To The Moon

Thursday (05 Sep) market showed a mixed reaction. NASDAQ settled slightly higher with +0.25% which is boosted by gains in some mega-cap constituents.

But S&P 500 went below ts 50-day moving average (5,506) to settle -0.30% lower. There have been mixed action seen persistently throughout the trading session which is due to the lack of conviction ahead of August Employment Situation Report on Friday (06 Sep) at 8:30 ET.

The market's recent focus has been on labor market conditions, but Thursday labor data did not gather significant responses from equities or bonds.

Economic Data Shows Expansion With Layoff Tame

We saw the labor data released on Thursday with August ADP Employment Change coming in at 99K while consensus was at 150K), with the previous revised to 111K from 122K.

Weekly Initial Claims was lower at 227K than consensus at 236K) while previous was revised to 232K from 231K Weekly Continuing Claims was 1.838 million with the previous revised to 1.860 million from 1.868 million. These labor data show that layoff activity remains relatively tame, but hiring activity is also subdued, as evidenced by the elevated stickiness of continuing jobless claims.

Q2 Productivity-Rev. was higher at 2.5% than consensus which was at 2.3% similar to previous at 2.3%. Q2 Unit Labor Costs-Rev. was lower at 0.4% than the consensus of 0.9% while previous was at 0.9%. This show that the friendly inflation view embedded in the softening unit labor costs, which were up just 0.3% over the last four quarters, the lowest rate since Q4 2013.

Overall activity in the largest sector of the U.S. economy remains in expansion mode, which is reassuring for a market concerned about a possible hard landing. Slow to moderate growth was noted across many industries.

August S&P Global US Services PMI - Final was higher at 55.7 than the previous at 55.0. August ISM Non-Manufacturing Index was also higher at 51.5% than consensus at 51.0% while previous was at 51.4%.

Note Yield Down Due to Lacklustre Action

The 10-year note yield settled twelve basis points lower at 3.722%, and the 2-year note yield settled nine basis points lower at 3.743%.

Mega Cap Helped Comm Services And Info Tech Stay In The Green

Eight of the 11 S&P 500 sectors settled with declines led by health care (-1.39%), industrials (-1.16%), and financials (-1.04%).

The mega cap help information technology and communication services to gain +0.05% and +0.52% to be the only ones in positive territory with Consumer Discretionary close at +1.41%.

Thursday’s lackluster action was also due to the understanding that the market has experienced significant consolidation this week. The S&P 500 is 2.6% lower than Friday's close, the Nasdaq Composite is down 3.3%, and the Russell 2000 is down 3.9% from last week.

Stocks To Watch

$Tesla Motors(TSLA)$ which was up 4.9% was a standout performer after a Bloomberg report suggested it could introduce full self-driving technology in China and Europe, pending necessary approvals, in the first quarter of 2025.

From the technical, both MACD and KDJ are giving clear signal of upside and TSLA is forming a bullish crossover on the MACD, so the current stock price of TSLA might still be a potential buy.

$Broadcom(AVGO)$ shares fell 3% in extended trading on Thursday after the semiconductor and software giant offered a weaker-than-expected forecast for the fourth quarter. The company expects revenue to be $14B, below the $14.13B estimate. Adjusted EBITDA is anticipated to be around 64% of total revenue. For the third quarter ending August 4, Broadcom earned an adjusted $1.24 per share as revenue rose 47% year-over-year to $13.07B. Excluding VMware, revenue rose 4% year-over-year. Semiconductor solutions revenue was $7.27B for the period, while infrastructure revenue was $5.8B.

$Salesforce.com(CRM)$ is in advanced discussions to buy privately-held startup Own for about $2 billion. Formerly known as OwnBackup, the company is a well-known provider of SaaS data protection and activation and has collaborated with other large SaaS ecosystems like Salesforce, ServiceNow, and Microsoft Dynamics 365. Salesforce and Own were not immediately available for comment.

With the technical giving CRM a signal of downside, I would not bet on this discussion on CRM acquisition, because there is much more to look at how CRM would be using this startup to boost its sales growth. Will there be upselling or cross selling from this acquisition to help?

I will hold back to look at CRM for now until we see a clear signal of potential upside.

$Docusign(DOCU)$ exceeded consensus estimates when it released its second quarter fiscal 2025 financial results on Thursday after the market closed. For the quarter ended July 31, DocuSign reported adjusted earnings per share of $0.97, which was much more than the consensus estimate of $0.81. Revenue for the quarter totaled $736M, which was also more than the estimate of $727.8M. However, shares slipped 2% during early post-market trading. For the quarter in progress, DocuSign forecasts revenue ranging from $743M to $747M, well above the estimate of $739M.

Even with a positive earnings, the market after hours did not react much to its stock price, and we can also see from the technical that DOCU is experiencing a downside trend, because what is important would be how DOCU is going to navigate its sales strategy, as I have shared in my previous on Net Retention Rate falling a concern.

DocuSign (DOCU) Net Retention Rate Falling A Concern

From the technical, both MACD and KDJ are pointing to potential downside, so I will hold back from looking at this stock.

Intel (INTC) is facing issues with its manufacturing or foundry business, which has become a red mark against the Pat Gelsinger-led company as it attempts to turn itself around. Citi believes Intel should exit the foundry business in the best interest of shareholders. Intel CFO David Zinsner said the company is skipping its 20A manufacturing technology in favor of the more advanced 18A manufacturing process, which will save Intel another $500M in costs.

Summary

I think market would still be in mixed mode as we could be seeing lack of conviction from investors as Broadcom earnings has get investors to think how the AI demand or trend would be moving.

Are we moving away from AI hardware era, and focus would now shift towards the AI software centric stocks? I think we should continue to watch the sectors as mega cap could slowly come back on the AI software demand.

Appreciate if you could share your thoughts in the comment section whether you think market would still be in a mixed trading mode because of lack of conviction.

@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.