Market Review 26th August 2024
Simplify the craziness
DAILY REVIEW
N
6 min read
Monday, August 26, 2024, saw a mixed performance in the U.S. stock markets, with the Dow Jones Industrial Average closing higher while the Nasdaq Composite struggled. The day was marked by investor caution ahead of NVIDIA's earnings report and key economic data releases later this week. While growth and technology stocks faltered, small-cap stocks and the Dow Jones managed to post gains, indicating a divergent market sentiment.
Market Highlights
Dow Jones Industrial Average: Closed 0.2% higher, hitting a record high, and is now more than 3% above its 50-day moving average.
Nasdaq Composite: Dropped 0.9% as semiconductor and tech stocks underperformed.
S&P 500: Fell 0.3%, reflecting a broader market pullback.
Russell 2000: Ended slightly lower after giving up early gains.
Volume: Declined on both the NYSE and Nasdaq compared to Friday's trading session.
Sector Performance
The S&P 500 sectors displayed mixed results:
Winners:
Energy: Benefited from a rise in oil prices, with West Texas Intermediate (WTI) crude oil surpassing the $77 level, gaining over 3%.
Consumer Staples: Posted solid gains as investors sought safer bets amid market uncertainty.
Losers:
Technology: Continued to lag, driven by a selloff in semiconductor stocks.
Consumer Services: Also underperformed, reflecting broader market caution.
Key Market Drivers
1. Upcoming Economic Data and Fed Rate Cuts
Investors are keenly awaiting NVIDIA's earnings on Wednesday, which could set the tone for the tech sector and broader markets. Additionally, the Federal Reserve's preferred measure of inflation, the Personal Consumption Expenditures (PCE) index, is due for release later this week, along with Canada's GDP report. These data points are expected to provide further insights into the economic outlook and the Fed's next moves.
Fed Chair Jerome Powell's recent comments at the Jackson Hole symposium have fueled expectations of imminent rate cuts. Powell signaled that the time for policy adjustment has arrived, with inflation moving closer to the Fed's target. The bond market is now pricing in the start of a rate-cutting cycle, possibly beginning at the next FOMC meeting in mid-September. Investors are now debating the size of the initial cut and the pace of subsequent reductions.
2. NVIDIA's Earnings: A Market-Moving Event
NVIDIA, the leading player in AI technology, has become a bellwether for the broader market. With a market capitalization of $3.2 trillion, NVIDIA now accounts for 7% of the S&P 500. The stock has rallied 161% year-to-date, and its upcoming earnings report on Wednesday is highly anticipated. Given NVIDIA's influence on the index, the results could significantly impact market sentiment, particularly in the tech sector.
The S&P 500's rally has broadened recently, with more sectors and stocks contributing to gains. This shift away from the "Magnificent 7" stocks suggests a more balanced market, which could lead to sustained gains in the latter half of the year.
Dow Jones Industrial Average: Key Movers
Apple (AAPL): The tech giant teased new iPhone and Apple Watch models ahead of its September 9 event, but the stock fell 0.2% on Monday. Investors are also speculating on potential AI-related announcements, such as updates to the Apple Intelligence platform and Siri, backed by OpenAI's ChatGPT.
Coca-Cola (KO) and Walt Disney (DIS): Both stocks were among the top performers on the Dow, gaining over 1% each.
Intel (INTC): The worst performer on the Dow, falling more than 1%. The stock struggled alongside other semiconductor names.
Amgen (AMGN) and Microsoft (MSFT): Both stocks also lagged, contributing to the mixed performance of the Dow.
Nasdaq Composite: Tech Stocks Under Pressure
The Nasdaq Composite underperformed on Monday, weighed down by a selloff in technology and semiconductor stocks. The Technology Select Sector SPDR (XLK) ETF fell nearly 1.3%, reflecting the broader weakness in the sector.
Tesla (TSLA): The electric vehicle maker struggled despite an AI-related announcement by CEO Elon Musk. Tesla's stock was hit by broader concerns about the tech sector's valuation.
Meta Platforms (META) and Amazon (AMZN): Both stocks declined, reflecting the market's cautious stance toward high-growth tech names.
Advanced Micro Devices (AMD) and NVIDIA (NVDA): Semiconductor stocks were among the hardest hit, with AMD and NVIDIA both posting losses ahead of NVIDIA's earnings report.
