Market Update: September 3, 2024
Economic data for the week included U.S. GDP growth for Q2 revised upward, along with higher durable goods orders and consumer confidence, in addition to gains in personal income and spending. Home prices remain strong on a trailing annual basis, although the pace has decelerated.
Equities were mixed, with value outperforming growth sectors and foreign stocks. Bonds generally fell back as yields ticked up a bit across the curve. Commodities were mixed, with energy and metals prices down for the week on demand concerns.
U.S. stocks were mixed on the lower volume last week of summer, with ‘value’ seeing gains of over a percent, while ‘growth’ fell back. Sector results reflected this, with financials gaining 3% on the week, followed by industrials and materials; on the other hand, technology stocks fell back by over -1% (largely the impact of NVIDIA), along with lesser declines in consumer discretionary (Tesla and Target). Real estate saw minor gains, despite higher yields during the week.
The most heavily-watched market news item was the earnings report for NVIDIA, expected to show revenue growth of over 100% on a year-over-year basis, with profit margins over 50% (well above most other companies in the S&P). However, investors ended up disappointed that margins weren’t continuing to expand at the same prior pace, and comments were optimistic, but not as much so as hoped—causing a stock decline. Representing nearly 7% of the S&P 500 and over 10% of the Nasdaq Composite indexes by market cap (as of the end of last week), the company represents a sizable weighting but also as a more recent bellwether of the artificial intelligence story, specifically due to demand for its specialized chips. It’s also become an indicator for the sentiment behind artificial intelligence as a thematic story, and to some degree, stocks in general, although that is a large burden to place on one a single company. There has also been some negative sentiment surrounding the AI-related firm Super Micro Computer, where short-seller accusations (admittedly self-serving in many cases) and a delayed annual report release (often taken as a precursor for deeper accounting problems) caused the stock to drop by -20%.
Foreign stocks were mixed, impacted by a percent rise in the value of the U.S. dollar. In developed markets, gains in the U.K. were coupled with little change in Europe and Japan as investors continue to expect an ECB rate cut in September. These regions were offset by declines in emerging markets. With the exception of India, which saw gains, the index was led downward by drops in China, Brazil, Korea, and Mexico, with continued demand concerns for the former.
Bonds fell back last week, as interest rates ticked a bit higher along with PCE not decelerating and hopes for a -0.50% cut in September seeming to fade a bit. Senior floating rate loans were the only positive performers, while high yield saw little change. Foreign bonds fell back generally, impacted by the stronger U.S. dollar.
Commodities were mixed, with gains in agriculture offset by declines in energy and metals, more typical with a stronger dollar. Oil prices fell -2% last week to under $74/barrel, as demand concerns in China outweighed other near-term factors. The prior weekend missile exchange between Israel and Hezbollah pushed up prices a bit, while the government in the Eastern half of Libya (somewhat of a failed state) shut down oil production in the midst of a power struggle with the Western half of the country. However, prices have been held down by apparent spare capacity and potential for OPEC+ to reverse production cuts in 2025, all of which have kept geopolitical concerns at bay for now.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.