Market Performance
The S&P 500 (-1.4%), Russell 2000 (-1.1%), and Nasdaq Composite (-2.8%) exhibited some consolidation today after recent gains. Mega cap stocks and chipmakers, which have been influential winners all year, registered outsized declines today and weighed on the broader market.
Notable Declines
- NVIDIA (NVDA 117.99, -8.37, -6.6%)
- Meta Platforms (META 461.99, -27.80, -5.7%)
- Apple (AAPL 228.88, -5.94, -2.5%)
- Broadcom (AVGO 155.98, -13.39, -7.9%)
The Vanguard Mega Cap Growth ETF (MGK) declined 2.8% and the PHLX Semiconductor Index (SOX) slid 6.8%. Semiconductor stocks were also reacting to a Bloomberg report that the Biden Administration is discussing tightening export restrictions to China even further.
Dow Jones Industrial Average
The price-weighed Dow Jones Industrial Average closed 0.6% higher, boosted by:
- Johnson & Johnson (JNJ 156.58, +5.57, +3.7%) after its Q2 earnings report
- UnitedHealth (UNH 573.28, +24.41, +4.5%), which was upgraded at Jefferies to Buy from Hold after yesterday's sharp earnings-related gain
Bank Stocks
Bank stocks also outperformed the rest of the market. The SPDR S&P Regional Bank ETF (KRE) jumped 1.2% and the SPDR S&P Bank ETF (KBE) closed 0.9% higher. The S&P 500 financial sector was among the top performers today, logging a 0.9% gain.
Sector Performance
The activity in mega caps and chipmakers led the information technology (-3.7%) and communication services (-2.1%) sectors sharply lower.
Bond Market
The equity and bond markets didn't react much to the Fed's July Beige Book, which showed that economic activity maintained a slight to modest pace of growth in a majority of Districts this reporting cycle. The 2-yr note yield declined one basis point to 4.43% and the 10-yr note yield declined two basis points to 4.15%. This also followed a solid $13 billion 20-yr bond reopening.
Year-to-Date Performance
- Nasdaq Composite: +19.9% YTD
- S&P 500: +17.2% YTD
- Russell 2000: +10.5% YTD
- S&P Midcap 400: +10.4% YTD
- Dow Jones Industrial Average: +9.3% YTD
Economic Data Review
- Weekly MBA Mortgage Applications Index 3.9%; Prior -0.2%
- June Housing Starts 1.353 mln (consensus 1.310 mln); Prior was revised to 1.314 mln from 1.277 mln
- June Building Permits 1.446 mln (consensus 1.391 mln); Prior was revised to 1.399 mln from 1.386 mln
The key takeaway from the report is that, while it might have been better than expected relative to consensus estimates, it was not a strong report nor a particularly encouraging report for an inventory-constrained housing market in need of lower-priced, single-family homes.
Industrial Production
- June Industrial Production 0.6% (consensus 0.3%); Prior was revised to 0.9% from 0.7%
- June Capacity Utilization 78.8% (consensus 78.6%); Prior was revised to 78.3% from 78.2%
The key takeaway from the report was the continued increase in manufacturing output.
Guru Stock Picks
Ronald Muhlenkamp has made the following transactions:
Today's News
Semiconductor stocks, including ASML, experienced a significant downturn after reports surfaced that the U.S. government may impose stricter export controls on the industry. ASML's second-quarter results showed stronger-than-expected performance, with net bookings surging by about 54% sequentially to €5.57B. However, the company's third-quarter outlook fell below Wall Street expectations, contributing to the sector's decline.
Google (GOOG, GOOGL) and Microsoft (MSFT, Financial) are reportedly providing Chinese companies access to Nvidia's (NVDA, Financial) high-end AI chips through data centers, circumventing U.S. export controls. The Biden Administration is considering new regulations to close this loophole, which could impact the tech giants' operations and revenue streams.
Kinder Morgan (KMI, Financial) reported a Q2 GAAP EPS of $0.26, beating estimates by $0.01. However, revenue of $3.57B missed expectations by $520M. The company approved a cash dividend of $0.2875 per share and projected a 15% increase in net income for 2024, including contributions from acquired assets.
YPF (YPF, Financial) has entered discussions with Energy Transfer (ET, Financial) to finance the Vaca Muerta Sur pipeline, essential for boosting Argentina's shale oil exports. The project is expected to cost $2.5B and aims to significantly increase the country's export capacity, providing a much-needed economic boost.
Darden Restaurants (DRI, Financial) announced the acquisition of Chuy's Holdings (CHUY, Financial) for $37.50 per share in an all-cash transaction valued at approximately $605 million. The deal is expected to generate $15 million in pre-tax net synergies by the end of fiscal 2026, adding to Darden's already diverse portfolio of restaurant brands.
United Airlines (UAL, Financial) posted Q2 Non-GAAP EPS of $4.14, beating estimates by $0.21, with revenue of $14.99B. Despite the positive earnings, shares dropped by 4.47%, possibly due to concerns over future capacity and cost management.
Johnson & Johnson's (JNJ, Financial) better-than-expected Q2 financials boosted several large-cap pharma stocks, including Bristol-Myers Squibb (BMY, Financial), AbbVie (ABBV, Financial), Viatris (VTRS, Financial), and Takeda Pharmaceutical (TAK, Financial). The gains were primarily driven by J&J's strong performance in its pharmaceutical segment.
Petco Health and Wellness Company (WOOF, Financial) named Joel Anderson, former CEO of Five Below (FIVE), as its new CEO, effective July 29. Anderson's appointment is anticipated to drive strategic growth and operational improvements for Petco.
SL Green Realty (SLG, Financial) announced the sellout of the Giorgio Armani Residences in Manhattan, with all 10 units under contract for a total of $168.2 million. The sales are expected to close in Q4 2024, marking a significant milestone for the luxury condominium project.
Bank OZK (OZK, Financial) reported Q2 GAAP EPS of $1.52, just missing analyst estimates, but achieved record net interest income for the eighth consecutive quarter. The bank also announced a $200M stock buyback program, reflecting strong financial health and commitment to shareholder returns.
GE Vernova (GEV, Financial) saw its stock drop by 9.3% after the U.S. government ordered Vineyard Wind to halt operations due to a damaged turbine blade. The suspension affects the installation of new wind turbines and ongoing power production, pending an investigation into the incident.
GuruFocus Stock Analysis
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