Market Performance
The stock market settled near session lows, resulting in significant declines for the major indices:
- Dow Jones Industrial Average: -1.2%
- S&P 500: -1.4%
- Nasdaq Composite: -2.3%
- Russell 2000: -3.0%
Economic Data and Growth Concerns
The downside bias was driven by growth concerns following disappointing economic data:
- Weekly initial jobless claims increased to 249,000 (consensus 233,000) from 235,000 last week, indicating a softening labor market that may weaken discretionary spending.
- ISM Manufacturing Index dropped to 46.8% in July (consensus 48.5%) from 48.5% in June, showing further contraction in the manufacturing sector.
However, not all data was disappointing:
- Q2 productivity growth was higher than expected at 2.3% (consensus 1.7%).
- Unit labor cost growth was smaller than expected at 0.9% (consensus 1.7%).
Bond and Equity Market Reactions
Growth concerns influenced price action in the bond and equity markets:
- 10-yr note yield settled below 4.00%, down 13 basis points to 3.98%.
- 2-yr note yield settled 18 basis points lower at 4.16%.
The drop in yields boosted rate-sensitive areas of the market:
- Real estate: +1.6%
- Utilities: +1.9%
The communication services sector also outperformed, gaining 0.9% due to a rise in Meta Platforms (META, Financial) shares, which increased by 4.8%.
The information technology sector registered the largest decline, dropping 3.4%, primarily due to weakness in the semiconductor space. This led the PHLX Semiconductor Index (SOX) to close 7.1% lower.
Upcoming Economic Reports
Market participants will focus on the July Employment Situation report, released at 8:30 ET tomorrow, and its implications for Fed policy.
Year-to-Date Performance
- Nasdaq Composite: +14.5% YTD
- S&P 500: +14.2% YTD
- S&P Midcap 400: +9.0% YTD
- Russell 2000: +7.9% YTD
- Dow Jones Industrial Average: +7.1% YTD
Reviewing Today's Economic Data
- Weekly Initial Claims: 249K (consensus 233K); Prior 235K; Weekly Continuing Claims: 1.877 million; Prior was revised to 1.844 million from 1.851 million. The key takeaway is the rising level of initial claims, suggesting a softening labor market expected to reduce discretionary spending.
- Q2 Productivity-Prel: 2.3% (consensus 1.6%); Prior was revised to 0.4% from 0.2%. Q2 Unit Labor Costs-Prel: 0.9% (consensus 1.7%); Prior was revised to 3.8% from 4.0%. The key takeaway is the moderation in unit labor costs, closely watched by the Fed. Unit labor costs increased 0.5% over the last four quarters, the lowest rate since Q3 2019.
- July S&P Global US Manufacturing PMI - Final: 49.6; Prior 49.5.
- June Construction Spending: -0.3% (consensus 0.1%); Prior was revised to -0.4% from -0.1%. The key takeaway is that construction spending was soft across both private and public sectors, reflecting weaker demand patterns as part of a softening economy.
- July ISM Manufacturing Index: 46.8% (consensus 48.5%); Prior 48.5%. The key takeaway is the clear weakness in the manufacturing sector, a byproduct of subdued demand.
Looking Ahead
The July Employment Situation report will be released at 8:30 ET tomorrow. Other data include June Factory Orders at 10:00 ET.
Guru Stock Picks
John Hussman has made the following transactions:
Today's News
Intel (INTC, Financial) shares tumbled 10.5% in extended trading after the semiconductor giant offered weaker-than-expected guidance for the coming quarter. The company announced it would cut 15% of its workforce and suspend its dividend. Intel expects third-quarter revenue between $12.5B and $13.5B, significantly below the $14.39B analysts anticipated. The company also projects an adjusted loss of $0.03 per share, compared to the $0.30 per share in adjusted earnings analysts expected. AMD (AMD) and Nvidia (NVDA) also saw declines in sympathy with Intel's results and guidance.
