the year.
Stocks ended the day in the green on Friday after a rally on Thursday saw the benchmark S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) erase losses suffered during this month's sell-off.
These gains helped secure the best week of the year for all of the major indexes and the best week for stocks since November.
After rallying more than 2% on Thursday, the Nasdaq closed up about 0.2% on Friday. The S&P 500 and Dow Jones Industrial Average (^DJI) also each secured gains of about 0.2%.
A quiet calendar greeted investors on Friday, with the main data release showing consumer sentiment ticked higher in August, rebounding for the first time in five months.
Thursday's gains were catalyzed by two key readings on the US consumer — monthly retail sales and Walmart's (WMT) latest earnings report — which showed any recessionary fears triggered by the sharp drop in stocks at the beginning of the month are likely misplaced.
"We've seen consistency with the consumer," Walmart's CFO told Yahoo Finance. "If you look at each month of the second quarter, they were all fairly consistent. There was no step-down in July, as some had expected. And that's generally our outlook for the year."
Following the positive data, investors have also now pared back some of their more dramatic bets on rate cuts from the Federal Reserve this year.
Data from the CME Group now shows investors placing 66% odds on the Fed cutting rates by 0.25% next month; odds of a 0.50% rate cut now stand at 33%. During the market's most turbulent moments last week, there was almost a near-certainty that a 0.50% cut would be warranted.
The next key update from investors on the rates front will come next Friday when Fed Chair Jay Powell is set to speak before the annual Jackson Hole Symposium.
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Stocks ended the day in the green on Friday after a rally on Thursday saw the benchmark S&P 500 (^GSPC) and tech-heavy Nasdaq Composite (^IXIC) erase losses suffered during this month's sell-off.
These gains helped secure the best week of the year for all of the major indexes and the best week for stocks since November.
After rallying more than 2% on Thursday, the Nasdaq closed up about 0.2% on Friday. The S&P 500 and Dow Jones Industrial Average (^DJI) also each secured gains of about 0.2%.
Fubo stock surges 22% after streaming sports service Venu blocked
Fubo (FUBO) stock surged as much as 22% on Friday after a judge issued an injunction blocking the launch of Venu, the sports streaming venture between Disney, Warner Bros., and Fox that was set to debut later this month.
Earlier this month, the companies announced Venu would cost consumers $42.99/month.
Fubo had sued to block the platform back in February, arguing the venture would lead to "the extreme suppression of competition in the US sports-focused streaming market."
Friday's ruling potentially keeps Venu from launching this year, particularly notable given the accelerated launch of the service would've made it available in time for football season, with ESPN and Fox both having NFL rights and the rights to the SEC and Big Ten, the two biggest college football conferences, respectively.
Gold prices jump above $2,500 for first time
Gold (GC=F) prices surged above $2,500 an ounce for the first time on Friday.
Andrew Critchlow, global head of news at S&P Global Commodity Insights, told Yahoo Finance that there are three pillars influencing gold prices: high inflation, India's market, and geopolitical risks.
Despite inflation easing in the US,
"Gold is the ultimate hedge against those inflationary risks," Critchlow said. "We're now starting to see [inflation] abate in the US, but we've still got pockets of inflation and cost of living issues around the world. Gold is going to continue to be a hedge to that."
In regards to India, Critchlow cited the country as "a massive consumer of gold globally." He added that India's rapid economic growth will continue to drive "the fundamentals of demand for gold prices" moving forward.
Finally, "gold is a hedge" against geopolitical risks, according to Critchlow. That includes risks surrounding elections, trade issues, and global policy changes, as investors often flock to the commodity amid heightened political uncertainty.
Jackson Hole, FOMC minutes: What to watch next week
Next week is quiet in terms of economic data, but it will still be a busy week.
Traders will digest not only Kamala Harris' economic agenda (her speech is coming up at 2:45p ET) but also Fed Chair Jerome Powell's speech at Jackson Hole, along with minutes from the July Federal Open Market Committee (FOMC) meeting. There will also be a preliminary estimate of annual benchmark revisions to employment.
"We don't anticipate any significant new developments from Powell's speech at Jackson Hole for a couple of reasons," Oxford Economics chief US economist Ryan Sweet wrote in a note to clients. "First, the Fed is data dependent and the August employment report, released after his speech, could factor heavily into whether the Fed cuts by 25bps or 50bps at its September meeting."
"Second, Powell has mentioned that the policymakers haven't discussed a 50bp rate cut, therefore he would avoid putting this on the table in his comments at Jackson Hole, as that would be front-running the rest of the FOMC. Jackson Hole speeches by Fed chairs have generally been big picture, rather than tipping the Fed's hand with regards to near-term changes to its monetary policy. Those expecting Powell to signal what the Fed will likely do in September will be disappointed," Sweet said.
