EDIT 5:00pm EST: @Zerohedge on Twitter noted that, "On Wednesday, the Bureau of Labor Statistics will downward revise jobs for the April 2023-March 2024 period by up to 1 million. This means that all "beats" recorded in the past year will have been misses and the US job market is in far worse shape than the admin would admit."
U.S. stocks ended last week on a positive note, with Friday’s gains marking the conclusion of the best week in 2024 for investors. The market rallied after a sharp downturn earlier in August, driven by favorable economic data and renewed investor confidence.
S&P 500, Nasdaq, and Dow Jones: Weekly Performance
This past Friday, the S&P 500 rose by 0.2%, closing at 5,554.25. The Nasdaq Composite edged up 0.21%, finishing at 17,631.72, while the Dow Jones Industrial Average added 96 points (0.24%) to end Friday at 40,659.76. For last week, the S&P 500 gained nearly 3.9%, the Nasdaq surged by 5.2%, and the Dow advanced by 2.9%. This recovery has brought the S&P 500 within 2% of its mid-July peak, signaling a strong rebound in the market.
Key Economic Data Eases Recession Fears
The market's recovery was bolstered by key economic data released throughout last week. Retail sales reported on last Thursday far exceeded economists' expectations, while weekly jobless claims decreased, indicating a more robust labor market. Earlier in the week, inflation data also pointed towards a potential soft landing for the economy, further alleviating fears of an impending recession that had triggered a global sell-off earlier in the month.
Expert Insights on Economic Data
Mark Haefele, Chief Investment Officer at UBS, commented on the balanced economic data, noting, “The data from the past week has been well-balanced, neither too hot nor too cold, which should help ease worries about an imminent recession or persistent inflation that might hinder the Federal Reserve’s ability to cut rates swiftly to protect growth.”
Tech Stocks Lead the Rally
Technology stocks were among the top performers this past week, with Nvidia standing out as a major winner, surging over 18%. Apple and Microsoft also posted solid gains of approximately 4% and 3%, respectively. The tech sector’s strength played a crucial role in the overall market recovery.
The Road to Recovery: Overcoming Early August’s Downturn
Earlier in August, the Dow had plummeted by 1,000 points, and the S&P 500 experienced its worst day since 2022 on August 5th. These declines were fueled by fears that the Federal Reserve might be too late in cutting interest rates, potentially leading the economy into a recession. Market volatility was further exacerbated by the unwinding of a significant hedge fund currency trade.
Investor Confidence Returns
Despite the early August downturn, investor confidence rebounded as positive economic reports alleviated recession fears. This led to a seven-day winning streak for the S&P 500 and the Nasdaq’s best week since November 2023. Last Friday, consumer sentiment exceeded expectations, as reflected in the latest University of Michigan survey, further boosting market optimism.
Corporate Earnings: A Strong Showing
Corporate earnings reports continue to impress, with about 93% of S&P 500-listed companies having reported results by last Friday afternoon. Notably, over 78% of these companies have surpassed Wall Street’s forecasts, reflecting robust corporate performance. Investors are now looking forward to earnings reports from major retailers like Lowe’s, Target, and Macy’s, as well as tech companies such as Zoom Video, Workday, and Palo Alto Networks in the coming week.
Potential Google Breakup: Risks and Implications
Analysts at Mizuho have raised concerns about the potential breakup of Google by the Department of Justice, warning that a successful breakup could result in a significant 30% drop in the company’s stock value. The firm highlighted that splitting Google’s search and YouTube businesses would negatively impact its advertising operations. However, Mizuho likened the situation to Microsoft’s antitrust cases, suggesting that Google might still retain its market share despite these challenges.
Walmart’s Best Week Since 2020
Walmart shares surged about 8% this past week, positioning the retailer for its best performance since July 2020. This rally followed the company’s better-than-expected earnings report and an upward revision of its full-year outlook. Walmart’s stock has risen nearly 40% in 2024, underscoring its strong market position.
