Market Summary
The stock market appeared to be biding its time ahead of key events that could lead to more active trading on Wednesday. Today's session saw modest losses for the major indices, breaking an eight-session winning streak for the S&P 500 and Nasdaq Composite. It was essentially a consolidation day with neither buyers nor sellers showing strong conviction at the index level.
Individual Stock Movements
- Palo Alto Networks (PANW 368.01, +24.65, +7.2%) impressed with its earnings results and guidance.
- Eli Lilly (LLY 949.97, +28.16, +3.1%) reported that tirzepatide reduced the risk of developing type 2 diabetes by 94% in adults with pre-diabetes.
- Boeing (BA 172.09, -7.55, -4.2%) was hit by a Bloomberg report indicating the company paused test flights of its 777X to investigate cracks in a key part.
- Lowe's (LOW 240.32, -2.89, -1.2%) lost ground after issuing disappointing FY25 guidance, although the losses were not significant.
Sector Performance
The only material move today was made by the energy sector (-2.7%), with losses registered by every component, suggesting a basket trade to reduce exposure. WTI crude futures were down just 0.8% to $73.17/bbl. Outside of the energy sector, the biggest moves were made by the consumer staples (+0.5%) and materials (-0.4%) sectors.
Market Volume and Breadth
Today's lack of conviction was reflected in the relatively light volume totals at the NYSE and Nasdaq. The lack of buying interest was evident in the advance-decline line, which favored decliners by nearly a 2-to-1 margin at both the NYSE and Nasdaq.
Treasury Market
The Treasury market had a good day, with yields sliding across the curve. Participants are anticipating that many of the world's leading central banks, particularly the Federal Reserve, are shifting to a less restrictive policy stance. The 2-yr note yield dropped seven basis points to 4.00%, and the 10-yr note yield fell five basis points to 3.82%.
Currency and Volatility
The impending shift for the Fed, which has kept rates higher for longer than other central banks, continues to weaken the dollar. The U.S. Dollar Index was down 0.5% at 101.48, leaving it down 4.2% for the quarter and trading at its lowest level since the start of the year. There was a pickup in hedging interest today, evidenced by the 8.0% jump in the CBOE Volatility Index ("VIX") to 15.82.
Upcoming Events
The increase in the VIX came ahead of Wednesday's main events, which include earnings reports from Target (TGT 144.44, -0.19, -0.1%), Macy's (M 17.74, -0.08, -0.5%), and TJX Cos. (TJX 113.31, +0.82, +0.7%) before the open. Also on the agenda are the release of benchmark revisions to nonfarm payrolls for April 2023-March 2024 at 10:00 a.m. ET, a $16 billion 20-yr bond auction at 1:00 p.m. ET, and the release of the Minutes for the July 30-31 FOMC meeting at 2:00 p.m. ET.
Guru Stock Picks
Steven Cohen has made the following transactions:
Warren Buffett has made the following transactions:
- Reduce in BAC by 1.48%
Today's News
JD.com (JD, Financial) saw a significant drop of 10% in after-hours trading following reports that a block of 144.5 million shares is being shopped around. The shares are being offered at $24.85-$25.85 each by Morgan Stanley, which is speculated to be selling on behalf of Walmart (WMT, Financial). Walmart received these shares in 2016 when it sold its Chinese e-commerce business Yihaodian for a 5% equity stake in JD.com. No SEC filing has confirmed the sale as of yet.
Alphabet's (GOOGL, Financial) Waymo announced that it has surpassed 100,000 trips per week, doubling its volume since May. Chief Product Officer Saswat Panigrahi attributed this milestone to deliberate scaling, cost optimization, and a strong consumer experience. Waymo's 6th-generation hardware, which offers more resolution, range, and compute power at a reduced cost, has been instrumental in achieving this growth.
Microchip Technology (MCHP, Financial) experienced a slip in early post-market trading after revealing that an unauthorized party disrupted its use of certain servers and some business operations. The company noticed the suspicious activity on August 17 and has since been working with external cybersecurity advisors to contain and remediate the issue. The impact on the company's financial condition or operations remains uncertain.
Oppenheimer analysts have updated their top equity ideas, adding Freshpet (FRPT, Financial) and Soleno Therapeutics (SLNO, Financial) to their list of stocks expected to outperform based on current market conditions. They removed Walmart (WMT, Financial) and Edwards Lifesciences (EW), among others, from their list. Analysts highlighted Freshpet's global growth prospects and CarMax's (KMX) strengthened operational capabilities due to digitally focused investments.
Elon Musk's $44B acquisition of Twitter has become the worst merger-finance deal for banks since the 2008-09 financial crisis. Banks like Bank of America (BAC, Financial) and Morgan Stanley (MS, Financial) lent $13B to Musk for the acquisition, but Twitter's financial performance faltered soon after, making it difficult for these banks to sell the debt without incurring significant losses. This situation has left the debt "hung" for a longer period than any similar unsold deal since the financial crisis.
Five9 (FIVN, Financial) announced plans to reduce its global workforce by 7% as part of efforts to drive balanced, profitable growth and increase shareholder value. This reduction will affect approximately 180 employees and is expected to cost the company between $12M to $15M. The decision follows the company's second-quarter financial results, which featured lowered annual revenue guidance due to weaker booking trends.
Wolfspeed (WOLF, Financial) is scheduled to announce its Q4 earnings results on August 21. The consensus EPS estimate is -$0.88, and the consensus revenue estimate is $201.41M, a 14.6% year-over-year decline. Over the last two years, Wolfspeed has beaten EPS estimates 63% of the time and revenue estimates 63% of the time. However, recent EPS estimates have seen multiple downward revisions.
Micron Technology (MU, Financial) ended an eight-session winning streak, closing 0.6% lower at $107.99. Despite this, the stock has gained more than 26% year-to-date. Analysts remain bullish on Micron, with a strong buy rating and a score of 4.87 out of 5. The company received high marks for growth but lower marks for valuation prospects.
FuelCell Energy (FCEL, Financial) announced plans for a special shareholder meeting on October 31 to vote on a proposal for a reverse stock split. The company did not disclose the size of the planned reverse split. FuelCell has previously enacted two reverse splits, in May 2019 and December 2015, respectively. The company reported a net loss in its latest quarter and saw a decline in cash and cash equivalents.
OpenAI has started allowing paying users to fine-tune its GPT-4o and GPT-4o mini models for specific use cases. Fine-tuning allows the models to better fit user needs and improve performance. This feature has been highly requested by developers and is seen as a significant enhancement to the AI's capabilities.
Exxon Mobil (XOM) believes that the arbitration panel studying its dispute with Chevron (CVX) over the $53B acquisition of Hess (HES) should consider the appraised value of Hess' Guyana oil assets. Exxon argues that the deal is an asset acquisition disguised as a merger, which would trigger a change of control and give Exxon the right of first refusal. Chevron and Hess disagree, stating that the Guyana valuation should not affect the arbitration.
Oshkosh Defense (OSK) was awarded a $1.5B contract for the Family of Heavy Tactical Vehicles. The work locations and funding details will be determined with each order, and the contract is expected to be completed by August 19, 2029.
GuruFocus Stock Analysis
- KLA Corp: Wonderful Business, Lousy Price by Grahamites
- Has Palantir Run Too Hot in the AI Race? by Muslim Farooque
- Capital One and Tutor Perini Look Good on Price-to-Cash Flow by John Dorfman
- Understanding Alibaba's Market Position, Financial Outlook by Uswah Tahir
- Beyond E-Commerce: Amazon Sees Its Future in Cloud, AI by Hammad Sadiq
