It was another tough week for the S & P 500 and Nasdaq despite Friday’s rally, which helped blunt some of the pain. The Dow and small-cap Russell 2000 were again the big winners as the rotation from market darlings to down-and-out names due for a catch-up trade continued. By sector, in this wild trading week, the S & P 500 health care index led to the upside, followed by materials, and utilities. Communication services led to the downside, followed by consumer discretionary and information technology. Looking back on the week, we got a stronger-than-expected read on second-quarter U.S. economic growth on Thursday, followed Friday by a largely inline June personal consumption expenditures price index. The print on PCE. It’s the Federal Reserve’s favorite inflation gauge, bolstered the case for three central bank interest rate cuts, starting in September. Weakness in this past week’s housing data also went Fed Chairman Jerome Powell’s way. Existing home sales for June, out Tuesday, were softer than expected. June new home sales, released Wednesday, were also short. Because shelter has been one of the stickiest areas of inflation, a cooling housing market also feeds into the “sooner rather than later” case of rate cuts. As for Club earnings, we got positive results from life sciences company Danaher and industrial firm Dover. Ford was a major disappointment and its nearly 20% stock drop for the week was the worst performer in the portfolio. Alphabet and Honeywell were net positive, in our view, even though both of them saw post-earnings sell-offs. In Alphabet’s case, we think it was profit-taking because the company did report a blowout, allowing the bears to seize on a small miss at YouTube. As for Honeywell, the company was forced to shave its earnings outlook, despite an upward revision to sales guidance as the short-cycle businesses aren’t seeing demand rebound as fast as originally thought. More broadly, 41% of the S & P 500 has now reported earnings. Of those, 78% exceeded earnings expectations and 60% reported better-than-expected revenue. In the week ahead, it’s going to be another big week of earnings with the four mega-cap names and 10 other Club names set to report. Major economic reports are also on the docket. Earnings We’ll hear from Procter & Gamble, Stanley Black & Decker, Advanced Micro Devices, Microsoft, Starbucks, GE Healthcare, DuPont, Meta Platforms, Eaton, Amazon, Apple, Nextracker, Coterra Energy, and Linde. Procter & Gamble : With consumers now pushing back on price hikes, it’s all about how P & G can continue to provide better value through innovation. Also in focus are market share gains and volume growth, which are key to top-line growth when price hikes are no longer a meaningful level. On the post-earnings call, we’ll be listening for commentary about input costs and freight costs in the context of profit margins. Stanley Black & Decker : It’s all about the turnaround underway. That means inventory optimization, increased cost efficiencies, and supply chain improvements. Management’s commentary on demand against the prospect of lower Fed interest rates will also be in key. While we still see more upside in the stock, we nonetheless opted to trim our position twice this past week, understanding that the bar is much higher when a stock rallies like this one into a release. Advanced Micro Devices : Demand for artificial intelligence accelerator chips (MI300) as the supply chain improves and an update on the pace on the PC refresh cycle will be key items to watch out for on the call. We’re also interested to hear how management plans to push deeper into software offerings following AMD’s recent announcement to acquire Silo AI. Microsoft : Azure cloud growth is the single most important metric aside from sales and earnings. On the call, we’ll be interested to hear about AI investments — and more importantly, any details management can provide regarding both the timing and size of return we might see on those investments. Microsoft doesn’t provide guidance until about 20 minutes into the post-earnings call, so any reaction seen immediately after the release should be taken with a bucket of salt. Starbucks : We expect to see signs of traffic stabilizing after a horrible previous quarter. If the company continues to disappoint, expect activist firm Elliott Management to apply pressure. GE HealthCare : Order rates, the backlog, margin expansion, and the timing of stimulus in China converting to orders will all be things to watch when GEHC reports. DuPont : Results should be solid thanks to the ongoing recovery in the electronics industry and the end of destocking in its water business. Any update on the three-part breakup will be welcomed. Meta Platforms : In addition to the headline results, costs will be a key watch item as heavy AI