Tesla’s Market Share Woes
Tesla continues to face challenges in maintaining its market share, particularly in the U.S. According to Bernstein analyst Toni Sacconaghi, Tesla’s volume share in the U.S. has dropped from 77% in late 2019 to 48% in early 2024. Sacconaghi does not anticipate a recovery in Tesla’s market share until the company introduces new, lower-priced models, which are expected around 2026 or 2027.
Vanguard S&P 500 ETF: A Record-Breaking Year
The Vanguard S&P 500 ETF (VOO) achieved a milestone by bringing in $54 billion by the end of July, making 2024 a record-breaking year for the fund. According to Morningstar, this is the largest annual inflow for any ETF on record, with Vanguard attracting $118 billion overall by July’s end, second only to iShares.
H&R Block’s Best Day Since 2022
H&R Block shares soared by more than 13% last Friday, marking the company’s best day since May 2022. The rally was fueled by the announcement of a 17% dividend increase and a $1.5 billion share buyback. The company also reported adjusted earnings of $1.89 per share for the fiscal fourth quarter on $1.06 billion in revenue, significantly boosting investor sentiment.
Stocks Making Major Moves
Several stocks made significant moves this past Friday, including Rocket Lab, Bavarian Nordic, and H&R Block. Rocket Lab surged over 16% after successfully shipping two Mars-bound spacecraft for launch, while Bavarian Nordic experienced a similar increase following positive developments regarding its mpox vaccine. H&R Block also saw a more than 16% jump after its strong earnings report and commitment to shareholder returns.
JPMorgan Warns of Potential Market Volatility
JPMorgan analysts issued a cautionary note, suggesting that the recent market turbulence could be a precursor to future volatility. They compared the recent downturn to a “dress rehearsal” for more severe corrections, driven by concerns over economic slowdown and the unwinding of crowded trades.
Play of the Week: $NFLX (Netflix)
Current Price Action:
- Recent Run-Up: $NFLX has been on a strong run since early August, recently testing the $680 area, which could act as a potential resistance zone.
- Potential Rejection: The $680 level is being closely monitored for signs of a pullback, especially after the stock tested this area on Friday.
Support and Entry Levels:
- Primary Entry: If $NFLX rejects the $680 resistance level, look for a pullback into the $650-$660 area for potential long positions.
- Secondary Resistance: If $NFLX continues to push higher, the next key resistance level to watch is around $696.
Target Levels:
- Upside Target: If the $680 level is breached, the next upside target is the $696 area.
- Downside Target: For a pullback, the $650-$660 zone is the key support area to watch for potential entries.
For Long Positions:
- Entry Point:
- Look for a pullback into the $650-$660 support zone for potential long entries, especially if confirmation signals such as bullish candlestick patterns or increased volume appear.
- Exit Point:
- Target the $680-$696 range for taking profits if the stock rebounds from the $650-$660 area.
Risk Management:
- Stop-Loss:
- Set a stop-loss just below the $650-$660 support zone to manage downside risk.
- Re-evaluate the position if $NFLX breaks below this level.
Secondary Resistance Strategy:
-
If Pushes Above $680:
- Monitor the $696 area for potential rejection and short opportunities.
- Consider entering short positions if bearish signals confirm resistance at $696.
-
Exit Point:
- For shorts, target a pullback toward the $650-$660 area.
Additional Considerations:
- Market Influence: Stay alert to broader tech sector movements, as continued strength in the sector could push $NFLX higher, impacting the resistance levels.
- Thorough Research: Keep up with market news, earnings reports, and other factors that might influence $NFLX’s price action.
Before making any investment decisions, conduct thorough research and consider consulting with a financial advisor. This analysis is based on previous price action, which does not indicate future price action.
Conclusion
The U.S. stock market has demonstrated resilience this past week, with strong economic data and robust corporate earnings driving a significant recovery. While concerns over potential market volatility remain, the overall sentiment is positive, and investors are optimistic about the future. As the market continues to navigate through economic challenges and potential risks, the focus will be on maintaining momentum and adapting to changing conditions. As investors continue to navigate these changes, stay up to date with our free newsletter & join our Discord server with free alerts and more here!