AI Powers Market: Consumer Discretionary Leads, Rate Cuts Consensus

Stay Informed and Stay Ahead: Market Watch, August 30th, 2024.

Late-Week Wall Street Markets

Key Takeaways

• Markets: DOW, S&P 500, and NASDAQ with solid gains. Consumer Discretionary leads, Energy lags. Top industry: Broadline Retail.
• Economic Reports: Data showed modest growth: personal income rose 0.3%, spending met expectations, and inflation pressures remained stable with slight increases in PCE measures.
• Yields & Commodities: Bond yields rose across most maturities: the 30-year increased to 4.195%, and the 10-year to 3.908%. Shorter-term notes also saw yield gains, while some bills declined. Commodity prices showed mixed results: crude oil fell by 2.98%, gold decreased by 0.95%, while corn and natural gas rose slightly.
• Crypto & ETFs: Cryptocurrencies experienced mixed movements Friday, stabilizing after hours. Bitcoin took a hit, settling at $59,154.97, down $5,380.86 (8.34%) over the past 5. ETF volume gainers: T-Rex 2X Long Tesla Daily Target ETF rose 7.52% to $13.15 with 4.5M shares traded. This offsets earlier bearish moves that capitalized on pullbacks.
• Market Tips: Focus on long-duration bonds, diversify with Russell 2000 ETFs, and consider adding leading mortage re-finance companies to your portfolio as Q4 rate cuts approach. Short-term, expect Bitcoin recovery, with notable growth potential in Energy and Materials.

Market Summary

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Indices & Sectors Performance:

• DOW, S&P 500, and NASDAQ rose decisively. All 11 sectors advanced, Consumer Discretionary leads, Energy lags. Broadline Retail (+3.64%),?Automobiles (+3.33%), Semiconductor & Semiconductor Equipment (+2.12%), and Electrical Equipment (+2.12%). ) leading.

Technical:

• The Dow Jones Industrial Average has experienced notable growth, with the 5-day moving average showing a +0.94% increase and a more substantial +4.59% gain over 20 days. The index continued to rise over the 50-day and 100-day periods, up +6.21% and +6.89%, respectively, and surged +21.04% over the 200-day period. Year-to-date, the Dow has gained +10.28%. Stochastic indicators reflect an overbought market across multiple time frames, with high values near 99%. RSI suggests moderate momentum, particularly in the short term, while MACD oscillators indicate strong upward trends, especially in longer periods, with increased volatility.

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• The S&P 500 has shown a consistent upward trend across various time frames. The 5-day moving average indicates a slight increase of +0.24%, while the 20-day and 50-day averages reflect stronger gains of +5.65% and +3.20%, respectively. Over the 100-day and 200-day periods, the index surged by +8.42% and +28.04%, signifying robust performance year-to-date with an 18.42% gain. Stochastic indicators suggest the market is overbought, especially in the short term, while Relative Strength Index (RSI) values hover around the mid-60s, indicating moderate momentum. MACD oscillators show positive momentum, particularly over longer periods, though short-term signals suggest consolidation.

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• The Nasdaq Composite has shown mixed performance over various periods. In the short term, the 5-day moving average is down -0.92%, while the 20-day average reveals a strong gain of +5.59%. The 50-day period remains flat with a marginal -0.04% change, while the 100-day and 200-day periods show significant increases of +8.63% and +28.66%, respectively. Year-to-date, the Nasdaq has gained +18.00%. Stochastic indicators suggest fluctuating momentum, with values varying from 47.42% to 86.81%, indicating some indecision in the market. RSI readings hover around the mid-50s, suggesting neutral momentum. The MACD oscillator is mixed, showing short-term weakness but long-term strength, indicating potential volatility ahead.

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Sectors:

• Year-to-date (YTD) data highlights a strong performance across most sectors within the S&P 500, with the index itself up +17.24%. The Information Technology sector leads with a significant +25.20% gain, followed by Communication Services at +21.35% and Financials at +20.08%. Utilities and Consumer Staples sectors also performed well, up +19.03% and +14.93%, respectively. Real Estate saw a +7.43% increase, while Energy lagged with a +8.43% gain. Sectors such as Consumer Discretionary and Industrials showed moderate growth, with Consumer Discretionary posting a smaller +3.79% rise. Overall, tech and communication services sectors drove the market, while energy and materials had more modest advances.

