Everything to Know about Macro and Markets
Stocks ended the holiday-shortened week with strong gains. The S&P 500 (SPX), the Nasdaq Composite (NDAQ), and the Nasdaq-100 (NDX) recorded new highs on Friday, while the Dow Jones Industrial Average (DJIA) notched a solid weekly gain, though still trading about 1.5% lower than the record high it reached in May.
The rally was led by large- and megacap technology names, such as Microsoft (MSFT) and Meta (META) that scored all-time closing highs. The S&P Communications Services sector – home to Alphabet (GOOGL), and Netflix (NFLX), as well as META – reached its highest level since 2000.
The Return of Goldilocks
Stocks were boosted higher on Friday after June’s job market report supported a “Goldilocks economy” thesis. The string of monthly gains north of 200,000 positions continued in June, but outside of still-strong job creation, the numbers signaled that the labor market is quickly cooling off. The U.S. unemployment rate unexpectedly rose to 4.1%, its highest level since November 2021, while wage growth slowed to a three-year low.
June’s data came as a relief after May’s strong hiring lowered hopes for this year’s monetary policy easing. However, along with June’s numbers came a significant downward revision to new jobs created last month. The signs of the weakening job market with easing wage pressures have strongly increased investor bets on a September rate cut, as they added to signs of the disinflation trend seen in the previous months’ PCE and CPI reports.
Still, Wall Street analysts warn against overly optimistic easing bets, as the job market has just begun to loosen up and is still very tight. On the other hand, the latest economic data has been consistent with the Federal Reserve’s view of steadily declining inflation in a gently cooling economy.
Powell and Earnings in Focus
The next catalyst in the rate cut debate is this week’s June CPI report, slated to be published on Thursday. If this data continues to confirm the Goldilocks narrative, it may tip the needle for the policymakers to consider more than one rate decrease this year.
Fed Chair Jerome Powell’s testimony before Congress this Tuesday may shed more light on the central bank’s assessment of the economy and its policy outlook change.
Another strong catalyst for stock markets is the Q2 2024 earnings season, kicking off at the end of this week with quarterly results from several economically important financials and other industry leaders.
Stocks That Made the News
¤ Meta Platforms (META) led the surge in megacaps with a weekly increase of 4.4% after analysts signaled optimism that Facebook parent’s massive AI investments are starting to pay off.
¤ The renewed AI optimism lifted most technology stocks; however, the undisputed AI leader NVIDIA (NVDA) lagged behind its megacap peers in the past week, as it slumped on Friday following a downgrade from New Street Research analysts citing valuation concerns.
¤ Advanced Micro Devices (AMD) jumped over 7% in the week after New Street Research named it a top pick in its review of AI-related names.
¤ Tesla (TSLA) was the best large-cap performer last week with a 27% rally, its best since January 2023, which helped the EV maker erase year-to-date losses. The stock was lifted by strong second-quarter delivery numbers and positive analyst assessment, which led investors to view TSLA’s previous sell-off as overdone.
¤ Amazon (AMZN) returned to gains on Friday, closing the week up by 1.3% after a strong decline earlier in the week following news that founder Jeff Bezos was planning to offload $5 billion of the company’s shares.
Upcoming Earnings and Dividend Announcements
This week marks the beginning of the Q2 2024 earnings season with several newsworthy earnings releases scheduled for this week.
This week’s most notable earnings reports will be published by Delta Air Lines (DAL), PepsiCo (PEP), Conagra Brands (CAG), Progressive Corp. (PGR), JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), Bank of New York Mellon (BK), and Fastenal Company (FAST).
Ex-dividend dates are coming this week for Walt Disney (DIS), Mastercard (MA), AT&T (T), Verizon (VZ), General Mills (GIS), Darden Restaurants (DRI), Oracle (ORCL), Accenture (ACN), and other dividend-paying firms.
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