Market Performance
The market experienced significant selling pressure today. Major indices recorded solid losses:
- Dow Jones Industrial Average: -1.3%
- Russell 2000: -2.1%
- S&P 500: -2.3%
- Nasdaq Composite: -3.6%
Many stocks participated in the broad retreat, with mega cap stocks, semiconductor shares, and growth stocks having an outsized impact on index performance.
Key Stock Movements
Quarterly results and guidance from Alphabet (GOOG) and Tesla (TSLA) did not meet high expectations, contributing to their declines:
- Alphabet (GOOG): -5.0%
- Tesla (TSLA): -12.3%
The Vanguard Mega Cap Growth ETF (MGK) declined 3.8%, the PHLX Semiconductor Index (SOX) logged a 5.4% decline, and the Russell 3000 Growth Index fell 3.7%.
Other influential laggards included:
- Visa (V): -4.0%, citing a slowdown in spending by lower-income consumers
- Lam Weston (LW): -28.2%, issuing an FY25 earnings warning linked to a slowdown in global restaurant traffic
Sector Performance
Heavily-weighted sectors experienced the largest declines:
- Information Technology: -4.1%
- Consumer Discretionary: -3.9%
- Communication Services: -3.8%
The remaining four sectors that closed in negative territory registered losses greater than 1.0%.
Treasury Yields
Treasuries settled in mixed fashion:
- 10-yr note yield: +5 basis points to 4.29%
- 2-yr note yield: -6 basis points to 4.42%
This price action was in response to a disappointing New Home Sales report for June, a poorly received 5-yr note sale, and mostly lower preliminary July PMI data from the eurozone and U.S.
Year-to-Date Performance
- Nasdaq Composite: +15.5% YTD
- S&P 500: +13.8% YTD
- Russell 2000: +8.3% YTD
- S&P Midcap 400: +7.8% YTD
- Dow Jones Industrial Average: +5.7% YTD
Economic Data
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index: -2.2%; Prior -3.9%
- June Adv. Intl. Trade in Goods: -$96.8 bln; Prior revised to -$99.4 bln from -$100.6 bln
- June Adv. Retail Inventories: 0.7%; Prior revised to 0.6% from 0.7%
- June Adv. Wholesale Inventories: 0.2%; Prior 0.6%
- July S&P Global US Manufacturing PMI - Prelim: 49.5; Prior 51.6
- July S&P Global Services PMI - Prelim: 56.0; Prior 55.3
- June New Home Sales: 617K (consensus 640K); Prior revised to 621K from 619K
The key takeaway is that new home sales activity remained soft in June, pressured by a lack of lower-priced homes and affordability issues stemming from high mortgage rates and higher selling prices.
Upcoming Economic Events
Thursday's economic lineup includes:
- 8:30 ET: Advance Q2 GDP (consensus 1.9%; prior 1.4%)
- Advance Q2 GDP Deflator (consensus 2.6%; prior 3.1%)
- Weekly Initial Claims (consensus 240,000; prior 243,000)
- Continuing Claims (prior 1.867 mln)
- June Durable Orders (consensus 0.4%; prior 0.1%)
- Durable Orders ex-transport (consensus 0.2%; prior -0.1%)
- 10:30 ET: Weekly natural gas inventories (prior +10 bcf)
Tomorrow's calendar also includes results from the $44 bln 7-yr Treasury note auction at 1:00 ET.
Overseas Markets
International markets closed as follows:
Today's News
IBM (IBM, Financial) shares rose over 4% in extended trading after the company reported second-quarter results and guidance that exceeded expectations. IBM earned $1.99 per share with revenue up 1.9% year-over-year to $15.77 billion. The company also increased its free cash flow forecast for the year, reporting $2.61 billion for the period, a 24% increase year-over-year. The strong performance was driven by growth in software, consulting, infrastructure, and financing segments.
ServiceNow (NOW, Financial) surpassed revenue and earnings per share estimates in its Q2 2024 financial results. The company reported Q2 revenue of $2.627 billion, a 22% increase year-over-year, and earnings per share of $3.13. Despite ending the trading day down 4.5%, ServiceNow rebounded 5.5% during early post-market action. The company also announced the departure of its president and COO, CJ Desai, following an internal investigation.