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Economic Highlights:

• Friday's economic data showcased modest growth in personal income and spending for July, with personal income rising by 0.3%, slightly beating the forecast of 0.2%. Personal spending met expectations with a 0.5% increase. The PCE index, a key inflation measure, rose by 0.2% month-over-month, in line with expectations, but the year-over-year PCE rate ticked up to 2.6%, slightly above the 2.5% forecast. Core PCE, which excludes food and energy, also saw a year-over-year rise of 2.6%, beating expectations. The Chicago Business Barometer (PMI) improved slightly to 46.10, signaling ongoing contraction but better than anticipated. Consumer sentiment remained steady at 67.90, closely matching forecasts. Overall, the data reflect a stable yet cautious economic environment with controlled inflation pressures.

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NASDAQ Global Market Update:

• NASDAQ saw 5.05B shares traded with a 1.58 advance/decline ratio. NVIDIA ^NVDA and ProShares UltraPro Short QQQ ^ SQQQ led actives.

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US Treasuries & Bond Markets:

• On Friday, bond prices fell across most maturities, leading to a rise in yields. The 30-year bond yield increased by 4.7 basis points to 4.195%, and the 10-year note yield rose by 4.3 basis points to 3.908%. Shorter-term notes also saw yield increases, with the 7-year and 5-year notes up by 4.0 and 3.5 basis points, respectively. The 2-year note yield rose by 2.1 basis points to 3.923%. In contrast, shorter-term bills showed mixed results, with the 1-month bill yield declining by 2.8 basis points to 5.268%, and the 3-month bill yield slightly down by 0.3 basis points to 5.095%. Overall, the bond market reflected rising yields, particularly in longer-dated maturities.

• Global bond yields rose, led by the U.S. 10-year at 3.908% (+0.043), with smaller gains in Germany, the U.K., Japan, Australia, and China.

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Market Factors:

• Mega and large cap value outperformed, gaining 1.5% and 1.3% WTD, while growth sectors lagged, with IPOs down 0.8%.

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Volatility:

• VIX at 15.00 (-4.15%); Fear & Greed Index climbs to "Greed", MCV Index “Extreme Greed”.

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Commodities & ETFs:

• Commodity prices showed mixed results: crude oil fell by 2.98%, gold decreased by 0.95%, while corn and natural gas rose slightly.

• ETF volume gainers: T-Rex 2X Long Tesla Daily Target ETF rose 7.52% to $13.15 with 4.5M shares traded. This offsets earlier bearish moves that capitalized on pullbacks.

Cryptocurrency & Currency:

• Cryptocurrencies experienced mixed movements Friday, stabilizing after hours. Bitcoin took a hit, settling at $59,154.97, down $5,380.86 (8.34%) over the past 5 days. The short-term outlook suggests potential upside, with early action indicating a possible recovery next week.

• Currencies saw mixed changes: the U.S. Dollar Index rose by 0.38%, while the Euro, U.K. Pound, and Chinese Yuan declined slightly. The Japanese Yen and Swiss Franc posted modest gains.

Stocks:

• Theriva Biologics Inc. (TOVX) surged 25.53% to $5.90 with 26.1M volume.

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?Notable Weekly Earnings:

• On Wednesday NVIDIA (NVDA), Thursday Dell Tech (DELL) beat estimates supporting AI CAGR story and boosting Markets.

Global Markets Summary:

• Asian indices rose: Nikkei +0.74%, Hang Seng +1.14%, Shanghai Composite +0.68%. European indices fell slightly: CAC 40 -0.13%, DAX -0.03%, FTSE 100 -0.04%.

Strategic Investment Adjustments:

• Focus on long-duration bonds with leveraged ETFs like ZROZ (PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF) and EDV (Vanguard Extended Duration Treasury Index ETF) to gain on potential rate cuts. Nasdaq/Tech and growth sectors show strong long-term potential. Diversify with Russell 2000 ETFs and bank index ETFs. Election years historically boost market performance. Top Small-Cap ETFs Poised to Benefit: Vanguard Small-Cap Growth ETF (VBK), iShares Russell 2000 Growth ETF (IWO), iShares S&P Small-Cap 600 Growth ETF (IJT).

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In the NEWS

Central Banking, Monetary Policy & Economics:

• Stable U.S. Inflation Keeps Door Open For Moderate Fed Cuts - WSJ
• ECB’s Villeroy Says September Rate Cut Is ‘Fair and Wise’ - Bloomberg

Business:

• Budget Airlines Want to Go Premium. That’s Easier Said Than Done. - WSJ
• Speculative Traders Turn Short Dollar as Fed Rate Cuts Loom - Bloomberg

China:

• Beijing to tap free-trade zones to reassure foreign investors with pro-business pledge - SCMP

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