The economist added FOMC minutes will take a back seat to Powell's Jackson Hole speech but that the minutes could "signal some support for a dovish 25bp rate cut in September – starting with a modest decline in the fed funds rate but with a bias to being more aggressive at subsequent meetings, if needed."
Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve Board Building Tuesday, Wednesday, July 31, 2024, in Washington. (AP Photo/Jose Luis Magana) (ASSOCIATED PRESS) Can Nvidia earnings turn around the struggling AI trade?
Despite a recent rebound in technology stocks, mega-cap names like Alphabet (GOOG, GOOGL), Amazon (AMZN), and Microsoft (MSFT) have all seen shares fall over the last month as investors question the staying power of artificial intelligence.
Shares of Google parent Alphabet have dropped 14% while Amazon shares are off about 8%. Microsoft stock has fallen more than 7% as of Thursday's close. But Nvidia earnings, due later this month, could be the next big catalyst for Big Tech and the AI trade overall.
Yahoo Finance's Dan Howley reports:
The chip company’s performance could turn around the AI trade more than any hyperscaler. Unlike those software firms, revenue hasn’t been a problem for Nvidia. Still, if it falls short of Wall Street’s already sky-high expectations, it could bring the AI trend down with it.
Alphabet, Amazon, and Microsoft’s AI spending might be giving investors pause, but it’s helping pad Nvidia’s bottom line. The company’s Hopper AI chips are the most sought-after on the market, and the firm is set to begin ramping up production of its Blackwell line later this year.
The company controls 80% to 95% of the market for high-powered AI chips, according to Reuters. That means every time a company says it's spending on AI capabilities, chances are it’s buying up, or at least using, Nvidia’s processors.
But Nvidia’s second quarter report also marks the start of what will be several quarters of difficult year-over-year revenue growth comparisons. The company’s fiscal Q2 2024 revenue came in at $13.5 billion, up 101% year over year. Data center revenue topped $10.3 billion, up 141%.
Each subsequent quarter has seen ever more impressive year-over-year gains for the chip giant. But that party won’t last forever. In its most recent quarter, Nvidia reported revenue of $26 billion, a 262% increase from the $7.19 billion the company reported in the prior year.
For its upcoming second quarter report, Wall Street analysts are anticipating revenue of $28.6 billion, a 112% year-over-year jump. And while that still represents an enormous increase in revenue, it’s not as staggering as the growth the company has seen in its previous quarters. And that could turn off some investors.
That’s not to say Nvidia isn’t expected to continue raking in cash, or that Wall Street is down on the company. As of Thursday, 66 analysts had Buy ratings on Nvidia’s stock. Just seven had Hold ratings and only one had a Sell rating.
Financials lead sector action but Tech still clear winner
Financials (XLF) and Communication Services (XLC) led Friday's sector action as Information Technology (XLK) worked its way into the green by afternoon trading. All three major indexes edged higher following a rally in equities one day prior.
The major indexes are currently on track for their best week of the year. That's a hard pivot compared to two weeks ago, when a disappointing jobs report spurred an anxiety-inducing sell-off across the entire market.
S&P 500 sectors, Intraday trading action (Source: Yahoo Finance) Notably, technology has led the comeback in stocks. Although it was not the best-performing sector on Friday, if you take a look at the sector action over the past nine trading days, it's clear tech has been a leader as investors "buy the dip" amid its recent sell-off.
"From a technical perspective, tech has moved to a modestly oversold condition," Truist co-chief investment officer and chief market strategist Keith Lerner wrote in a note to clients on August 8. "To be fair, at previous bottoms, the sector moved to an even deeper oversold condition. This could certainly happen again, meaning the correction may have not fully run its course."
"Still, our view is the risk/reward has improved for the tech sector and the secular story remains intact," Lerner added. "Moreover, in a cooling economic environment, we expect investors to come back to tech given some of the secular tailwinds stemming from artificial intelligence (AI) and its premium growth prospects. Moreover, during the current earnings season, we have seen capital spending trends toward AI continue to rise."
S&P 500 sectors, 9 day trading action (Source: Yahoo Finance) All quiet on the data front until the Fed
A busy economic data week played a pivotal role in the stock rebound this week. After fears of recession were rising following a weaker-than-expected jobs report, this week's data helped calm investors.
The latest data prints have shown inflation continues to fall toward the Fed's 2% goal while consumer spending holds up and layoffs aren't ticking higher.
In sum, economists and Wall Street strategists have argued this week's data dump shows the vaunted soft-landing, where the US economy avoids a sharp economic downturn as inflation retreats to the Fed's 2% goal, is now firmly back in sight.
