Market Overview
Today's session started on an upbeat note, leading the S&P 500 and Dow Jones Industrial Average to new all-time intraday highs. Stocks faded from session highs, though, leaving the S&P 500 and DJIA near their flat lines at the close.
Economic Data
Market participants were digesting some relatively pleasing economic data, which supported the soft landing narrative and didn't change the market's rate cut expectations that much. Retail sales and industrial production were both stronger than expected in August. According to the CME FedWatch Tool, the likelihood of a 50 basis points rate cut tomorrow sits at 63.0%, up from 34.0% one week ago.
Market Performance
The market's optimistic view on the economy and rate cuts contributed to an overall positive bias, and to the outperformance of small-cap stocks and cyclical sectors. The Russell 2000 climbed 0.7%, and the S&P 500 energy (+1.4%), industrials (+0.5%), financial (+0.5%), and consumer discretionary (+0.6%) sectors showed relative strength. Countercyclical sectors underperformed the index. The health care (-1.0%) and consumer staples (-0.9%) sectors were the worst performers today.
Notable Stock Movements
Positive price action in Microsoft (MSFT) also provided some support to the broader market after news of a 10% increase to its quarterly dividend and a share buyback authorization up to $60 billion.
Bond Market
The 10-yr yield settled two basis points higher at 3.64%, and the 2-yr yield settled three basis points higher at 3.59%.
Year-to-Date Performance
- S&P 500: +18.1% YTD
- Nasdaq Composite: +17.4% YTD
- Dow Jones Industrial Average: +10.4% YTD
- S&P Midcap 400: +10.4% YTD
- Russell 2000: +8.8% YTD
Reviewing Today's Economic Data
- August Retail Sales 0.1% (consensus -0.2%); Prior revised to 1.1% from 1.0%
- August Retail Sales ex-auto 0.1% (consensus 0.2%); Prior 0.4%
The key takeaway from the report is that control group sales -- the component that factors into GDP -- were up a sturdy 0.3% following an upwardly revised 0.4% increase (from 0.3%) in July and 0.9% increase in June. There is no hard landing in those numbers.
- August Industrial Production 0.8% (consensus 0.1%); Prior revised to -0.9% from -0.6%
- August Capacity Utilization 78.0% (consensus 77.9%); Prior revised to 77.4% from 77.8%
The key takeaway from the report is that industrial production snapped back in August, led by manufacturing output and a near 10% increase in the index of motor vehicles and parts, after being depressed by Hurricane Beryl in July.
- July Business Inventories 0.4% (consensus 0.4%); Prior 0.3%
- September NAHB Housing Market Index 41 (consensus 41); Prior 39
Tomorrow's Economic Lineup
- 7:00 ET: Weekly MBA Mortgage Applications Index
- 8:30 ET: August Housing Starts and Building Permits
- 10:30 ET: Weekly EIA Crude Oil Inventories
The headline event tomorrow is the Fed policy decision at 2:00 ET.
Guru Stock Picks
Steven Cohen has made the following transactions:
Today's News
Rising prices and an uncertain economic situation have increasingly forced consumers to turn to credit cards to make ends meet. At the same time, the interest rates for these purchases have soared to new highs. As a result of these macro factors, many of the industry's biggest players have drawn significant attention from investors. This has been a boon for shares of credit card giants American Express (AXP, Financial), Visa (V, Financial), and Mastercard (MA, Financial), which have drifted higher through 2024 and have set new 52-week highs. The upward momentum has come as consumers become even more reliant on credit cards. A study issued by the Federal Reserve Bank of New York showed that credit card debt jumped to $1.14T in Q2, or about $6,500 per person. This was up 10.8% from last year. Meanwhile, the cost of carrying credit card debt has jumped dramatically.
Interactive Brokers (IBKR) said reduced net buying on its trading platform suggests clients may be feeling cautious before the Federal Reserve’s policy meeting set to conclude on Wednesday. Despite this, large-cap equities have advanced largely as investors see the possibility of the Fed making a deep rate cut of 50 basis points. Tech sector behemoths Nvidia (NVDA, Financial) and Tesla (TSLA, Financial) occupied familiar first and second spots on IBKR’s weekly list of the 25 most-active symbols. However, net buying in Nvidia was "quite modest" compared with recent reports.
Coca-Cola Company (KO, Financial) announced on Tuesday that it is partnering with Bacardi Limited to debut a ready-to-drink pre-mixed cocktail. The BACARDĂŤ Mixed with Coca-Cola RTD product will be available in several markets around the world, with the initial launch planned for select European markets and Mexico in 2025. This partnership marks Coca-Cola's continued development of its portfolio into the growing alcohol ready-to-drink market.
Nvidia (NVDA, Financial) is in discussions to acquire software startup OctoAI. The chipmaker has offered roughly $165M for the Seattle-based startup, which sells software for customers to use and make their artificial intelligence models run more efficiently. Nvidia shares fell 1.4% in late afternoon trading on Tuesday.
Albertsons (ACI, Financial) slid 2.2% on the last day of the Federal Trade Commission's trial to block the supermarket chain's $25 billion sale to rival Kroger (KR, Financial). Kroger fell 1.7%. The FTC sued to block the mega supermarket combination, arguing it would lead to higher prices for consumers. The supermarket chains argue that they need to get bigger to better compete with Walmart (WMT), Amazon (AMZN), and Costco (COST).
Snap (SNAP, Financial) revealed its fifth generation of Spectacles, an augmented reality headset powered by Snap OS, the company's new operating system. The glasses operate independently or with a smartphone and are available today for subscribers of the Spectacles Developer Program. Spectacles are powered by Qualcomm's (QCOM) Snapdragon processors. Snap also announced a new partnership with Microsoft-backed (MSFT) OpenAI to bring cloud-hosted multimodal AI models to Spectacles.
Electronic Arts (EA, Financial) is on track towards the high end of the net bookings guidance it provided in July for the second quarter and full fiscal year ending March 31, 2025. The company is investing in The Sims platform and expects to more-than-double annual net bookings from it over the next five years. EA also plans for a movie partnership with Amazon MGM Studios.
The Children's Place (PLCE, Financial) soared in midday trading on Tuesday amid a high level of short interest outstanding on the retailer. Volume on PLCE was above normal activity as shares broke to a six-month high. The rally started earlier in the month after the company's Q2 earnings report showed improved profitability despite lower revenue.
SentinelOne's (S) deal with Lenovo to include SentinelOne's software and generative artificial intelligence solutions on all new PC shipments could "meaningfully" contribute to SentinelOne’s top line in 12 months, according to Wells Fargo. SentinelOne shares rose 6% in late afternoon trading.
Senator Tommy Tuberville disclosed that he sold shares in tech giant Apple (AAPL, Financial), along with several other companies. The form showed sales of Medtronic (MDT), CVS (CVS), and UPS (UPS), made via a joint account.
Casella Waste Systems (CWST) said on Tuesday that it has commenced a proposed underwritten public offering of $400 million of its Class A common stock. Casella intends to use the net proceeds to finance its acquisition of Royal Carting and Welsh Sanitation, to repay borrowings under its revolving credit facility, and for general corporate purposes.
Newmont (NEM) is on track to raise at least $2B from selling smaller mines and development projects. The company plans to finalize sales of mines and projects in Ghana, the U.S., and Canada by the end of Q1 2025.
Accenture (ACN) shares fell 3% on Tuesday after Bloomberg reported that the company has pushed back the majority of staff promotions amid the continued slump in the consulting industry. Most promotions will occur in June 2025, as opposed to December.
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