Market Overview
The stock market exhibited mixed action at the index level today, but the vibe under the surface was positive throughout the entire session. Advancers led decliners by a 2-to-1 margin at the NYSE and by a 3-to-2 margin at the Nasdaq.
Index Performance
- S&P 500 (-0.5%) and Nasdaq Composite (-0.9%) traded above and below their prior closing levels, following the fickle price action in mega cap shares.
- Dow Jones Industrial Average (+0.2%) and Russell 2000 (+1.3%) were either mostly or entirely positive today.
Mega Cap Stocks
The fickle nature of mega cap stocks was evident in the performance of the Vanguard Mega Cap Growth ETF (MGK), which traded up as much as 0.9% at its high and down as much as 2.1% at its low. The equal-weighted S&P 500, however, settled with a 0.1% gain amid rebound action elsewhere.
Stock Highlights
The upside bias stemmed from buy-the-dip interest after yesterday's solid sell-off. Outsized moves in either direction were reserved for names with specific catalysts:
- Honeywell (HON) dropped to 202.45, down 5.2% after reporting earnings news.
- Ford Motor (F, Financial) fell to 11.16, down 18.4% after reporting earnings news.
- IBM (IBM) rose to 191.98, up 4.3% after reporting earnings.
- ServiceNow (NOW) surged to 848.79, up 13.4% after reporting earnings.
Bond Market
The 10-yr note yield declined three basis points to 4.26%, and the 2-yr note yield rose two basis points to 4.44%. Treasuries were reacting to this morning's economic releases, which were in line with the market's soft landing expectation and also acted as support for equities. Additionally, today's $44 billion 7-yr note auction met strong demand.
Year-to-Date Performance
- Nasdaq Composite: +14.5% YTD
- S&P 500: +13.2% YTD
- Russell 2000: +9.7% YTD
- S&P Midcap 400: +8.8% YTD
- Dow Jones Industrial Average: +6.0% YTD
Economic Data Review
- Q2 GDP-Adv. 2.8% (consensus 1.9%); Prior 1.4%
- Q2 Chain Deflator-Adv. 2.3% (consensus 2.6%); Prior 3.1%
- Weekly Initial Claims 235K (consensus 240K); Prior revised to 245K from 243K
- Weekly Continuing Claims 1.851 mln; Prior revised to 1.860 mln from 1.867 mln
- June Durable Orders -6.6% (consensus 0.4%); Prior 0.1%
- June Durable Goods -ex transportation 0.5% (consensus 0.2%); Prior -0.1%
Key Takeaways
The key takeaway from the GDP report is that there was no breakdown in consumer spending, which actually accelerated, increasing 2.3% following a 1.5% increase in the first quarter. The key takeaway from the initial claims report is that there hasn't been an alarming jump in initial claims, indicating a normal slowing in the labor market rather than rapid deterioration. The key takeaway from the durable orders report is that the weakness was driven by a large drop in nondefense aircraft and parts orders, which are volatile. Business spending in June was quite solid, evidenced by the 1.0% increase in new orders for nondefense capital goods excluding aircraft.
Upcoming Economic Data
Friday's economic calendar features:
Guru Stock Picks
Eaton Vance Worldwide Health Sciences Fund has made the following transactions:
- Reduce in SYK by 7.62%
- Sold out in HUM
- Add in ARGX by 23.71%
- New position in OCSE:COLO B
Baillie Gifford has made the following transactions:
Warren Buffett has made the following transactions:
- Reduce in BAC by 1.89%
Today's News
Tesla (TSLA, Financial) experienced a significant post-earnings selloff this week, with shares dropping 12.3% on Wednesday, marking their worst single-day performance since September 2020. The electric vehicle giant's fourth consecutive quarterly earnings miss and the delay of its Robotaxi event until October contributed to a $97 billion market cap wipeout. This decline was a major factor in a broader tech selloff. Despite Tesla's dramatic drop, Nvidia (NVDA, Financial) reclaimed the number one spot on Interactive Brokers' (IBKR) updated list of the most-active symbols on its trading platform.
Ford (F, Financial) shares plummeted on Thursday, opening below key moving averages due to disappointing Q2 results and ongoing concerns over warranty expenses. The automaker missed profit and revenue expectations, primarily due to losses in its electric vehicle division and increased warranty costs. CEO Jim Farley acknowledged the impact of field service actions and inflationary pressures on the company's profitability during the earnings call.
Disney (DIS, Financial) continued its downward trajectory, closing negatively on Thursday and extending its seven-day slump during which it lost 8.3%. The entertainment conglomerate's stock closed at $89.23, nearing its 52-week low of $78.73. Despite some positive ratings for profitability and growth prospects, the stock has struggled with valuation concerns and has only seen a few green trading days in recent months.
DexCom (DXCM, Financial) reported Q2 results with a Non-GAAP EPS of $0.43, beating estimates by $0.04, while revenue of $1 billion missed expectations by $40 million. U.S. revenue grew by 19%, and international revenue increased by 7% on a reported basis. The company provided guidance with revenue expected to be between $4.00 and $4.05 billion for the year, below the consensus estimate of $4.33 billion.
L3Harris Technologies (LHX, Financial) posted Q2 Non-GAAP EPS of $3.24, surpassing expectations by $0.06, with revenue of $5.3 billion, slightly missing by $10 million. The company raised its 2024 revenue guidance to a range of $21.0 billion to $21.3 billion and increased its Non-GAAP EPS guidance to $12.85-$13.15.
Kinsale Capital (KNSL, Financial) reported impressive Q2 results, with Non-GAAP EPS of $3.75, beating estimates by $0.20, and revenue of $384.55 million, exceeding expectations by $10.77 million. The company's gross written premiums increased by 20.9%, and net investment income rose by 48.3%.
Boston Beer (SAM, Financial) missed Q2 expectations with GAAP EPS of $4.39, falling short by $0.63, and revenue of $579.1 million, down 4% year-over-year. The company reported declines in depletions and shipments but maintained its full-year 2024 guidance for depletions, shipments, and gross margin.
Juniper Networks (JNPR, Financial) shares dropped 1.3% in extended-hours trading after reporting preliminary Q2 results that missed expectations. The company earned an adjusted $0.31 per share, with revenue dropping 16.8% year-over-year to $1.19 billion. Despite the miss, Juniper saw robust orders from cloud customers and strong demand in its enterprise segment.
Digital Realty (DLR, Financial) delivered mixed Q2 results, with core FFO per share beating estimates while revenue missed. The data center REIT reaffirmed its 2024 FFO per share guidance and maintained its revenue outlook, citing strong demand for data center capacity and improved financial leverage.
Deckers Outdoor (DECK, Financial) reported a strong Q1 with GAAP EPS of $4.52, beating estimates by $1.01, and revenue of $825 million, up 22.1% year-over-year. The company saw significant growth in both direct-to-consumer and wholesale channels and raised its full fiscal year 2025 outlook for net sales and gross margin.
Microsoft-backed (MSFT) OpenAI has started testing SearchGPT, a new AI-driven search feature, with a select group of users and publishers. The initiative aims to combine AI models with web information, addressing concerns about the impact on publishers and content creators by providing clear attribution and links.
Apple (AAPL, Financial) shares rose on Thursday as Baird raised its price target to $240, citing the potential boost in iPhone sales from its AI initiative, Apple Intelligence. The firm noted that a significant portion of iPhones globally would need to upgrade to take advantage of the new AI features.
GuruFocus Stock Analysis
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