Share Market News for 29th July 2024

The S&P 500 and Nasdaq Composite gained on Monday, as investors eye big earnings from the technology sector in the coming days.

The S&P 500 rose 0.08% to close at 5,463.54, while the Nasdaq Composite added 0.07% to 17,370.20. The Dow Jones Industrial Average fell 49.41 points, or 0.12%, to close at 40,539.93.

– Piya Singh

Tesla shares jumped more than 5% on Monday after Morgan Stanley crowned the electric vehicle maker as its top pick among auto stocks.

Analyst Adam Jonas replaced Ford with Tesla, citing the latter’s efforts to cut costs and manage risk. Ford shares slide more than 1% in midday trading.

Jonas’ call comes as automakers have grappled with the end of the electric vehicle euphoria. Many of the companies in this sector have either walked back or delayed plans for this car type.

“While Tesla is still making cars, we note the company is aggressively redeploying incremental resources, technology, people and capital away from the auto side of the house,” Jonas wrote to clients. “We found it notable that Ford management spent far more time on its 2Q conference call discussing EVs than Tesla did.”

Even with Monday’s move, Tesla shares have still dropped by more than 5% this year. Ford shares have slid nearly 10%.

— Alex Harring

The sell-off in Big Tech appears to have found some stability, at least for the short term.

The Roundhill Magnificent Seven ETF (MAGS) rose nearly 1.2% on Monday, following a 1% gain on Friday.

Prior to this bounce, the ETF had fallen in seven of eight trading sessions, with a cumulative loss of almost 10%.

— Jesse Pound

McDonald’s is hearing the message consumers are sending loud and clear: They want more value.

While the fast-food giant missed Wall Street’s quarterly targets, investors appear more focused on what is to come, and they seem to suspect that management is on the right track with its approach to pricing.

McDonald’s shares were recently trading up 4.5% as management said it was working to make sure its menu is priced right. It also will continue its popular $5 meal deal.

“We’ve seen a lot of enthusiasm and the number of $5 meal deals sold are above expectations,” said Joe Erlinger, McDonald’s U.S. president, on its earnings conference call. “Trial rates of the deal are highest amongst lower income consumers and sentiment towards the brand around value and affordability has begun to shift positively.”

— Christina Cheddar Berk

Small-cap stocks are heading for a potential bearish signal known as an “outside day” on Monday if the Russell 2000 closes below 2,238.67, which was Friday’s lowest price.

The small-cap index has been outperforming large-cap indexes this month amid a sector-fueled rotation in the equity market. The Russell 2000 is up more than 9% in July, compared to a 0.3% gain for the S&P 500. The Russell has outperformed the S&P by more than three standard deviations above the historical average over the past 20 trading days. Market watchers have called for a near-term pause in the rally.

Crypto-connected stocks are among those furthest off their intraday highs, including Riot Platforms (RIOT), Cipher Mining (CIFR) and Marathon Digital (MARA). Other notable names trading significantly off their highs include Archer Aviation (ACHR), Carvana (CVNA) and SoundHound AI (SOUN).

An “outside day” is a two-day technical pattern where the second day’s trading range fully engulfs the prior day’s range and changes the direction of recent momentum. Traders often use this pattern to predict potential reversals in an asset’s direction.

— Nick Wells

On Semiconductor popped nearly 13% on Monday after reporting an earnings and revenue beat before the bell.

The chip company’s second-quarter adjusted earnings per share came in at 96 cents, topping the 92 cents expected from analysts polled by FactSet. Revenue was $1.74 billion, versus the $1.73 billion consensus estimate. However, both adjusted earnings per share and revenue were down from the second quarter of 2023.

The company guided for third-quarter earnings per share to come in between 91 cents and $1.03, while it anticipates third-quarter revenue will be between $1.70 billion and $1.80 billion.

“We remain dedicated to driving growth through market share gains, doubling down on investments in strategic markets, and expanding the breadth of our portfolio of industry-leading products with analog and mixed-signal solutions,” CEO Hassane El-Khoury said in the earnings press release.

“As reflected by our recent supply agreement with Volkswagen Group, we also continue to strengthen our silicon carbide leadership position in automotive as we ramp production with leading global OEMs in Europe, North America and China,” he added.

— Michelle Fox

These are the stocks making the biggest moves in midday trading:

• Walt Disney — Shares of the entertainment giant gained 2% after a big box office debut for “Deadpool & Wolverine.”
• Dexcom — Shares of the diabetes company were trading 5% higher, recouping some of their losses from Friday.
• On Semiconductor — Shares jumped nearly 13% after the chip company reported financial results that topped expectations.

Read the full list of stocks moving here.

— Lisa Kailai Han

Customers resisted higher menu prices as McDonald’s results missed across the board in the latest quarter. Same-store sales declined in all regions, leading to a 1% decline companywide, versus Wall Street expectations for a 0.4% rise. It was the first same-store sales contraction since Q4 of 2020.

Revenues were flat in the latest quarter, but missed Wall Street expectations by the largest amount since October 2014 ($6.49 billion vs. $6.61 billion estimate).

That led to the fast-food giant’s second consecutive earnings miss, with adjusted earnings per share of $2.97 versus a $3.07 estimate, its biggest earnings miss since January 2022 . Earnings contracted 6% in the latest quarter, the biggest year-over-year decline since Q4 of 2020.

Despite all the bad news, shares of McDonald’s are up — likely because the poor performance happened before the company began offering its new $5 value menu. That initiative began toward the end of June, just days before the latest quarter ended. McDonald’s has been counting on that value proposition to attract guests back to its restaurants amid what is currently a very competitive fast-food sales environment.

The recent trade into small-cap stocks may not be losing steam just yet.

The iShares Russell 2000 ETF (IWM) gained nearly 0.9% in premarket trading, signaling the market’s broader rotation into small-cap stocks could continue this week. The Russell 2000 index of small caps ended last week 3.5% higher, and is up 12% over the past month.

Boosting this rotation is the expectation that central bankers will soon cut interest rates and that the improved rate outlook and inflationary environment should then boost small caps and other cyclical areas of the market, which tend to have higher financing costs.

— Pia Singh

The S&P 500’s decline from its July 16 all-time high may not be over, according to market history collected by Sam Stovall.

From its high to the low last week, the drop in the S&P 500 totaled 4.7%, according to the chief investment strategist at CFRA. Since 1990, 68% of all declines of 4.5% or more became pullbacks within a “matter of weeks,” wrote Stovall in a Monday note. The strategist defines a pullback as a decline of 5% to 9.9%.

Oppenheimer strategist John Stoltzfus noted that after last week’s volatile market action, the prospects of a broadening rally out of megacap tech is becoming more plausible.

The S&P 500 and Nasdaq Composite fell last week, while the small-cap Russell 2000 and Dow Jones Industrial Average posted gains.

“It’s not so much that investors are abandoning the ‘Magnificent Seven’ stocks and the domination of market performance by the largest tech names but rather the broadening to us looks like a realistic perception by market participants that the next leg up requires a wider and less concentrated approach for stocks to move higher as the Fed gets nearer to cutting its benchmark rate,” Stoltzfus said in a note.

— Fred Imbert

The Federal Reserve’s Federal Open Markets Committee meets on Tuesday and Wednesday, but the market is not expecting a rate cut this week.

Traders in the fed fund futures market put the probability of the central bank holding rates steady for this meeting at roughly 96%, according to the CME Fed Watch Tool.

However, traders do overwhelmingly expect one cut at the September meeting.

— Jesse Pound

Equity futures were calm at 6 p.m. in New York, with Dow futures adding about 50 points.

— Jesse Pound