Market Review 19th July 2024
Simplify the craziness
DAILY REVIEW
N
2 min read
Wall Street ended the week in turmoil as investors shifted from megacap tech giants to smaller stocks, leading to notable declines in major indices. The Dow Jones Industrial Average plunged over 370 points, marking a 1% drop. The S&P 500 and Nasdaq Composite both lost about 0.6%, capping off a rough week for tech-heavy stocks.
A Week of Declines
This week was marked by a significant rotation out of the year’s megacap winners, with big tech stocks like Microsoft and CrowdStrike suffering notable losses. CrowdStrike, in particular, saw its shares plummet by more than 11% due to a major IT outage that disrupted global businesses. Meanwhile, the S&P 500 dropped 2%, its worst performance since April, and the Nasdaq experienced a 3% decline, snapping a six-week winning streak.
Small Caps and Sector Shifts
Despite the broader market downturn, small caps and certain sectors showed resilience. The Dow managed a 0.6% weekly gain, and the Russell 2000, focused on smaller stocks, climbed nearly 2%. This rotation has been welcomed by some market watchers who were concerned about the rally being too dependent on a handful of tech giants.
Expert Insights
“The stock market is experiencing a long overdue rotation,” said Glen Smith, Chief Investment Officer at GDS Wealth Management. “Investors are taking money out of big tech stocks which have performed so well and moving that money into other areas of the market.”
IT Outage Impact
A major IT outage on Friday exacerbated the market's woes, disrupting flights, banking services, and other businesses worldwide. The outage, traced back to a faulty update from CrowdStrike, caused widespread chaos, highlighting the vulnerabilities in our interconnected digital world.
Notable Movers
Among the notable movers, Netflix stood out positively, with shares rising after reporting better-than-expected results, despite slightly lower revenue guidance. On the flip side, Amazon’s shares fell more than 6% this week, even though its Prime Day sales event was deemed successful by analysts.
Looking Forward
Next week brings significant events, including the Bank of Canada's interest rate decision and the U.S. earnings season. The Fed’s preferred inflation measure, the core personal consumption expenditures price index (PCE), will also be closely watched. About 30% of S&P 500 companies, including heavyweights like Tesla, Visa, and Alphabet, are set to report their earnings.
Economic Outlook
The recent cooling in inflation and the labor market suggests that the Fed might implement its first rate cut in September. This potential shift, along with positive but moderating economic growth and rising corporate profits, supports a bullish market outlook. However, as we enter the traditionally volatile months of September and October, increased volatility is expected. Any market pullbacks could be viewed as buying opportunities, given the current economic backdrop.