"This week's jam-packed data calendar delivered mostly good news. Inflation was generally tepid, and activity still looks healthy," Bank of America Securities head of 3conomics Michael Gapen wrote in weekly note to clients on Friday. "The recent data flow is consistent with our soft-landing forecast."
A quiet week of economic data will bring little to change that narrative next week. But Federal Reserve chair Jerome Powell's speech at the Jackson Hole Symposium could alter market expectations for the Fed.
"The easiest thing for Chair Powell to do would be to repeat his message from July," Gapen wrote. "An evolution of the July FOMC language would suggest the committee is "very close" or "close" to the point where easing is likely to occur. A more dovish signal could be a statement that the committee wants to avoid "unexpected weakness" in the labor market, rather than simply responding to it after it occurs."
As of Friday morning, markets are pricing in a 76% chance the Fed will cut interest rates by 25 basis points by the end of its September meeting. A week ago, markets had priced in a more than 50% chance the Fed would provide a deeper cut and slash rates by 50 basis points.
Vice President Kamala Harris to detail economic policy in speech Friday
Vice President Kamala Harris is set to lay out her plans for the US economy in a speech slated for Friday afternoon.
Yahoo Finance's Ben Weschkul breaks down what to expect:
It will be the Democratic nominee’s first extended foray into economic policy since announcing her run for the presidency.
The plan "will address some of the sharpest pain points American families are confronting and bolster their financial security," the campaign said in a statement.
Her 2:45 pm ET address in Raleigh, NC will likely highlight a critical view of corporate mergers, signal new efforts to drive down healthcare costs, and unveil a push to expand the child tax credit to $6,000 for the first year of a child’s life.
Democratic presidential nominee Vice President Kamala Harris greets attendees after speaking about the administration's efforts to lower prescription drug costs during an event at Prince George's Community College in Largo, Md., Thursday, Aug. 15, 2024. (AP Photo/Susan Walsh) (ASSOCIATED PRESS) Her new plan also includes a new first-time homebuyer credit of $25,000.
The speech is an an attempt by the campaign to keep its political momentum going with a focus on kitchen table issues and everyday costs after Harris has moved into a seeming tie with former President Donald Trump ahead of next week’s Democratic National Convention in Chicago.
But the speech is also likely to still leave key areas of the potential Harris economic agenda largely undefined on a series of issues ranging from many key tax issues to manufacturing policy to the ballooning national debt.
Consumer sentiment ticks higher in August, inflation expectations steady
Consumer sentiment rebounded for the first time in five months in August.
The latest University of Michigan consumer sentiment survey released Friday showed sentiment ticked higher in August. The index reading for the month came in at 67.8, up from 66.4 in July and above the 66.9 economists had expected.
Consumer inflation expectations were unchanged for the month, with consumers expecting inflation at 2.9% over the next year and 3% over the next five to 10 years.
Stocks take a breather at the open
Stocks slipped in early trading on Friday after a rally on Thursday saw the S&P 500 (^GSPC) and Nasdaq (^IXIC) erase losses suffered during this month's sell-off. These gains have the major indexes on track for their best week of the year.
After rallying more than 2% on Thursday, the Nasdaq Composite (^IXIC) fell about 0.4% at the open. The S&P 500 (^GSPC) slipped 0.2% while the Dow Jones Industrial Average (^DJI) traded on both sides of the flat line.
Information Technology (XLK), which had been the leader since the sell-off on Aug. 5, was one of the worst-performing sectors in the S&P 500 in early trading, falling more than 0.5%.
Housing starts hit four year low in July
New residential construction pulled back in July as builders continued to feel the effects of high interest rates.
Housing starts fell 6.8% from the previous month to a seasonally adjusted annual pace of 1.238 million units, according to data from the Census Bureau released Friday, marking a four-year low. Single family housing starts dropped 14.1% to a seasonally adjusted annual pace of 851,000.
The data comes as mortgage rates have been on a downward trend in recent weeks but remain high relative to the period immediately following the start of the pandemic, keeping many buyers and sellers on the sidelines.
Meanwhile, housing inventory is also rising.
"The slump in both housing starts and building permits in July, to the lowest levels since the epoch of the pandemic, only partly reflects the temporary impact of Hurricane Beryl,” Paul Ashworth, chief economist at Capital Economics, wrote after the release.
“Accordingly, even though lower interest rates should provide ongoing support to new home sales, the existing oversupply in some regional markets could be a bigger constraint that we previously anticipated,” the economist added.
Friday's data showed that building permits for single family homes also declined last month, slipping 0.1% month over month to 938,000. Meanwhile, permits for multifamily came in at a rate of 408,000 in July.
In August, homebuilder confidence hit the lowest level since December as high interest rates and record home prices continue to reduce demand for new homes.
