Market Today: Cisco's Strong Earnings and Nike's Potential Activist Target

Market Overview

The stock market showed more subdued action following today's in-line CPI print compared to yesterday's rally after the favorable PPI print. The S&P 500 (+0.4%) and Dow Jones Industrial Average (+0.6%) closed with gains, while the Nasdaq Composite settled fractionally higher than yesterday. The Russell 2000 logged a 0.5% decline.

Inflation Data

Total CPI was up 0.2% month-over-month in July, as expected. Core-CPI, which excludes food and energy, was also up 0.2%, as expected. The index for shelter was up 0.4% month-over-month, accounting for nearly 90% of the increase in the all-items index.

On a year-over-year basis, total CPI was up 2.9%, versus 3.0% in June. Core-CPI was up 3.2%, versus 3.3% in June.

Market Sentiment

The lackluster response in equities was partly due to some good news being priced in yesterday. Advancers led decliners by a 5-to-3 margin at the NYSE, while decliners led advancers by the same margin at the Nasdaq.

Stock Movements

• Kellanova (K): Kellanova (K 80.28, +5.78, +7.8%) was the top-performing stock in the S&P 500 after news that Mars will acquire Kellanova for $83.50/share in cash, or total consideration of $35.9 billion, including debt.
• Alphabet (GOOG): Alphabet (GOOG 162.03, -3.90, -2.4%) was an influential laggard after a Bloomberg report that the Department of Justice may be looking at breaking up the company following last week's court ruling that Alphabet violated search-related antitrust laws.
• Meta Platforms (META): Meta Platforms (META 526.76, -1.78, -0.3%) also saw a decline, contributing to the S&P 500 communication services sector (-0.9%) ending in last place.

Sector Performance

The financial (+1.3%) and information technology (+0.6%) sectors logged some of the largest gains.

Fed Rate Expectations

The CPI print also had the market repricing the likelihood of a 50 basis points rate cut at the September FOMC meeting. According to the CME FedWatch Tool, there is still a 100% probability of a 25 basis points rate cut in September after today's release, but the probability of a 50 basis points rate cut has been reduced to 35.5% from 53.0%.

Bond Market

The 2-yr note yield, which is most sensitive to changes in the fed funds rate, settled one basis point higher at 3.95%. The 10-yr note yield declined three basis points to 3.82%.

Year-to-Date Performance

• Nasdaq Composite: +14.5% YTD
• S&P 500: +14.4% YTD
• S&P Midcap 400: +6.2% YTD
• Dow Jones Industrial Average: +6.2% YTD
• Russell 2000: +2.8% YTD

Today's Economic Data

• Weekly MBA Mortgage Applications Index: 16.8%; Prior: 6.9%
• July CPI: 0.2% (consensus: 0.2%); Prior: -0.1%
• July Core CPI: 0.2% (consensus: 0.2%); Prior: 0.1%

The key takeaway from the report is that it points to ongoing disinflation. Hence, it won't change the market's belief that the Fed will cut rates by 25 basis points in September, even though CPI inflation is comfortably above the Fed's 2% goal, which is oriented around PCE price inflation currently at 2.5%.

Guru Stock Picks

Andreas Halvorsen has made the following transactions:

• Add in LBPH by 78.6%

Jefferies Group has made the following transactions:

• Reduce in KTB by 67.18%
• Sold out in GBX
• Add in EQT by 68.11%
• New position in PLNT

Nelson Peltz has made the following transactions:

• Reduce in WEN by 51.74%

Bill Ackman has made the following transactions:

• Reduce in QSR by 0.88%
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Bruce Berkowitz has made the following transactions:

• Reduce in JOE by 3.29%

Warren Buffett has made the following transactions:

• Reduce in BAC by 2%

Chase Coleman has made the following transactions:

• Reduce in JD by 73.79%
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Murray Stahl has made the following transactions:

• Reduce in BGC by 1.89%
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• Add in IBM by 0.55%
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John Rogers has made the following transactions:

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Mason Hawkins has made the following transactions:

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Mario Gabelli has made the following transactions:

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Howard Marks has made the following transactions:

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Alan Fournier has made the following transactions:

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Arnold Van Den Berg has made the following transactions:

• Reduce in RSP by 2.88%
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Tiger Management has made the following transactions:

• Add in VOO by 296.09%

Mairs and Power has made the following transactions:

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Francis Chou has made the following transactions:

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Barrow, Hanley, Mewhinney & Strauss has made the following transactions:

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Leon Cooperman has made the following transactions:

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HOTCHKIS & WILEY has made the following transactions:

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Jana Partners has made the following transactions:

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Yale University has made the following transactions:

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Mark Hillman has made the following transactions:

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Robert Karr has made the following transactions:

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Philippe Laffont has made the following transactions:

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Paul Tudor Jones has made the following transactions:

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Prem Watsa has made the following transactions:

• Reduce in MU by 94.23%
• Sold out in GEV
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• New position in UAA

Ruane Cunniff has made the following transactions:

• Reduce in LBRDK by 13.31%
• Add in GPI by 23.1%
• New position in GS

Today's News

Cisco (CSCO, Financial) reported Q4 Non-GAAP EPS of $0.87, exceeding expectations by $0.02. The company’s revenue came in at $13.64 billion, beating estimates by $100 million despite a 10.3% year-over-year decline. Product order growth increased by 14% year-over-year, and the total subscription revenue reached $27.4 billion, including contributions from Splunk. Cisco's Q1 FY 2025 guidance forecasts revenue between $13.65 billion and $13.85 billion, slightly above consensus estimates.

Medical Properties Trust (MPW, Financial) completed the sale of 11 facilities in Colorado to University of Colorado Health for $86 million. The proceeds will be used to reduce debt and for general corporate purposes.

Speculation is mounting that Nike (NKE, Financial) could be the next target for an activist investor. Former Deckers CEO Dave Powers is considered a strong candidate to take over as Nike's CEO. UBS's recent acquisition of 11 million shares in Nike has fueled these rumors, with the bank now holding 27 million shares.

Stanley Druckenmiller (Trades, Portfolio)'s Duquesne Family Office significantly reduced its stakes in Apple (AAPL, Financial), Coupang (CPNG), and Microsoft (MSFT) during Q2. The firm exited its positions in Capital One Financial (COF), Vertiv Holdings (VRT), and KeyCorp (KEY), while adding new stakes in Adobe (ADBE, Financial), TeraWulf (WULF), SpringWorks Therapeutics (SWTX), and Philip Morris International (PM). Duquesne also increased its holdings in Coherent (COHR), Seagate Technology (STX), and Kinder Morgan (KMI).

StoneCo (STNE, Financial) reported Q2 Non-GAAP EPS of R$1.61 and revenue of R$3.21 billion, marking an 8.8% year-over-year increase. The company achieved an adjusted EBITDA of R$1,587.2 million, a 5.9% increase year-over-year, and an adjusted EBITDA margin of 49.5%.

Michael Burry (Trades, Portfolio)'s Scion Asset Management closed out positions in Sprott Physical Gold Trust (PHYS), Safe Bulkers (SB), Star Bulk Carriers (SBLK), and BP Plc (BP) during Q2. The firm added new positions in Hudson Pacific Properties (HPP), Olaplex Holdings (OLPX), Molina Healthcare (MOH), and BioAtla (BCAB). Scion increased its stakes in Baidu (BIDU) and Alibaba (BABA, Financial), while reducing its holdings in The RealReal (REAL) and JD.com (JD).

Tiger Global Management increased its holdings in Amazon (AMZN, Financial) and Alphabet (GOOGL, Financial) during Q2 2024. The firm reduced its stakes in Uber Technologies (UBER, Financial) and JD.com (JD) while opening new positions in Reddit (RDDT), Rubrik (RBRK), and Astera Labs (ALAB). Exited stakes include Maplebear (CART) and Freshworks (FRSH).

Apple (AAPL, Financial) is developing a tabletop robot with a display similar to an iPad and a robotic limb. The device is intended to serve as a smart home command center, video conferencing device, and remote-controlled home security tool. Despite internal debates, CEO Tim Cook and head of hardware engineering John Ternus are championing the project.

Soros Fund Management closed out its stakes in Alphabet (GOOGL, Financial), Aercap Holdings (AER), Okta (OKTA), Cboe Global Markets (CBOE), DoorDash (DASH), and Jacobs Solutions (J) during Q2. The firm reduced its holdings in Nike (NKE, Financial) and Uber Technologies (UBER, Financial) while adding new positions in Fiserv (FI), DraftKings (DKNG), Target (TGT), and Salesforce (CRM).

The FDA approved Incyte’s (INCY, Financial) biologic therapy Niktimvo for treating chronic graft-versus-host disease (cGVHD) after the failure of at least two prior lines of systemic therapy in adult and pediatric patients weighing at least 40 kg.

Softbank Group (SFTBY) increased its stake in Nvidia (NVDA, Financial) and took a new stake in Tempus AI (TEM) during Q2. The company’s holdings in Nvidia rose to 10.5 million shares. Softbank also trimmed its stakes in IonQ (IONQ) and T-Mobile US (TMUS) and exited its position in Airspan Network Holdings (MIMOQ).

Alphabet (GOOGL, Financial) shares fell 3.3% following reports that the Justice Department is considering a push to break up the tech giant after a recent antitrust case victory. Analysts remain skeptical about the likelihood of a breakup happening quickly.

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