Amazon (AMZN, Financial) reported Q2 GAAP EPS of $1.26, beating estimates by $0.23. Despite a revenue miss, with $148B falling short by $760M, the company saw significant growth in its AWS segment, which increased 19% year-over-year to $26.3 billion. Amazon's North America segment sales grew by 9% year-over-year to $90.0 billion, while international segment sales increased by 7% to $31.7 billion. For Q3 2024, Amazon anticipates net sales between $154.0 billion and $158.5 billion, slightly below the consensus of $158.33B.
Meta (META, Financial) shares rose following stronger-than-expected Q2 results, despite major U.S. equity averages selling off due to soft economic data. The Nasdaq Composite dropped 2.3%, marking its sharpest loss since July 24. The Dow fell 1.2%, led by Boeing (BA), and the S&P 500 slumped 1.4%, with the Information Technology sector falling 3.4%. Investors reacted to a rise in weekly initial jobless claims to 249K and the U.S. PMI Manufacturing Index falling into contraction territory.
DraftKings (DKNG, Financial) reported Q2 Non-GAAP EPS of $0.22, beating estimates by $0.03, although its revenue of $1.1B missed by $20M. The company announced a $1.0 billion share repurchase authorization, reflecting confidence in its long-term outlook. DraftKings raised its fiscal year 2024 revenue guidance to a range of $5.05 billion to $5.25 billion, indicating year-over-year growth of 38% to 43%.
BigCommerce (BIGC), Etsy (ETSY), and Wayfair (W) reported soft earnings, causing a sharp decline in the broader e-commerce and online retail sector. Wayfair saw a 2.2% decline in revenue during Q2, while Etsy reported a 3.0% year-over-year increase in revenue but a 2.9% decline in consolidated GMS. BigCommerce set profit guidance below expectations, impacting its stock performance.
Twilio (TWLO) reported Q2 Non-GAAP EPS of $0.87, beating estimates by $0.17, with revenue of $1.08B, up 4% year-over-year. The company reported more than 316,000 active customer accounts as of June 30, 2024, compared to over 304,000 in the prior year. Twilio's Q3 revenue consensus is $1.09B, with Non-GAAP EPS consensus of $0.73.
Booking Holdings (BKNG, Financial) reported Q2 Non-GAAP EPS of $41.90, beating estimates by $3.20, with revenue of $5.9B, up 7.3% year-over-year. The company saw a 7% increase in room nights booked from the prior-year quarter. Gross travel bookings increased by 4% from the prior-year quarter, reaching $41.4 billion.
MicroStrategy (MSTR, Financial) reported Q2 EPS of -$7.62, which may not be comparable to the consensus of -$0.21, with revenue of $111.44M, down 7.4% year-over-year. The company acquired 12,222 bitcoins since the beginning of Q2 for $805.2 million, bringing its total bitcoin holdings to 226,500 at a total cost of $8.3 billion.
Coinbase (COIN, Financial) reported Q2 GAAP EPS of $0.14, missing estimates by $0.78, but its revenue of $1.45B, up 104.8% year-over-year, beat estimates by $90M. The company reported adjusted EBITDA of $596 million and made significant progress in diversifying its revenues, with subscription and services revenue reaching nearly $600 million.
Snap (SNAP, Financial) reported Q2 Non-GAAP EPS of $0.02, in-line with expectations, but its revenue of $1.24B, up 15.9% year-over-year, missed by $10M. Shares fell 15% following the report. Snap's Q3 guidance range for revenue is between $1,335 million and $1,375 million, implying year-over-year revenue growth of 12% to 16%.
CloudFlare (NET, Financial) reported Q2 Non-GAAP EPS of $0.20, beating estimates by $0.06, with revenue of $401M, up 30.0% year-over-year. The company provided a Q3 revenue outlook of $423.0 to $424.0 million, in line with consensus, and a 2024 revenue outlook of $1,657.0 to $1,659.0 million.
Atlassian (TEAM, Financial) reported Q4 Non-GAAP EPS of $0.66, beating estimates by $0.06, with revenue of $1.13B, up 20.3% year-over-year. The company expects Q1 revenue between $1,149 million and $1,157 million, slightly below the consensus of $1.16B. Atlassian projects total revenue growth of 16% year-over-year for 2025.
GuruFocus Stock Analysis
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