To The Moon

On Thursday (18 July) we saw indices all closed near their worst levels of the session with significant losses. The S&P 500 lost -0.8%, NASDAQ decline -0.7% and DJIA lost -1.3% while Russell 2000 has the biggest decline at -1.9%.

Decliners led advancers by a 7-to-2 margin at both the NYSE and the Nasdaq.

Mega Cap and Semiconductor Early Mixed Action Ended Lower Or Pullback

There are mixed action at the indices level during the early trading session, these are coming from the mega cap and semiconductor stocks. But at the end of the day session, we saw many stocks finished lower or pulled back from their highs in early session. These includes many of the mega cap and semiconductor stocks.

The Vanguard Mega Cap Growth ETF (MGK) closed 0.9% lower and the PHLX Semiconductor Index (SOX), which had been up as much as 1.9%, closed just 0.5% higher than yesterday.

$Apple(AAPL)$ was part of the significant losers, having lost -2.1%, Amazon suffered -2.2% loss while Microsoft has a decline of -0.7%.

Only Energy Sector Manage A Positive Gain

Domino's Pizza recorded the steepest decline among S&P 500 components after reporting earnings. This price action, along with the decline in Amazon (AMZN), contributed to the underperformance of the S&P 500 consumer discretionary sector (-1.28%).

The S&P 500 Health Care sector was the worst performer with -2.29%, followed by Financials with -1.28%. The only positive gain was by Energy sector which managed to get +0.33%. Utilities was close as second with +0.06%.

Note Yield Was Higher

The 10-year note yield managed to settle four basis points higher at 4.197% and the 2-year note yield was three basis points higher at 4.471%.

Following the release of weekly jobless claims report on Thursday (18 July) morning, which showed quite a substantial increase in the initial claims, the bond and equity markets remain little changed.

Labor Market Data Show Some Softening

With the weekly initial claims coming in higher at 243K with consensus at 225K while the previous was revised to 223K from 222K, and the weekly continuing claims was 1.867 million while the previous was revised to 1.847 million from 1.852 million.

July Philadelphia Fed Index was 13.9 with consensus at 2.9) while the previous was at 1.3. June Leading Indicators was higher at -0.2% compared to consensus at -0.3%) while the previous was revised to -0.4% from -0.5%

These reports seem to fit the view that labor market is experiencing some softening, this trend might change the market’s belief that Fed likely to cut the target range for the fed funds rate before the end of the year.

Stocks To Watch

$Netflix(NFLX)$ stock dipped 2% in post market trading after surpassing revenue and user growth expectations in its Q2 earnings. Revenue grew 17% to $9.559 billion, driven by a 16.5% increase in paid memberships, which totaled 277.65 million globally.

However, free cash flow took a step back, and the average revenue per membership rose just 1%. Operating income saw a 42% year-over-year increase to $2.6 billion, and the operating margin improved to 27.2%. Earnings per share rose 48%, surpassing expectations, but the shortfall in free cash flow weighed on investor sentiment.

This does not seem to come as a surprise from the technical indicators perspective, as the MACD and KDJ are showing downside movement, and there is no potential signal for another reversal in the near term. So what could be worrying moving forward is will Netflix be able to support itself against the competition?

With a lower cash flow, it would mean that there are certain opportunities that Netflix have to forego, but for long term, this might be a chance to monitor and look at Netflix.

$Broadcom(AVGO)$ is in discussions with OpenAI, the AI startup backed by Microsoft (MSFT), to develop a new AI server chip. OpenAI has recruited engineers from Google's (GOOG) tensor processing unit team to reduce its reliance on Nvidia (NVDA). This move aligns with OpenAI CEO Sam Altman's vision to enhance global semiconductor infrastructure, addressing the current shortage of AI infrastructure.

With this move by Broadcom, we could be seeing a shift of AI race leadership as more and more companies would slowly followed suit to reduce their reliance on Nvidia, hence the makers and provider for chip makers might be in focus.

For example, we could be looking at $Taiwan Semiconductor Manufacturing(TSM)$ as well because the demand for more chip design and fabrication might increase.

$SoFi Technologies Inc.(SOFI)$ ended its seven-day winning streak, falling 3.95% after the U.S. government announced the forgiveness of $1.2 billion in student loans. This decision affected other student loan providers like Navient and Nelnet as well. Despite the recent decline, SoFi remains 15% above its 20-day simple moving average.

Despite this announcement which has caused SOFI to fell by more than 3.5% yesterday, from the technical indicators, MACD still are forming an upside and though there is sign of a small dip, but i would think the J value would not fell below the KDJ line.

I would expect SOFI to make a rebound today (19 July) towards its next earnings on 30 July 2024. At time of this writing, SOFI is up by 0.40% in 24-hours trading.

Intuitive Surgical (ISRG) reported Q2 non-GAAP EPS of $1.78, beating estimates by $0.24, with revenue of $2 billion, up 13.6% year-over-year. The company saw a 17% increase in worldwide da Vinci procedures and placed 341 da Vinci surgical systems, growing its installed base to 9,203 systems as of June 30, 2024.

From the technical, ISRG looks to be on the downside trend, but it has garnered more than 6% in post market trading after its earnings.

Amazon (AMZN) reported record sales during Prime Day 2024, with more items sold than any previous Prime Day event. Independent sellers sold over 200 million items, and the event saw increased engagement with Amazon's new AI-powered shopping assistant and the in-app shopping experience, Amazon Inspire.

Summary

I would believe that sector rotation would continue as we see energy, utilities and health care sector getting the attention from investors, there might be some semiconductor and mega cap stocks trying to make a rebound, but it would be a rather flat performance.

Appreciate if you could share your thoughts in the comment section whether you think sector rotation would continue though we could see some recovery from mega cap and semiconductor stocks.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.