Though Friday’s gains eased some of the pain, it was another tough week for the S&P 500 and Nasdaq. The Dow and small-cap Russell 2000 were again big winners as the rotation from market darlings to underdogs waiting to trade higher continues. Sector-wise, the S&P 500 Health Care Index led gains in the rough trading week, followed by Materials and Utilities. Communication Services led losses, followed by Consumer Goods and Information Technology. Looking back at the week, second-quarter U.S. economic growth came in better than expected on Thursday, and the Personal Consumption Expenditures Price Index came in roughly in line with expectations for June on Friday. The Federal Reserve’s favorite inflation meter, PCE, strengthened the case for the central bank’s three interest rate cuts starting in September. Weak housing data last week also worked in Fed Chairman Jerome Powell’s favor. Existing home sales for June, released on Tuesday, came in below expectations. New home sales released Wednesday for June were also weak. Housing is one of the most troubling areas of inflation, so a cooling housing market will also lead to a rate cut “sooner or later.” As for the club’s earnings, positive results came from life sciences company Danaher and industrial company Dover. Ford was a big disappointment, with a roughly 20% drop in its stock price for the week making it the worst performing stock in the portfolio. We see positive net income for both Alphabet and Honeywell, despite the selling that followed their earnings announcements. In Alphabet’s case, we see profit taking as the company reported a big increase in earnings, allowing bears to take advantage of a small, unexpected drop in YouTube. As for Honeywell, it was forced to lower its earnings outlook despite raising its sales guidance as demand recovery for its short-cycle businesses is not as fast as initially thought. More broadly, 41% of the S&P 500 reported profits. Of those, 78% beat earnings expectations and 60% reported earnings above expectations. The coming week is shaping up to be another big week of gains with four mega-cap stocks and 10 other club stocks due to report. Major economic reports are also expected. Earnings We have announcements from Procter & Gamble, Stanley Black & Decker, Advanced Micro Devices, Microsoft, Starbucks, GE Healthcare, DuPont, Meta Platforms, Eaton, Amazon, Apple, Nextracker, Kotera Energy and Linde. Procter & Gamble: With consumers resisting price increases, the focus is on how P&G can continue to deliver better value through innovation. There is also a focus on market share gains and volume growth, which will be key to sales growth once price increases no longer reach meaningful levels. In the post-earnings conference call, we will be looking at comments on input and transportation costs from a margin perspective. Stanley Black & Decker: It’s all about the ongoing turnaround. That means optimizing inventory, improving cost efficiencies, and improving the supply chain. Management’s comments on demand relative to the prospect of Fed interest rate cuts will also be important. We still see upside in this stock, but we chose to reduce our position twice last week anyway, because we understand that when the stock spikes to announce something like this time, the bar is much higher. Advanced Micro Devices: Demand for its artificial intelligence accelerator chips (MI300) as the supply chain improves, and an update on the pace of the PC refresh cycle, are key items to watch on the call. We’ll also be interested to hear how management plans to further focus on software products after AMD recently announced it would acquire Silo AI. Microsoft: Azure cloud growth is the most important metric aside from revenue and profits. On the call, we want to hear about AI investments and, more importantly, any details management can provide on both the timing and magnitude of the returns they expect from those investments. Microsoft doesn’t provide guidance until about 20 minutes into its post-earnings call, so it’s best to take immediate reactions with a pinch of salt. Starbucks: Expect to see signs of traffic stabilizing after last quarter’s awful performance. Expect activist firm Elliott Management to apply pressure if the company continues to deliver disappointing results. GE Healthcare: Order rates, backlogs, margin expansion, and the timing of Chinese stimulus translating into orders will all be in focus when GEHC reports. DuPont: Results should be solid as the electronics industry continues to recover and the water business ends its de-stocking. Any updates on the three-part breakdown would be welcome. Meta Platforms: In addition to headline results, costs will be a key item of focus. Large investments in AI without much clarity on returns remain a major concern for investors. Fortunately, Meta can ease these concerns by explaining that it is slowly working on ways to monetize AI more directly, as well as how its investments have already created cost efficiencies internally and provided better targeting capabilities to its advertising customers. Eaton: We expect another quarter of better-than-expected results and earnings growth due to robust demand for electrical equipment. We added to our position