Global Market Sell-Off
The global sell-off that began late last week on fears about US economic growth continued into the new week. Japan's Nikkei slumped 12% overnight, contributing to a cautious feeling in the US market today. The price action in Japanese stocks was related to an unwinding of the yen carry trade following a rapid strengthening in the yen against the dollar.
US Market Performance
- Dow Jones Industrial Average: -2.6%
- S&P 500: -3.0%
- Nasdaq Composite: -3.4%
Today's retreat had the S&P 500 flirting with correction territory, ultimately settling 9.3% below its high close on July 16. Only 22 of the S&P 500 components closed higher than Friday, and all 30 Dow components logged a decline. The 11 S&P 500 sectors closed with losses ranging from 1.7% (industrials) to 3.8% (information technology).
Impact of Mega Cap and Chipmaker Stocks
Losses in the mega cap and chipmaker spaces had an outsized impact on index performance. NVIDIA (NVDA, Financial) was a standout from both spaces, registering a sizable loss due in part to news that a chip has been delayed, which might impact other big tech names.
Treasury Yields
The price action in Treasuries had the 2-yr yield briefly move below the 10-yr note yield for the first time in about 2 years. Buying dissipated in response to a better-than-expected ISM Non-Manufacturing Index for July. The bond market settled little changed Friday. The 10-yr note yield settled one basis point lower at 3.79%, and the 2-yr note yield settled one basis point higher at 3.88%.
Year-to-Date Performance
- S&P 500: +8.7% YTD
- Nasdaq Composite: +7.9% YTD
- S&P Midcap 400: +3.1% YTD
- Dow Jones Industrial Average: +2.7% YTD
- Russell 2000: +3.1% YTD
Economic Data Review
Reviewing today's economic data:
- July S&P Global US Services PMI - Final: 55.0 (Prior: 56.0)
- July ISM Non-Manufacturing Index: 51.4% (Consensus: 51.3%, Prior: 48.8%)
The key takeaway from the report is that overall activity in the largest sector of the U.S. economy rebounded strongly, with indices for Business Activity and Employment jumping back into expansionary territory after contracting in June.
Upcoming Economic Data
Tuesday's economic data is limited to the June Trade Balance at 8:30 ET.
Today's News
Google (GOOG)(GOOGL, Financial) lost its antitrust suit over search, marking a significant victory for the Justice Department in its first major tech anticompetitive case in decades. U.S. District Court Judge Amit Mehta ruled that Google violated Section 2 of the Sherman Act by maintaining its monopoly in general search services and text advertising through exclusive distribution agreements. These agreements effectively blocked competitors from succeeding in the market. Alphabet's stock continued to slide following the ruling.
Palantir Technologies (PLTR, Financial) reported a successful Q2 with Non-GAAP EPS of $0.09, beating estimates by $0.01, and revenue of $678.13M, surpassing expectations by $25.71M. The company closed 27 deals over $10 million and saw a 41% year-over-year increase in customer count. Palantir also raised its full-year revenue guidance, leading to a 13% rise in shares.
Dell Technologies (DELL, Financial) is cutting its sales team as it shifts focus to artificial intelligence offerings. The company aims to streamline management layers and prioritize investments in AI to grow faster than the market. This follows a previous reduction of about 5% of its global workforce last year.
Super Micro Computer (SMCI, Financial) is set to report its Q4 results, with Wall Street expecting EPS of $8.16 on revenue of $5.31 billion. The company, which specializes in AI servers, has seen a significant revenue increase driven by demand for its products. Analysts believe Supermicro's ability to provide liquid cooling at scale gives it an edge in the AI computing market.
Kellanova (K, Financial) shares rose 15% amid reports that Mars is in talks for a potential takeover. RBC analyst Nik Modi suggested that Kellanova could be valued at $108 in such a deal, raising the company's price target to $76 from $62 and upgrading its rating to outperform.
Nvidia (NVDA, Financial) shares fell 6.4% after reports indicated a potential three-month delay in the release of its Blackwell line of GPUs designed for AI. Despite this, analysts believe the demand for Nvidia's GPUs remains strong and any sales delays will likely be pushed to fiscal 2026.
Datadog (DDOG, Financial) and Dynatrace (DT, Financial) were highlighted by Baird as strong buys ahead of their earnings reports, citing continued strong trends in cloud observability and AI. Both companies are expected to benefit from the shift to the cloud and digital modernization, with AI presenting long-term growth opportunities.
Lucid Group (LCID, Financial) announced it produced 2,110 vehicles in Q2 and delivered 2,394 vehicles, maintaining its annual production target of 9,000 vehicles. The company reported Q2 revenue of $200.58 million and a loss from operations of $787.42 million. Lucid also entered into agreements for $750 million in convertible preferred stock and a $750 million unsecured delayed draw term loan facility.
Boeing (BA, Financial) delivered the first MH-139A Grey Wolf production helicopter to the U.S. Air Force, part of a 2023 initial production order for 13 helicopters. The Air Force has awarded Boeing contracts for a total of 26 aircraft, which will support U.S. modernization efforts and national security.
GuruFocus Stock Analysis
- The Great Rotation by Wade W. Slome, CFA, CFP
- The Sane Portfolio Cruises Into Its 23rd Year by John Dorfman
- MSCI's Strong 2nd-Quarter Earnings Continue to Dispel the Negative Sentiment by Daniel Urbina
- Broadcom: Riding the AI Wave Amidst Legacy Declines, Valuation Concerns by Lucas Wong
