Market overview
The stock market seemed to be waiting for important events that could lead to more active trading on Wednesday. Today’s session brought slight losses for the major indexes, ending an eight-day winning streak for the S&P 500 and the Nasdaq Composite. It was essentially a consolidation day, with neither buyers nor sellers showing strong conviction at the index level.
Individual warehouse movements
- Palo Alto Networks (PANW 368.01, +24.65, +7.2%) impressed with its earnings results and forecasts.
- 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 prediabetes.
- Boeing (BA 172.09, -7.55, -4.2%) was rocked by a Bloomberg report indicating that the company had 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 releasing disappointing guidance for fiscal 2025, but the losses were not significant.
Sector development
The only significant move today was in the energy sector (-2.7%), with all components posting losses, suggesting a basket trade to reduce exposure. WTI crude oil futures fell just 0.8% to $73.17/bbl. Outside of energy, the biggest moves were in the consumer staples (+0.5%) and materials (-0.4%) sectors.
Market volume and breadth
Today’s lack of conviction was reflected in the relatively low trading volumes on the NYSE and Nasdaq. The lack of buying interest was reflected in the advance-decline line, which favored losers by a ratio of almost 2:1 on both the NYSE and Nasdaq.
Treasury market
The Treasury market had a good day, with yields falling across the curve. Market participants expect many of the world’s leading central banks, particularly the Federal Reserve, to move to less restrictive monetary policy. The yield on the 2-year note fell seven basis points to 4.00%, and the yield on the 10-year note fell five basis points to 3.82%.
Currency and volatility
The impending policy change by the Fed, which has kept rates high longer than other central banks, continues to weaken the dollar. The US dollar index fell 0.5% to 101.48, down 4.2% for the quarter and at its lowest level since the beginning of the year. Interest in hedging increased today, reflected in the CBOE Volatility Index (“VIX”) rising 8.0% to 15.82.
Upcoming events
The rise in the VIX came ahead of Wednesday’s key 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 market opens. Also on the agenda are the release of benchmark revisions to nonfarm payrolls for April 2023-March 2024 at 10:00 a.m. ET, an auction of $16 billion in 20-year bonds at 1:00 p.m. ET and the release of minutes from the July 30-31 FOMC meeting at 2:00 p.m. ET.
Guru Stock Tips
Steven Cohen has made the following transactions:
- Reduction of PGR by 28.77%
- Sold out at AMPS
- Add RCI by 724.62%
- New position at TDG
Warren Buffet has made the following transactions:
Latest news
JD.com (JD, Financial) saw a significant 10% decline in after-hours trading after reports surfaced that a block of 144.5 million shares is being offered. The shares are being offered by Morgan Stanley at a price of $24.85 to $25.85 apiece. There is speculation that Morgan Stanley is conducting the sale on behalf of Walmart (WMT, Financial). Walmart received these shares in 2016 when it sold its Chinese e-commerce company Yihaodian for a 5% stake in JD.com. So far, no SEC filing has confirmed the sale.
Alphabet’s (GOOGL, Finance) Waymo announced that it has surpassed 100,000 rides per week, doubling its volume since May. Chief Product Officer Saswat Panigrahi attributed this milestone to targeted scaling, cost optimization and a strong customer experience. Waymo’s 6th generation hardware, which offers more resolution, range and processing power at a lower cost, was instrumental in this growth.
Microchip Technology (MCHP, Financial) saw its shares plunge in early after-hours trading after it was revealed that an unauthorized party had disrupted the use of certain servers and some business operations. The company noticed the suspicious activity on August 17 and has since been working with third-party cybersecurity consultants to contain and remediate the issue. The impact on the company’s financial condition or operations remains uncertain.
Analysts at Oppenheimer updated their top stock ideas, adding Freshpet (FRPT, Financials) and Soleno Therapeutics (SLNO, Financials) to their list of stocks expected to outperform given current market conditions. They removed Walmart (WMT, Financials) and Edwards Lifesciences (EW), among others, from their list. The analysts highlighted Freshpet’s global growth prospects and CarMax’s (KMX) strengthened operational capabilities due to digital-focused investments.
Elon Musk’s $44 billion acquisition of Twitter is the worst merger financing deal for banks since the 2008-09 financial crisis. Banks like Bank of America (BAC, Financial) and Morgan Stanley (MS, Financial) loaned Musk $13 billion for the acquisition, but Twitter’s financial performance faltered shortly thereafter, making it difficult for those banks to sell the debt without significant losses. This situation left the debt “hanging” longer than any similar unsold deal since the financial crisis.
Five9 (FIVN, Finance) has announced plans to reduce its global workforce by 7% in order to achieve balanced, profitable growth and increase shareholder value. This reduction will affect approximately 180 employees and is expected to cost the company between $12 million and $15 million. The decision follows the company’s second quarter financial results, which saw it provide lower revenue guidance for the year due to weaker booking trends.
Wolfspeed (WOLF, Financials) will report its fourth quarter results on August 21. The consensus EPS estimate is -$0.88 and the consensus revenue estimate is $201.41 million, down 14.6% year over year. Over the past two years, Wolfspeed has beaten EPS estimates 63% of the time and topped revenue estimates 63% of the time. However, recent earnings estimates have been revised downward several times.
Micron Technology (MU, Financial) ended an eight-day winning streak, closing 0.6% lower at $107.99. Despite this, the stock has gained more than 26% since the beginning of the year. Analysts remain optimistic on Micron, with a Strong Buy recommendation and a rating of 4.87 out of 5. The company received high ratings for growth but lower ratings for valuation outlook.
FuelCell Energy (FCEL, Financial) announced plans for a special meeting of shareholders on October 31 to vote on a proposal for a reverse stock split. The company did not disclose the size of the proposed reverse stock split. FuelCell has previously conducted two reverse stock splits, in May 2019 and December 2015, respectively. The company reported a net loss last quarter and saw a decline in cash and cash equivalents.
OpenAI now allows paying users to fine-tune its GPT-4o and GPT-4o mini models for specific use cases. Fine-tuning allows the models to be better tailored to user requirements and improve performance. This feature has been highly requested by developers and is considered a significant improvement in the AI’s capabilities.
Exxon Mobil (XOM) believes the arbitration panel investigating its dispute with Chevron (CVX) over the $53 billion acquisition of Hess (HES) should take into account the estimated value of Hess’s oil assets in Guyana. Exxon argues that the deal is an asset acquisition disguised as a merger that would trigger a change of control and give Exxon a right of first refusal. Chevron and Hess disagree, saying that Guyana’s valuation should have no bearing on the arbitration.
Oshkosh Defense (OSK) was awarded a $1.5 billion contract for the heavy tactical vehicle family. Locations and financing details are determined with each order, and the contract is scheduled to be completed by August 19, 2029.
