A Volatile US Market Week Ahead ? Read & Know.
Week In Review.
Last week was a disappointment, especially after Wed, 17 Jul 2024.
Market never really recovered after that, as predicted in my post (click here ! to read).
It was a bitter pill to swallow when faced with actuality, when the two weeks prior were so positive and charting new “highs” almost daily.
By the time market closed on Friday: (see above)
DJIA: +0.3% (-149.13 to 40,287.13). Still in the green zone, an outlier with a tiny 0.3% gain.
S&P 500: -2.36% (-133.16 to 5,505.00). Sustained a smaller weekly decline
Nasdaq: -4.11% (-758.97 to 17,726.94). Snapped a 6-week string of gains.
S&P 500 Expected Volatility.
The VIX index performance was exact opposite of the S&P 500 and Nasdaq.
For the week ending 19 Jul 2024, it had gained +27.47% to round off the week at 16.52., a 3rd peak YTD.
Although there is resilience in overall market’s sentiments, a rise in the VIX suggests heightened investor anxiety and uncertainty.
[Sidetrack] : The “real” VIX actually measures the expected volatility of the S&P 500 index over the next 30 days.
The implied volatility coincided with a pullback in mega-cap stocks, which have been leading the S&P 500 this year.
Due to their outsized market capitalizations, the Magnificent Seven stocks hold a disproportionate influence on the market-cap weighted Nasdaq composite and S&P 500 indexes. (see below)
Mega Tech Stocks Performances.
The “Magnificent Seven” had a “dipped” performance for the week ending 19 July 2024. (see above)
Based on ascending percentage “decline”:
$Microsoft(MSFT)$ : -3.53% (-$15.99).
GOOG : -3.94% (-$7.35).
$Meta Platforms, Inc.(META)$ : -4.43% (-$22.04)
$Apple(AAPL)$ : -5.51% (-$12.18).
$Amazon.com(AMZN)$ : -5.87% (-11.38)
TSLA : -6.52% (-$10.03)
$NVIDIA Corp(NVDA)$ : -9.76% (-$12.76).
Although Nvidia had the “biggest” percentage fall of -9.76%, Meta Platform had the biggest quantum decline at $22.04.
Sectors - Winners & Losers.
As a “strategic” investor, besides keeping any eye on (or investing in) the Magnificent Seven, we should also sniff out non-tech winners and not put all eggs in one basket - right.
A drill down analysis of the S&P 500 Index will help:
Tech sector has a negligible 0.5% return. A surprise given how tech stocks have taken a tumble. (see Magnificent 7 above).
Finance sector still managed a credible performance of 2.0% returns given “positive” earnings by the Big 5 US banks that on the surface have beaten Wall Street consensus.
The best performing sectors belong to Utilities (3.9%) and Real Estate (4.4%).
Utilities, mention previously is coming into focus because of “fallout” on increasing artificial intelligence (AI) setup & adoption that consumes a lot of energy.
Real Estate is because both institution and retail investors are flocking back in anticipation of an interest cut by the Fed in less than 2 months’ time.
What’s In-store For This Week? [My viewpoints]
Start Of The Week.
At the start of a new week, some semblance of “calm” should return to the market given that:
Institutions and individual investors have time to reflect and take stock of last week’s trauma.
Pre-market indicators for Mon, 22 Jul 2024 seems to be singing that tune. (see above)
New Political Wind Blows.
Politically, with President Biden bowing out of the election race officially, fear of a lop-sided race to the White House has been allayed for now.
Domestically, the Democratic party will have to find a warrior to lead the party into the battle ground.
While the Republican party will have to wait and re-calibrate their campaign strategy against a new opponent; with the old game plan against Biden is obsolete mostly.
Quarterly Earnings Marches On.
Sectorial quarterly earnings will continue to take centrestage at the start of the week.
Notable mentions include:
Alphabet - Tue, 23 Jul 2023 - pm.
Tesla - Tue, 23 Jul 2024 - pm. Stock to watch given the hypes surrounding the stock.
Visa Inc - Tue, 23 Jul 2024 - pm.
Coca Cola Inc - Tue, 23 Jul 2024 - am.
IBM - Wed, 24 Jul 2024 - pm.
AT&T - Wed, 24 Jul 2024 - am.
Chipotle Mexican Grill - 24 Jul 2024 - pm. Stock to watch given its recent stock split & decline.
AbbVie Inc - Thu, 25 Jul 2024 - am.
Stellantis N.V. - Thu, 25 Jul 2024 - am.
Mid-Week.
On Thu, 25 Jul 2024, US economic report - Gross Domestic Product (GDP) for Q2 2024 first estimates will be out.
No doubt, US central bank will be pouring over it - looking for more clues that US economy continues to be in a healthy state; giving them the confidence that September 2024 is the right moment to initiate the first interest cut.
While the Fed looks to the report, the Market will look at the report to predict the Fed’s action course.
If there is ever a time US market is going to get jittery all over again, it will be Thursday IF the data does not show a healthy economy, chugging along.
End Of The Week.
On Fri, 26 Jul 2024, the other inflation report - Personal Consumption Expenditure report will be released in the morning before the start of trading day.
Wall Street is anticipating a benign reading in the personal consumption expenditures (PCE) inflation for June 2024.
This is arrived at after taking into considerations:
The softer readings in the consumer price (CPI) report released on 11 Jul 2024.
The producer prices (PPI) report released on 12 Jul 2024, that traced an increased (+0.2%) slightly more than expected in June amid a rise in the cost of services,
US Central bankers will definitely combed through this report thoroughly in preparation for their first interest cut in September 2024; barring any unforseen circumstances.
If Wall Street gets this prediction right, US market may just end on a “high” on Friday, just maybe !
It will be a pressure that the Fed needs to ensure they get it right (this time) as opposed to almost 2 years back when they dragged their feed to hike interest rate !
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