Small Caps and Energy Stocks: Bright Spots in a Mixed Market
While growth and tech stocks struggled, small-cap stocks and the energy sector provided some positive momentum.
Russell 2000: The index, which tracks small-cap stocks, managed to close slightly higher, up 0.3%. However, it gave up some early gains as the session progressed.
Energy Stocks: Benefited from a surge in oil prices, with WTI crude oil rising over 3% to exceed the $77 per barrel mark. This rally was driven by concerns about escalating tensions in the Middle East, which could disrupt supply.
Individual Stock Highlights
Aecom (ACM): The construction stock cleared a consolidation pattern entry point at 98.72, entering a buy zone. The stock has been on an upward trajectory since reporting strong earnings on August 5. Aecom boasts a Composite Rating of 95 and an Accumulation/Distribution Rating of B+, indicating strong institutional buying.
Carl Icahn's Firm: Shares of Icahn Enterprises plunged after the firm announced a share offering. The stock has been under pressure following a short seller's report earlier this year, and the latest development added to investor concerns.
Global Markets: Mixed Performance Amid U.S. Dollar Weakness
Overseas markets also experienced mixed results on Monday. Last week's rally, fueled by a weaker U.S. dollar and expectations of Fed rate cuts, lost some momentum. Investors are now focused on upcoming economic data and central bank meetings, which will provide further clarity on the global economic outlook.
European Markets: Showed resilience, with major indices posting modest gains. The European Central Bank's (ECB) next meeting is highly anticipated, as policymakers weigh the impact of recent economic data on their monetary policy stance.
Asian Markets: Were mixed, with Chinese stocks underperforming due to ongoing concerns about the country's economic slowdown and regulatory crackdowns. In contrast, Japanese equities continued to benefit from a weaker yen and strong corporate earnings.
Commodities: Oil Prices Surge Amid Middle East Tensions
Oil prices spiked on Monday, driven by escalating tensions in the Middle East. WTI crude oil rose more than 3%, surpassing the $77 per barrel level. The rally in oil prices provided a boost to energy stocks, which were among the best performers in the S&P 500.
Gold: Prices were stable, reflecting investor caution ahead of key economic data releases later this week. The precious metal remains supported by expectations of Fed rate cuts and geopolitical uncertainties.
Other Commodities: Copper and other industrial metals were mixed, with concerns about global demand offsetting supply-side disruptions.
Looking Ahead: Key Events to Watch
Investors will be closely monitoring several key events this week that could shape market sentiment:
NVIDIA Earnings (Wednesday): The company's earnings report is expected to provide critical insights into the health of the tech sector, particularly in AI and semiconductors. Given NVIDIA's significant weighting in the S&P 500, its performance could have a ripple effect across the market.
Fed's Preferred Inflation Measure (Friday): The PCE index, the Fed's preferred measure of inflation, will be released on Friday. This data will be closely watched as it could influence the Fed's decision-making at its next meeting in mid-September.
Canada GDP (Friday): Investors will also be watching Canada's GDP report for insights into the health of the Canadian economy. A strong report could bolster expectations for continued economic growth, while a weak report could raise concerns about a slowdown.
Conclusion: A Cautious Start to the Week
The stock market kicked off the week on a mixed note, with the Dow Jones Industrial Average managing to post gains while the Nasdaq Composite lagged behind. Investors are exercising caution ahead of key earnings reports and economic data releases later this week. While the market remains supported by expectations of Fed rate cuts, the near-term outlook will likely be shaped by the upcoming data and earnings reports.
References
Dow Jones Closes Higher, But Nasdaq Tumbles
Investors Eye Upcoming Fed Rate Cuts
NVIDIA Earnings to Set the Tone for Markets
Apple Teases New iPhone Ahead of September Event
WTI Crude Oil Surges Amid Middle East Tensions
Global Markets Mixed as U.S. Dollar Weakens
Aecom Clears Buy Zone Entry
$SPY $QQQ $ES_F $NQ_F $NVDA $TSLA $AMD $AAPL $MSFT $SMCI $META $AMZN $AVGO $MU $LLY $GOOG $BAC $XOM $COST $MSTR $SNOW $CAVA $SBUX $AMAT $V $QCOM $TXN $PANW $INTU $INTC $JNJ $JPM $COIN $PLTR $UNH $PG $CRM $CRWD $NFLX $HD $KO $LRCX $CVX $BKNG $WDAY $ABBV $DELL $UBER $ADBE $MRK