last week. Amazon: In addition to further growth in Amazon Web Services cloud revenue, investors will be keeping an eye on logistics costs, especially the “cost of services” for the company’s retail division, where Amazon is expected to grow into overcapacity. Apple: Reported results are always important, but in Apple’s case, given that the iPhone 16 launch is a little further away and we have information that Apple Intelligence will require iPhone 15 Pro and above, it is guidance that will determine the stock’s reaction. Nextracker: In a politically uncertain environment, we will be focusing on margins, backlog, and the status of solar projects. Coterra Energy: The key is for management to do what they can control, which is to use capital efficiently and target the most economically viable commodities (oil or natural gas) to ensure stable cash flows and deliver continued cash returns to shareholders. As for guidance, we expect to see an increase in production without a material increase in capital expenditure projections. Linde: We expect the same as before, i.e. steady earnings growth. The Street forecast is 6%. End market commentary also helps us better formulate our view on the economy and therefore the stock market. Last week, we reduced positions to take profits before the reports. Economy This week is all about employment, with the July employment report on Friday, the July ADP U.S. Business Employment Survey on Wednesday, and the June Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. Of the three, the government employment report released on Friday is the most comprehensive and will be the most heavily weighted as it provides insights into nonfarm payroll growth, the national unemployment rate, wage inflation, part-time worker trends, and more. According to FactSet, economists expect a 160,000 job gain, wage inflation of 3.9% year-over-year, and an unemployment rate of 4.1%. ADP has been a tough predictor of government employment reports since the COVID-19 pandemic.However, it is closely watched by traders and because it breaks down employment by sector and by company size, it can also help understand which areas of the economy are hiring vigorously and which are struggling. Economists are expecting a 154,000 job gain, according to FactSet. The JOLTS provides insight into how tight the labor market is. These are June numbers, so they are lagging compared to the other two reports on employment. Finally, there is the two-day July Fed meeting that ends on Wednesday. While the market is not expecting a rate cut this time, they would like to hear as clearly as possible that they are on track to move toward a rate cut in September. Monday, July 29th Before the bell: McDonald’s (MCD) After the bell: F5 Networks (FFIV) Tuesday, July 30th Before the bell: Procter & Gamble (PG), Stanley Black & Decker (SWK), SoFi (SOFI), PayPal (PYPL), Pfizer (PFE), BP (BP), JetBlue Airways (JBLU), Merck (MRK), Corning (GLW) After the bell: Advanced Micro Devices (AMD), Microsoft (MSFT), Starbucks (SBUX), Pinterest (PINS), First Solar (FSLR), Caesars Entertainment (CZR), Electronic Arts (EA), Live Nation Entertainment (LYV), Match Group (MTCH) Wednesday, July 31st 8:15 AM ET: ADP Employment Survey 10 AM ET: Home Sales Outlook 2 PM ET: FOMC MeetingBefore the bell: GE Healthcare (GEHC), DuPont (DD), Boeing (BA), Norwegian Cruise Lines (NCLH), Wingstop (WING), Kraft Heinz (KHC), Mastercard (MA), Teva Pharmaceuticals (TEVA), Fiverr (FVRR), Humana (HUM), Vita Coco (COCO), Generac (GNRC), Hess Corporation (HES), AutoNation (AN) After the bell: Meta Platforms (META), Arm Holdings (ARM), Qualcomm (QCOM), Carvana (CVNA), Lam Research (LRCX), Western Digital (WDC), Etsy (ETSY), eBay (EBAY), MGM Resorts (MGM) Thursday, August 1 8:30 AM ET: Initial Jobless Claims 10:30 AM ET: ISM ManufacturingBefore the Bell: Eaton (ETN), Moderna (MRNA), Crocs (CROX), ConocoPhillips (COP), Mobileye Global (MBLY), Wayfair (W), Sirius XM (SIRI), Biogen (BIIB), Canada Goose Holdings (GOOS), Hershey’s (HSY), Toyota Motor Corp. (TM), Dominion Energy (D), Wendy’s (WEN), Roblox (RBLX), Regeneron (REGN), Air Products & Chemicals (APD), Shake Shack (SHAK), Shell (SHEL), Southern Company (SO), WW International (WW) After the Bell: Amazon (AMZN), Apple (AAPL), NextTracker (NXT), Kotera Energy Intel (INTC), Coinbase Global (COIN), DraftKings (DKNG), Roku (ROKU), Blockchain Global (BGC), and Yahoo! News (Yahoo). (SQ), Cloudflare (NET), Booking Holdings (BKNG), Snap (SNAP), DoorDash (DASH) Friday, August 2 8:30 AM ET: Nonfarm Payrolls 10 AM Factory Orders Before the Bell: Linde (LIN), ExxonMobil (XOM), Chevron (CVX), Enbridge (ENB), LyondellBasell Industries (LYB) (Click here for a complete list) Subscribers to Jim Cramer’s CNBC Investment Club receive trade alerts before Jim makes any trades. Jim waits 45 minutes after sending a trade alert before buying or selling shares in his charitable trust’s portfolio. 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Traders work on the floor of the New York Stock Exchange during afternoon trading on July 26, 2024 in New York City.
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It was another tough week for the S&P 500 and Nasdaq, though Friday’s gains eased some of the pain.
