Market Performance
The S&P 500 (-0.8%), Nasdaq Composite (-0.7%), Dow Jones Industrial Average (-1.3%), and Russell 2000 (-1.9%) all closed near their worst levels of the session with solid losses. Decliners led advancers by a 7-to-2 margin at both the NYSE and the Nasdaq.
Mixed Action in Mega Cap and Semiconductor Spaces
Mixed action in the mega cap and semiconductor spaces contributed to mixed action at the index level in early trading. Ultimately, many stocks finished lower on the day or pulled back from early highs, including mega cap and semiconductor names. The Vanguard Mega Cap Growth ETF (MGK) closed 0.9% lower and the PHLX Semiconductor Index (SOX), which had been up as much as 1.9%, closed just 0.5% higher than yesterday.
Influential Losers
- Apple (AAPL 224.18, -4.70, -2.1%)
- Microsoft (MSFT 440.37, -3.15, -0.7%)
- Amazon.com (AMZN 183.75, -4.17, -2.2%)
- Domino's Pizza (DPZ 409.04, -64.23, -13.6%)
Domino's Pizza recorded the steepest decline among S&P 500 components after reporting earnings. This price action, along with the decline in Amazon (AMZN, Financial), contributed to the underperformance of the S&P 500 consumer discretionary sector (-1.3%).
Offsetting Support
A solid earnings-related gain in D.R. Horton (DHI 173.42, +16.91, +10.1%) and other homebuilder stocks provided some offsetting support in the consumer discretionary sector.
Sector Performance
- Health care (-2.3%)
- Financial (-1.3%)
- Energy (+0.3%) - the only sector in positive territory by the close
Bond Market
The 10-yr note yield settled four basis points higher at 4.19% and the 2-yr note yield settled three basis points higher at 4.46%. The bond and equity markets were little changed by this morning's release of a weekly jobless claims report that showed a sizable increase in initial claims.
Year-to-Date Performance
- Nasdaq Composite: +19.1% YTD
- S&P 500: +16.2% YTD
- Russell 2000: +8.5% YTD
- S&P Midcap 400: +9.2% YTD
- Dow Jones Industrial Average: +7.9% YTD
Economic Data
- Weekly Initial Claims: 243K (consensus 225K); Prior revised to 223K from 222K
- Weekly Continuing Claims: 1.867 mln; Prior revised to 1.847 mln from 1.852 mln
The key takeaway from the report is that it fits with the view that there is some softening in the labor market, which is a trend that will massage the market's belief that the Fed is likely to cut the target range for the fed funds rate before the end of the year.
- July Philadelphia Fed Index: 13.9 (consensus 2.9); Prior 1.3
- June Leading Indicators: -0.2% (consensus -0.3%); Prior revised to -0.4% from -0.5%
There is no US economic data on tomorrow's calendar.
Today's News
Netflix (NFLX, Financial) stock dipped 2% in postmarket trading after surpassing revenue and user growth expectations in its Q2 earnings. Revenue grew 17% to $9.559 billion, driven by a 16.5% increase in paid memberships, which totaled 277.65 million globally. However, free cash flow took a step back, and the average revenue per membership rose just 1%. Operating income saw a 42% year-over-year increase to $2.6 billion, and the operating margin improved to 27.2%. Earnings per share rose 48%, surpassing expectations, but the shortfall in free cash flow weighed on investor sentiment.
Broadcom (AVGO, Financial) is in discussions with OpenAI, the AI startup backed by Microsoft (MSFT, Financial), to develop a new AI server chip. OpenAI has recruited engineers from Google's (GOOGL, Financial) tensor processing unit team to reduce its reliance on Nvidia (NVDA, Financial). This move aligns with OpenAI CEO Sam Altman's vision to enhance global semiconductor infrastructure, addressing the current shortage of AI infrastructure.
Plug Power (PLUG, Financial) announced an underwritten public offering of $200 million of its common stock and granted underwriters a 30-day option to purchase up to an additional $30 million in shares. This move follows the company's recent challenges and aims to bolster its financial position amid ongoing market uncertainties.
SoFi Technologies (SOFI, Financial) ended its seven-day winning streak, falling 3.95% after the U.S. government announced the forgiveness of $1.2 billion in student loans. This decision affected other student loan providers like Navient and Nelnet as well. Despite the recent decline, SoFi remains 15% above its 20-day simple moving average.
Intuitive Surgical (ISRG, Financial) reported Q2 non-GAAP EPS of $1.78, beating estimates by $0.24, with revenue of $2 billion, up 13.6% year-over-year. The company saw a 17% increase in worldwide da Vinci procedures and placed 341 da Vinci surgical systems, growing its installed base to 9,203 systems as of June 30, 2024.
Shares of Eli Lilly (LLY, Financial) and Novo Nordisk (NVO, Financial) extended their declines, with Lilly falling ~6% and Novo losing ~5%. This continued selloff followed promising trial results for a competing weight loss drug by Roche. The three-day slide has erased approximately $86.1 billion in market capitalization for Eli Lilly.
SunPower (SPWR, Financial) plummeted 27.3% after announcing it would pause some operations, including halting new product shipments and deactivating lease agreements. This decision follows the resignation of Ernst & Young as its auditor amid misconduct allegations by senior executives. Analysts suggest this could benefit competitors like Sunnova Energy (NOVA) and Sunrun (RUN).
Amazon (AMZN, Financial) reported record sales during Prime Day 2024, with more items sold than any previous Prime Day event. Independent sellers sold over 200 million items, and the event saw increased engagement with Amazon's new AI-powered shopping assistant and the in-app shopping experience, Amazon Inspire.
Align Technology (ALGN) plans to launch a new sales initiative with Costco (COST). Costco members can purchase a $100 e-card for a $400 credit towards Invisalign treatment, plus an Invisalign Essential Bundle. This initiative aims to attract new customers and redirect a portion of Align's advertising spend effectively.
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