Market Overview
The stock market maintained a positive disposition through most of the session. However, the S&P 500 ended flat, and the Nasdaq Composite closed 0.2% lower, following a sharp move lower in the afternoon. This price action coincided with NVIDIA (NVDA, Financial) extending its post-earnings decline, along with other mega-cap names giving back initial gains.
NVIDIA's Performance
NVIDIA (NVDA, Financial) reported above-consensus earnings and guidance but didn't live up to ultra-high expectations. The stock slid 6.4%, falling to $117.59. Despite this decline, shares are still 137% higher this year, including today's drop. The pullback in NVIDIA shares was part of a normal consolidation after a stellar year.
Market Indices and ETFs
- The Vanguard Mega Cap Growth ETF (MGK) settled 0.3% lower.
- The PHLX Semiconductor Index (SOX) logged a 0.6% decline.
Despite these declines, the equal-weighted S&P 500 still logged a 0.4% gain. Advancers led decliners by a 2-to-1 margin at the NYSE and by a 3-to-2 margin at the Nasdaq. The Dow Jones Industrial Average reached a fresh record despite a loss in Salesforce (CRM), which dropped 0.7% to $257.01 after initially trading higher in response to its earnings report.
Positive Earnings Reports
Other companies that reported earnings garnered positive responses, contributing to the upside bias. Notable standouts included:
- CrowdStrike (CRWD) rose 2.8% to $271.67.
- Affirm Holdings (AFRM) surged 31.9% to $41.66.
- Best Buy (BBY) jumped 14.1% to $100.18.
Economic Data
Today's economic releases supported the soft landing narrative. Jobless claims remain steady, below recession-like levels, and Q2 GDP was revised up. The 10-year note yield settled three basis points higher at 3.87%, and the 2-year note yield settled two basis points higher at 3.89%. However, today's $44 billion 7-year note sale met with soft demand.
Year-to-Date Performance
- S&P 500: +17.2% YTD
- Nasdaq Composite: +16.7% YTD
- S&P Midcap 400: +10.3% YTD
- Dow Jones Industrial Average: +9.7% YTD
- Russell 2000: +8.7% YTD
Reviewing Economic Data
- July Adv. Intl. Trade in Goods: -$102.7 billion; Prior revised to -$96.6 billion from -$96.8 billion
- July Adv. Retail Inventories: 0.8%; Prior revised to 0.9% from 0.7%
- July Adv. Wholesale Inventories: 0.3%; Prior revised to 0.1% from 0.2%
- Weekly Initial Claims: 231K; Prior revised to 233K from 232K
- Weekly Continuing Claims: 1.868 million; Prior revised to 1.855 million from 1.863 million
The key takeaway from the report is the steady standing of initial jobless claims, which remain well below levels typically associated with an economy in recession.
Q2 GDP Data
- Q2 GDP-Second Estimate: 3.0%; Prior 2.8%
- Q2 GDP Deflator - Second Estimate: 2.5%; Prior 2.3%
The key takeaway from the report is that consumer spending (+2.9%) was solid in the second quarter, exceeding the prior eight-quarter average of 2.2%.
July Pending Home Sales
July Pending Home Sales dropped 5.5% against a consensus of 1.2%, compared to a prior increase of 4.8%.
Upcoming Economic Data
Friday's economic calendar features the Fed's preferred inflation gauge in the form of the PCE Price Indexes. Other data include the final reading for the August University of Michigan Consumer Sentiment survey.
Guru Stock Picks
Wasatch International Growth has made the following transactions:
- Reduce in CYBR by 23.62%
- Sold out in XAMS:IMCD
- Add in OSTO:HEM by 49.78%
- New position in NSE:APLAPOLLO
Leith Wheeler Canadian Equity has made the following transactions:
- Reduce in TSX:NFI by 1.64%
- Sold out in TSXV:LMN
- Add in TSX:FTT by 1.59%
- New position in TSX:CAR.UN
Causeway International Value has made the following transactions:
Bill Nygren has made the following transactions:
Oakmark Intl Small Cap has made the following transactions:
- Reduce in LSE:SMDS by 20.87%
- Sold out in OCSE:GN
- Add in LSE:STJ by 11.04%
- New position in XSGO:ANDINA-B
Today's News
Dell Technologies (DELL, Financial) shares rose 4.8% in extended trading after reporting fiscal second-quarter results that topped expectations. The company earned an adjusted $1.89 per share with revenue increasing by 9.1% to $25.03 billion. The Infrastructure Solutions Group delivered a standout performance with an 80% rise in servers and networking revenue, hitting $7.67 billion, well above estimates.
MongoDB (MDB, Financial) rallied in postmarket action after its Q2 earnings report showed strong new workload acquisition and better-than-expected Atlas consumption trends. Total revenue increased by 12.8% year-over-year to $478.1 million. Non-GAAP EPS was reported at $0.70, surpassing the $0.48 consensus. The company also provided optimistic guidance for Q3 and the full fiscal year 2025.
Dollar General Corporation (DG, Financial) traded 29.7% lower after a disappointing Q2 earnings report that included a sharp drop in full-year guidance. Wells Fargo analysts pointed to challenges such as macroeconomic pressure and increased competition, particularly from Walmart (WMT, Financial), as significant factors affecting the retailer's performance.
Lululemon (LULU, Financial) reported Q2 GAAP EPS of $3.15, beating estimates by $0.23, although revenue of $2.37 billion missed by $40 million. The company expects Q3 net revenue to be in the range of $2.340 billion to $2.365 billion, with diluted EPS projected between $2.68 and $2.73. For 2024, Lululemon forecasts net revenue between $10.375 billion and $10.475 billion.
Ulta Beauty (ULTA, Financial) reported Q2 GAAP EPS of $5.30, missing by $0.15, and revenue of $2.6 billion, which also fell short by $10 million. Comparable sales decreased by 1.2%, leading to a revised FY24 outlook with net sales now expected to be between $11.0 billion and $11.2 billion, down from the previous range of $11.5 billion to $11.6 billion.
Marvell Technology (MRVL, Financial) announced Q2 Non-GAAP EPS of $0.30, beating estimates by $0.01, with revenue of $1.27 billion, down 5.2% year-over-year but surpassing expectations by $20 million. The company provided a positive outlook for the third quarter, expecting net revenue to be around $1.450 billion.
Joby Aviation (JOBY, Financial) saw a spike in its shares following news of a deal with Virgin Atlantic. The partnership is expected to be commemorated with a photoshoot in London, marking a significant milestone for the eVTOL company. Joby Aviation previously announced a mutually exclusive deal with Delta Air Lines (DAL) in the U.S. and U.K.
SecureWorks (SCWX, Financial) jumped 20% after a report that majority-owner Dell Technologies (DELL, Financial) is exploring a potential sale of the cybersecurity firm. Dell has hired Morgan Stanley and Piper Sandler to solicit interest from possible buyers, including private equity firms.
Apple (AAPL, Financial) and Nvidia (NVDA, Financial) have held discussions about investing in a new funding round for OpenAI, potentially valuing the AI startup at $100 billion. Microsoft (MSFT, Financial) is also expected to be part of this funding round, continuing its previous investments in OpenAI.
GuruFocus Stock Analysis
- From Guyana to the Permian Basin: How Exxon Mobil Is Positioning for the Future by Hammad Sadiq
- PayPal: A Rebound in Progress With Strong Upside Potential by Sheraden Frances
- Why Nu Holdings Still Has Room to Run by Muslim Farooque
- Will Nvidia Continue to Dominate? by Yiannis Zourmpanos