Chipotle Mexican Grill (CMG, Financial) reported a Q2 Non-GAAP EPS of $0.34, beating estimates by $0.02, and revenue of $2.97 billion, up 18.3% year-over-year. Comparable restaurant sales increased by 11.1%, and operating margins improved. The company opened 52 new restaurants in the quarter and provided a positive outlook for 2024, expecting mid to high-single-digit growth in comparable restaurant sales and up to 315 new openings.
Bank of America (BAC, Financial) announced an 8.3% increase in its quarterly dividend to $0.26 per share. The board also authorized a new $25 billion common stock repurchase program, effective August 1, 2024, replacing the current program which will expire on that date.
Ford (F, Financial) reported Q2 Non-GAAP EPS of $0.47, missing estimates by $0.21, and automotive revenue of $44.81 billion, which also missed by $70 million. Despite this, the company raised its full-year adjusted free cash flow outlook by $1 billion and declared a third-quarter dividend of $0.15 per share.
Annaly Capital Management (NLY, Financial) reported Q2 earnings available for distribution (EAD) of $0.68 per share, beating estimates by $0.04. The company also reported a book value per common share of $19.25 and an economic return of 0.9% for the second quarter.
Semiconductor stocks, including Qualcomm (QCOM, Financial), Broadcom (AVGO), and Nvidia (NVDA, Financial), were mostly lower amid a broader tech sector decline. Nvidia dropped 6.6%, partly due to Tesla's (TSLA) CEO Elon Musk suggesting that the company's upcoming Dojo supercomputer could compete with Nvidia's offerings.
QuantumScape (QS, Financial) reported a Q2 GAAP EPS of -$0.25, missing estimates by $0.02. The company provided full-year guidance for an adjusted EBITDA loss between $250 million and $300 million and expects to be on the lower end of its capital expenditure guidance range.
United Rentals (URI, Financial) reported Q2 Non-GAAP EPS of $10.70, beating estimates by $0.19, and revenue of $3.77 billion, up 6.2% year-over-year. The company returned $969 million to shareholders year-to-date and narrowed its outlook ranges for revenue and adjusted EBITDA.
Viking Therapeutics (VKTX, Financial) reported Q2 GAAP EPS of -$0.20, beating estimates by $0.07. The company held $942 million in cash, cash equivalents, and short-term investments as of June 30, 2024, compared to $362 million at the end of 2023.
Hawaiian Holdings (HA, Financial) fell 9% amid reports that the Department of Justice is unlikely to approve its planned $1.8 billion sale to Alaska Air (ALK). The antitrust regulator is preparing to challenge the combination, according to sources familiar with the matter.
Edwards Lifesciences (EW) reported Q2 Non-GAAP EPS of $0.70, beating estimates by $0.01, but revenue of $1.63 billion missed by $20 million. The company announced investments to acquire JenaValve Technology and Endotronix for approximately $1.2 billion.
Las Vegas Sands (LVS) traded lower in the post-market session after missing revenue and EPS estimates in its Q2 earnings report. The company reported revenue of $2.76 billion, an 8.7% increase year-over-year, but $60 million short of expectations. EPS came in at $0.55, missing the $0.56 consensus.
KLAC (KLAC) reported Q4 Non-GAAP EPS of $6.60, beating estimates by $0.50, and revenue of $2.57 billion, up 8.9% year-over-year. The company provided a positive Q1 outlook with expected total revenues in the range of $2.75 billion +/- $150 million.
EPRT (EPRT) posted Q2 earnings that rose less than expected, with AFFO per share of $0.43, below the $0.47 analyst estimate. Total revenue of $109.3 million surpassed expectations, but total expenses remained virtually unchanged from the previous quarter.
Bausch Health (BHC) fell 23% after resuming trading following the company's denial of a report suggesting it is negotiating a potential prepackaged Chapter 11 to cut debt. The company stated that it is not considering bankruptcy or insolvency of any kind.
TSLA (TSLA) shares tumbled over 11% as investors expressed concern over slowing vehicle sales. Elon Musk conducted a poll on social network X, where 68.1% of respondents favored Tesla investing $5 billion in Musk's AI company xAI. The poll was conducted to gauge interest, with any decision requiring board and shareholder approval.
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