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Stocks had a rough week, topped off with a pummeling Friday after the July jobs data came in weaker than expected.
The Nasdaq led the way down, losing 3.35% on the week, followed by the Dow Jones Industrial’s decline of 2.1%, and the S&P 500’s 2.06% drop.
It was a dramatic shift in sentiment that began Thursday. Until then, bad economic news was good news for the stock market, because it meant the Federal Reserve would start cutting interest rates sooner. Now it appears bad economic news is, in fact, bad news for stocks. On Thursday, a drop in U.S. manufacturing activity for July and a jump in initial jobless claims dragged down the market. Then came Friday’s payroll report, which also showed an uptick in unemployment and lower-than-expected wage inflation.
The fear is that the central bank, which has been criticized for waiting too long to raise rates, is now moving too slow to lower them. Before Friday’s employment data, three quarter-percentage point cuts were expected this year, starting in September. Now the market odds that September might see a half-percentage point rate cut are rising.
Jim Cramer said Friday the Fed should have cut at this week’s meeting. However, he was calling for calm all day long, saying the flight from stocks, especially mega-cap tech companies, was overdone. Indeed, we used the market drop as an opportunity to pick up shares of high-quality companies. On Friday morning, we picked up more Broadcom, and would’ve added Advanced Micro Devices were we not restricted. Later, we purchased Palo Alto and revealed six stocks we’re eyeing in the coming week.
Looking under the hood of the S&P 500, utilities led to the upside, followed by real estate and communication services sectors. Consumer discretionary led to the downside, followed by technology and energy.
Next week is light on economic data, so expect earnings reports and CEO commentaries to drive the market action.
State of the service economy: The release of the July ISM Services PMI — which is based on surveys sent to purchasing and supply companies of more than 400 services firms — kicks off the trading week. As of Friday, economists are looking to a reading of 51.5, according to FactSet. That would indicate a slight expansion after contracting in June. In addition to the headline number, it’s always helpful to take a look at the “what respondents are saying” section of the report, which is filled with qualitative information from different industry sources.
Earnings: About 75% of the S&P 500 has now reported earnings. Of those, 78% exceeded earnings expectations while 59% reported better-than-expected revenue results, according to FactSet. In our portfolio, more than 60% of the companies have now delivered results, including 14 firms in the past week alone. Three more come out in the coming week.
- Wynn Resorts: Investors are expecting to see sequential pullbacks in all three major geographic regions (Macau, Las Vegas, and Boston). However, while a 3% year-over-year revenue decline is expected in Boston, we still want to see 2% growth in Vegas and consolidated growth of nearly 23% in Macau (Wynn Macau up 28% and Wynn Palace up about 19%). Occupancy commentary is important given the prolonged weakness in China and signs of further slowing here in the U.S.
- Disney: Management told us last quarter that the direct-to-consumer segment would see losses one more time in the third quarter, due to weakness at Disney+ Hotstar, before returning back to profitability by September. Is that still the case? What else is management seeing in terms of demand for experiences for its parks and cruises? That takes on extra salience with the market suddenly concerned about a recession.
- Eli Lilly: Outside of sales and earnings, diabetes and weight-loss drugs Mounjaro and Zepbound remain the two most important line items in the report since they are key to the long-term growth thesis that the stock is trading on. Demand for the drugs is obviously important, but lack of supply has been the bigger issue. How are management’s efforts to boost supply coming along? Also welcome: An update on the Kisnula (donanemab) opportunity now that the Food and Drug Administration has approved the drug for some patients with early Alzheimer’s symptoms.
