Market Performance
The S&P 500 jumped 1.6% and the Nasdaq Composite logged a 2.6% gain. Meanwhile, the Dow Jones Industrial Average (+0.2%) and Russell 2000 (+0.5%) settled with smaller gains. The FOMC decision and Fed Chair Powell's press conference initially drew in additional buying interest, but gains faded slightly ahead of the close. The major indices settled with solid gains, little changed from levels seen before the 2:00 p.m. ET policy directive and 2:30 p.m. ET press conference.
FOMC Decision
The FOMC voted unanimously to leave the target range for the fed funds rate unchanged at 5.25-5.50%, as expected. The Fed is approaching its mandate in a more balanced manner, not overweighting the inflation side as it had been in prior meetings. This nuanced transition aligns with comments from various Fed officials leading up to today's decision.
Fed Chair Powell's Press Conference
Fed Chair Powell's press conference met market expectations. He didn't pre-commit the FOMC to cutting rates at the September meeting but suggested that the discussion of a rate cut would be on the table if the Fed gets the data it hopes for.
Treasury Yields
Treasuries had a somewhat muted response. The 10-year note yield fell three basis points to 4.11%, and the 2-year note yield declined two basis points to 4.34%.
Stock Highlights
The positive bias today was driven by strength in the semiconductor space and mega-cap stocks throughout the session. NVIDIA (NVDA) was a top performer, gaining 12.8%. The PHLX Semiconductor Index (SOX) jumped 7.0%. This overshadowed an earnings-related loss in Microsoft (MSFT), which fell 1.1%. The strength in semiconductor shares was in response to earnings news from AMD (AMD), Microsoft's robust capex budget, and talk that some foreign companies could be exempt from export restrictions to China. Dow component Boeing (BA) also stood out after reporting earnings, gaining 2.0%.
Year-to-Date Performance
- Nasdaq Composite: +17.2% YTD
- S&P 500: +15.8% YTD
- Russell 2000: +11.2% YTD
- S&P Midcap 400: +11.4% YTD
- Dow Jones Industrial Average: +8.4% YTD
Economic Data Review
- Weekly MBA Mortgage Applications Index: -3.9%; Prior: -2.2%
- July ADP Employment Change: 122K (consensus 160K); Prior revised to 155K from 150K
- Q2 Employment Cost Index: 0.9% (consensus 1.0%); Prior: 1.2%
- June Pending Home Sales: 4.8% (consensus 1.5%); Prior revised to -1.9% from -2.1%
- July Chicago PMI: 45.3; Prior: 47.4
The key takeaway is a year-over-year moderation in wages, salaries, and benefit costs, suggesting the Fed might be convinced to cut rates in September.
Guru Stock Picks
Fairholme Fund has made the following transactions:
- Add in JOE by 2.38%
Bruce Berkowitz has made the following transactions:
- Reduce in JOE by 3.29%
Today's News
Meta Platforms (META, Financial) saw a significant postmarket rise after reporting strong second-quarter earnings that exceeded expectations. The company posted earnings per share of $5.16, surpassing the anticipated $4.78, and reported revenue of $39.07 billion, beating the expected $38.31 billion. Meta also provided optimistic sales guidance for the current quarter, projecting between $38.5 billion and $41 billion, compared to the expected $39.2 billion. Despite increasing tech spending, particularly in artificial intelligence, the stock's positive reaction defied the recent trend of declines among tech giants post-earnings reports.
Qualcomm (QCOM, Financial) shares jumped 4.5% in extended trading following the release of its fiscal third-quarter results, which topped expectations. The company reported an adjusted earnings per share of $2.33 and a revenue increase of 11.3% year-over-year to $9.39 billion. Notably, automotive sales surged 87% to $811 million, while handset sales rose 12% to $5.9 billion. CEO Cristiano Amon highlighted the launch of Snapdragon X Series solutions as a significant milestone in transforming Qualcomm from a communications company to a broader tech entity.
Arm Holdings (ARM, Financial) experienced a 9% decline in extended trading despite reporting fiscal first-quarter results and guidance that exceeded expectations. The company posted an adjusted earnings per share of $0.40 and a 39% year-over-year revenue increase to $939 million. However, its forward guidance for the second quarter came in below analyst expectations, projecting adjusted earnings between $0.23 and $0.27 per share and revenue between $780 million and $830 million.
Teladoc Health (TDOC, Financial) reported a second-quarter non-GAAP EPS of -$0.28, which beat expectations by $0.09, but its revenue of $642.4 million missed estimates by $7.26 million. The company projected modest revenue growth for the full year, expecting a year-over-year increase in the low to mid-single digits, and an adjusted EBITDA margin expansion of 150 to 200 basis points. Despite the mixed results, shares fell by 3%.
Lam Research (LRCX, Financial) reported strong fourth-quarter results, with non-GAAP EPS of $8.14, beating estimates by $0.55, and revenue of $3.87 billion, surpassing expectations by $40 million. The company also provided a positive outlook for the upcoming quarter, projecting revenue of $4.05 billion with a gross margin of 47%. Cash and cash equivalents increased to $5.9 billion by the end of June 2024, up from $5.7 billion at the end of March 2024.
Paycom Software (PAYC, Financial) raised its full-year guidance after posting second-quarter earnings that beat Wall Street estimates. The company reported a non-GAAP EPS of $1.62, exceeding expectations by $0.02, and revenue of $438 million, up 9.2% year-over-year. Paycom also increased its stock repurchase plan, making $1.5 billion available for buybacks. The company projected third-quarter revenue between $444 million and $449 million and adjusted EBITDA between $155 million and $159 million.
Enovix (ENVX, Financial) signed a non-binding Memorandum of Understanding with a global automotive OEM to scale its cell architecture for the EV market. The agreement focuses on cell design, performance validation, and optimization at various levels. Enovix also reported a second-quarter non-GAAP EPS of -$0.14, beating expectations by $0.09, and revenue of $3.8 million, surpassing estimates by $0.15 million.
Riot Platforms (RIOT, Financial) reported a second-quarter GAAP EPS of -$0.32, missing estimates by $0.18, and revenue of $70.02 million, down 8.7% year-over-year. The decline was primarily due to a $9.7 million decrease in engineering revenues, partially offset by a $6 million increase in Bitcoin mining revenue. The company produced 844 Bitcoin during the quarter, a 52% decrease from the same period last year, mainly due to the block subsidy 'halving' event and increased network difficulty.
GuruFocus Stock Analysis
- Back-to-School Buzz: Spending Expected to Fall From 2023's Record Level​ by Wall Street Horizon
- Meta: Overvalued, but Growth Intact Amid Strategic Investments by Oliver Rodzianko
- Big Tech, Interest Rates, Inflation and Politics: What to Expect From 2nd-Quarter Earnings by Jacob Wolinsky
- The Future Is Optimistic for Duolingo by Renato Neves
- Supported by Cloud, AI Units, Microsoft Is on a Path of High Growth by Akim Guerreiro