investments without much clarity on the returns remains a key concern for investors. Fortunately, in addition to slowly working on ways to monetize AI more directly, Meta can benefit and work to assuage these concerns by talking about how investments are already improving cost efficiencies internally and providing better targeting capabilities to its advertising customers. Eaton : We’re looking for the string of beat and raise quarters to continue thanks to strong demand for its electrical equipment. We added to our position this past week. Amazon : In addition to further Amazon Web Services cloud revenue growth, investors will be focused on logistics costs, specifically the “cost to serve” on the retail side of the company’s business as we look for Amazon to grow into excess capacity. Apple : Reported results are always important — but for Apple, given the iPhone 16 announcement is a little over away and what we’ve learned about Apple Intelligence requiring an iPhone15 Pro or better, it’s the guidance that will determine the stock reaction. Nextracker : We’ll be focused on margins, the backlogs, and the state of solar projects amid political uncertainty. Coterra Energy : It’s all about management executing on things they can control. That means using capital efficiently and targeting the commodity with the most economic potential — oil or natural gas — to ensure solid cash flows and continued cash returns to shareholders. As for guidance, we want to see more production without any real increase in the capital expenditures forecast. Linde : We’re looking for more of the same — steady earnings growth; 6% is the Street estimate. End market commentary will also help us better formulate our view of the economy — and in turn the stock market. We did trim the position this past week to lock in gains ahead of the report. Economy It’s all about jobs this week, with the July employment report on Friday, the July ADP survey of hiring at U.S. companies on Wednesday, and the June Job Openings and Labor Turnover Survey, JOLTS, on Tuesday. Of the three, Friday’s jobs numbers from the government carry the most weight as they’re the most comprehensive and provide insight into, among other things, nonfarm payroll additions, the nation’s rate unemployment rate, wage inflation, and part-time worker dynamics. Economists, per FactSet, are expecting to see 160,000 job additions, wage inflation of 3.9% year-over-year, and a 4.1% unemployment rate. ADP has been a tough predictor of the government employment report since Covid. However, it is closely monitored by traders and can also be helpful in understanding what areas of the economy are hiring and where employment may be struggling, given that it does breakdown jobs by sector and business size. According to FactSet, economists are expecting to see a 154,000 job additions. JOLTS provides insight into how tight the labor market is. Those are June numbers so they are on a lag compared to the other two reports on employment. Last, but certainly not least, we have the two-day July Fed meeting set to conclude Wednesday. The market isn’t expecting to a cut this time around but will want to hear as clearly as possible that we’re on the path to a cut in September. Monday, July 29 Before the bell: McDonalds (MCD) After the bell: F5 Networks (FFIV) Tuesday, July 30 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 Inc (FSLR), Caesars Entertainment (CZR), Electronic Arts (EA), Live Nation Entertainment (LYV), Match Group (MTCH) Wednesday, July 31 8:15 a.m. ET: ADP Employment Survey 10 a.m. ET: Pending Home Sales 2 p.m. ET: FOMC Meeting Before the bell: GE HealthCare (GEHC), DuPont (DD), Boeing (BA), Norwegian Cruise Line (NCLH), Wingstop (WING), Kraft Heinz (KHC), Mastercard (MA), Teva Pharmaceutical (TEVA), Fiverr (FVRR), Humana (HUM), Vita Coco (COCO), Generac (GNRC), Hess Corp (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, Aug. 1 8:30 a.m. ET: Initial Jobless Claims 10:30 a.m. ET: ISM Manufacturing Before the bell: Eaton (ETN), Moderna (MRNA), Crocs (CROX), ConocoPhillips (COP), Mobileye Global (MBLY), Wayfair (W), SiriusXM (SIRI), Biogen (BIIB), Canada Goose Holdings (GOOS), Hershey (HSY), Toyota Motor (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), Nextracker (NXT), Coterra Energy Intel (INTC), Coinbase Global (COIN), DraftKings (DKNG), Roku (ROKU), Block (SQ), Cloudflare (NET), Booking Holdings (BKNG), Snap (SNAP), DoorDash (DASH) Friday, Aug. 2 8:30 a.m. ET: Nonfarm Payrolls 10 a.m. Factory Orders Before the bell: Linde (LIN), Exxon Mobil (XOM), Chevron (CVX), Enbridge (ENB), LyondellBasell Industries (LYB) (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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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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