Monday, August 5
- 10:00 a.m. ET: ISM Services PMI
- Before the bell: Berkshire Hathaway (BRK.B), Carlyle Group (CG), Krystal Biotech (KRYS), Tyson Foods (TSN), Alpha Metallurgical Resources (AMR), BioCryst Pharmaceuticals (BCRX), Freshpet (FRPT), Axsome Therapeutics (AXSM), BioNTech SE (BNTX)
- After the bell: Palantir Technologies (PLTR), Hims & Hers Health (HIMS), Clover Health (CLOV), Lucid Group (LCID), Realty Income Corp. (O), Avis Budget Group (CAR), CSX Corp. (CSX), Simon Property Group (SPG), Sterling Construction Company (STRL), Teradata Corp (TDC), Yum China Holdings (YUMC), ZoomInfo Technologies (ZI)
Tuesday, August 6
- Before the bell: Uber Technologies (UBER), Celsius Holdings (CELH), fuboTV (FUBO), Caterpillar (CAT), Baxter International (BAX), Vulcan Materials Company (VMC), Allegheny Technologies Incorporated (ATI), Constellation Energy Group (CEG), Marathon Petroleum Corp. (MPC), Owens Corning Inc (OC), CLEAR Secure (YOU), Organon (OGN), Duke Energy Corp. (DUK), Zoetis (ZTS), GXO Logistics (GXO), Yum! Brands (YUM), Planet Fitness (PLNT), Kenvue (KVUE), Builders FirstSource (BLDR)
- After the bell: Wynn Resorts Ltd (WYNN), Supermicro (SMCI), Rivian Automotive (RIVN), Airbnb (ABNB), Devon Energy Corp. (DVN), Reddit (RDDT), GigaCloud Technology Inc (GCT), Upstart Holdings (UPST), Amgen (AMGN), Axon Enterprise (AXON), AMSC (AMSC), Fortinet (FTNT), Lumen Technologies (LUMN), Illumina (ILMN), VF Corp (VFC), Coupang (CPNG)
Wednesday, August 7
- Before the bell: Walt Disney Co (DIS), Shopify (SHOP), Novo Nordisk A/S (NVO), CVS Health (CVS), Global Payments (GPN), Aurora Cannabis Inc (ACB), Emerson Electric Co. (EMR), Sony Group Corporation (SONY), Lyft (LYFT), Dynatrace, Inc (DT), ODP Corporation (ODP), NOW (DNOW), Icahn Enterprises L.P. (IEP), MannKind Corp (MNKD), Oscar Health (OSCR), ACM Research (ACMR), Brink’s Company (BCO)
- After the bell: Robinhood Markets (HOOD), Magnite (MGNI), AppLovin Corporation (APP), Digital Turbine (APPS), Sarepta Therapeutics (SRPT), HubSpot (HUBS), Occidental Petroleum Corp. (OXY), Energy Transfer LP (ET), Dutch Bros (BROS), Fastly (FSLY), SolarEdge Technologies (SEDG), Aspen Aerogels (ASPN), Coeur D’Alene Mines Corp. (CDE)
Thursday, August 8
- 8:30 a.m. ET: Initial Jobless Claims
- Before the bell: Eli Lilly & Co. (LLY), Vistra Energy (VST), Datadog (DDOG), Plug Power (PLUG), Cheniere Energy (LNG), Novavax (NVAX), Cronos Group (CRON), CyberArk (CYBR), Himax Technologies (HIMX), Medical Properties Trust Inc (MPW), SharkNinja (SN), Krispy Kreme (DNUT), Papa John’s International (PZZA)
- After the bell: SoundHound AI (SOUN), e.l.f. Beauty (ELF), Unity (U), Paramount Global (PARA), Trade Desk (TTD), Rocket Lab USA (RKLB), CleanSpark (CLSK), Array Technologies Inc (ARRY), B2Gold Corp. (BTG), Sweetgreen (SG), Honest Company (HNST), Gilead Sciences (GILD), TaskUs (TASK), Five9 (FIVN)
Friday, August 9
- Before the bell: Canopy Growth Corporation (CGC), Nikola Corporation (NKLA), Embraer (ERJ), New Fortress Energy LLC (NFE), Construction Partners (ROAD)
(See here for a full list of the stocks in Jim Cramer’s Charitable Trust.)
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