NEWS

Choppy trading and fresh record highs

U.S. stock markets experienced another volatile session, with the S&P 500 and Nasdaq reaching new record highs but ultimately closing flat for the second consecutive day. Investors remain cautious ahead of key Consumer Price Index (CPI) inflation data expected on Thursday.

Federal Reserve Chairman Jerome Powell's appearance before the Senate Banking Committee provided no surprises, as he refrained from signaling the timing of any rate cuts. Economists, however, feel more confident about a potential rate reduction in September following Powell's remarks that the U.S. economy is no longer "overheated" and the job market has stabilized.

The upcoming CPI data will be a significant indicator for the market, potentially influencing the Fed's next moves. Despite the mixed performance, large-cap stocks like Apple (AAPL), Alphabet (GOOGL), and Walmart (WMT) reached 52-week highs. 🤯

Anyhow, look below, these were the market close for the main indices and most fancy assets:

STOCKS

New highs but market’s breadth remains narrow

While the S&P 500 and Nasdaq touched all-time highs, the Smallcap Russell index declined, and the Dow Jones Industrials lagged behind. The technology sector initially led the market but later reversed, whereas financials, especially big banks like Goldman Sachs (GS) and JPMorgan Chase (JPM), saw significant gains ahead of the CPI data and the start of bank earnings on Friday.

Large-cap tech stocks, collectively known as the Mag7 (AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA), continue to dominate the market, accounting for about 33% of the S&P 500 and 43% of the Nasdaq 100. Despite market volatility, these stocks have shown remarkable resilience, contributing to the muted volatility in indices.👀

The market's breadth remains narrow, with a significant portion of the gains driven by a few large-cap tech stocks. The S&P 500 has seen an impressive run, up in 35 of the last 46 days, and 10 of the last 12 weeks. This bullish trend, especially into election uncertainty, highlights strong investor confidence despite broader economic concerns.

In retail, Helen of Troy (HELE) shares fell on disappointing Q1 earnings, while mattress retailers like Tempur Sealy (TPX) faced declining demand. Casual dining restaurants saw broad weakness despite a price target increase for Chipotle (CMG). Chewy (CHWY) was downgraded, and Jumia Technologies (JMIA) surged on a new Buy rating.

BP shares dropped following a Q2 earnings warning, while Chemours (CC) was upgraded. Trucking stocks faced downgrades, and Boeing (BA) reported strong deliveries.

Bank of America (BAC) was upgraded, anticipating improved net interest income. The crypto sector rebounded, with Coinbase (COIN) facing lowered revenue estimates. REITs saw upgrades for Regency Centers (REG) and SL Green (SLG), while Assured Guaranty (AGO) and Principal Financial Group (PFG) were also upgraded.

Indivior (INDV) cut its forecasts, Kymera Therapeutics (KYMR) expanded trials, Pfizer (PFE) announced a leadership change, and UniQure (QURE) reported positive trial data. Disney (DIS) announced a new cruise ship, Netflix (NFLX) received a price target increase, and Nvidia (NVDA) and Micron (MU) received positive outlooks. TEM's IPO received Buy ratings, and Arlo Technologies (ARLO) surpassed 4 million paid accounts.

OTHER ASSETS

Oil down, Gold and Dollar green

U.S. crude oil futures settled at $81.41 per barrel, down 1.12%, while Brent crude futures closed at $84.66 per barrel, down 1.27%. The market is awaiting weekly API and EIA inventory data. August gold prices rose by $4.40 to settle at $2,367.90 an ounce, reflecting cautious investor sentiment ahead of the CPI report.

The Energy Information Administration (EIA) raised its forecast for 2024 U.S. oil production by 10,000 barrels per day (bpd), now expecting output to grow by 320,000 bpd year-over-year to 13.25 million bpd. For 2025, the forecast was increased by 60,000 bpd, anticipating output to grow by 520,000 bpd year-over-year to 13.77 million bpd. The EIA maintained its 2025 U.S. oil demand forecast at 20.6 million bpd.

Treasury yields edged higher following a 10-year auction and comments from Fed Chair Powell. The U.S. sold $58 billion in 3-year notes at a high yield of 4.399%, with strong demand reflected in a bid-to-cover ratio of 2.67.

FOLLOWING DAYS

Here is what to look for next

Investors are eagerly awaiting Thursday’s CPI report, which will be a pivotal indicator for the Federal Reserve’s next moves on interest rates. The data will influence both equity markets and commodities like gold. Additionally, the start of bank earnings on Friday, with reports from JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC), will provide insights into the financial sector’s health and future prospects.

Technically, while equities have shown resilience, the narrowing market breadth suggests a cautious approach is warranted. The upcoming economic data and Fed updates will be critical in determining market direction.