Monday Market Rundown, July 24th - July 28th 2024

Apple is currently embroiled in significant legal disputes with the European Union under the new Digital Markets Act (DMA). These recent charges allege that Apple's App Store practices restrict developers from directing customers to alternative purchasing options, marking a pivotal moment in the enforcement of digital competition laws. This article delves into the details of Apple's legal battles with the EU, the implications of the DMA, and the broader impact on the tech giant's business model and the global digital market.

Earnings Reports:

Monday: Enerpac Tool Group Corp. (EPAC)

Tuesday: FedEx Corporation (FDX), Woodside Energy Group (WDS), Carnival Corporation (CCL), TD Synnex Corporation (SNX), Manchester United Ltd. (MANU)

Wednesday: Micron Technology (MU), Paychex, Inc (PAYX), General Mills (GIS), Jefferies Financial Group (JEF), Levi Strauss & Co (LEVI)

Thursday: Nike, Inc. (NKE), McCormick & Company (MKC), Walgreens Bo0ts Alliance (WBA), Acuity Brands (AYI), The Simply Good Foods Company (SMPL)

Friday: Coca-Cola Europacfic Partners (CCEP), AngloGold Ashanti PLC (AU)

Economic Calendar:

Tuesday: Consumer Confidence, FHFA Housing Price Index, S&P Case-Shiller Home Price Index

Wednesday: EIA Crude Oil Inventories, MBA Mortgage Applications Index, New Home Sales

Thursday: Advanced International Trade in Goods, Advanced Retail Inventories, Advanced Wholesale Inventories, Continuing Claims, Durable Goods Orders, EIA Natural Gas Inventories, GDP – Third Estimate, GDP Deflator – Third Estimate, Initial Jobless Claims, Pending Home Sales

Friday: PCE Prices, Personal Income, Personal Spending, University of Michigan Consumer Sentiment - Final

Commentary - The Week Ahead

PCE

Market participants will be closely watching the Personal Consumption Expenditures (PCE) index for May, due on Friday. The PCE is the Federal Reserve's preferred inflation gauge, and its readings are crucial for understanding inflation trends. Economists expect core PCE to rise 0.1% month-over-month and 2.6% year-over-year, indicating a potential slowdown from April’s figures. This data is vital for shaping expectations around the Federal Reserve's monetary policy, especially concerning interest rate decisions. A tamer PCE reading, following a lower Consumer Price Index (CPI) for May, could increase hopes that inflation is cooling, possibly leading to future rate cuts.

Additionally, on Thursday, the third revision to the first-quarter gross domestic product (GDP) growth estimate will be released. The previous revision downgraded economic growth to 1.3%, reflecting a slower pace than initially estimated. This revision will offer further clarity on the economic trajectory, aiding investors and policymakers in refining their economic forecasts and policy decisions. The combination of these economic indicators will provide crucial insights into the current state and future direction of the U.S. economy.

Nvidia Shareholder Meeting, Earnings from Micron, FedEx, Nike Highlight Corporate Calendar?

Nvidia's annual shareholder meeting on Wednesday is a highly anticipated event, especially as the company's share price surge has elevated its market value to over $3 trillion. Nvidia's success in the AI market, driven by its GPUs, has positioned it as a leader in the tech industry. Investors will be eager to hear from executives about future plans, AI advancements, and strategies to maintain its competitive edge. The meeting's outcomes will be crucial in understanding Nvidia’s approach to sustaining growth amidst the rapid advancements in AI technology.

On Wednesday, Micron Technology will deliver its quarterly earnings report, garnering attention following an upgrade from Bank of America due to optimism around its AI product offerings. As AI continues to be a driving force in tech, Micron's performance in this space could significantly impact its financial results and market perception. Investors will look for insights into Micron’s sales, profit margins, and strategic plans in the competitive AI market.

FedEx, a global economic bellwether, will report its quarterly earnings on Tuesday. This follows the company's announcement of a $5 billion stock buyback program. FedEx's performance is often seen as a reflection of global economic activity, making its report crucial for assessing economic resilience. Key focus areas will include shipment volumes, cost management, and strategic adjustments amid current market conditions.

Nike’s earnings report on Thursday is also highly anticipated. Following weak guidance in the last quarter, the world's largest shoemaker is under pressure to perform. Nike’s upcoming marketing campaigns, particularly for the Summer Olympic Games, will be pivotal. Investors will seek updates on how these initiatives might boost sales and brand visibility, alongside insights into inventory levels, consumer demand trends, and international market performance.

Weekly Spotlight - Apple vs. the EU

Apple finds itself at the forefront of a major legal battle with the European Union (EU), facing significant allegations under the new Digital Markets Act (DMA). This recent clash highlights the increasing regulatory scrutiny tech giants are under in Europe and around the world.

The European Union has charged Apple with failing to comply with the DMA, specifically accusing the company of restricting developers' ability to direct customers to alternative purchasing options outside the App Store. This move marks the first charges issued under the DMA, which aims to foster competition in digital advertising, online search, and app ecosystems. If found guilty, Apple could face fines up to 10% of its global revenue, a staggering penalty for one of the world's most valuable companies.

These charges position Apple as the primary target under the DMA so far, reflecting the EU's commitment to enforcing its new digital competition laws swiftly and effectively. Earlier this year, the bloc fined Apple approximately $2 billion in a separate case addressing similar concerns with the App Store.

The DMA's introduction represents a broader effort by the EU to address the concentration of market power among a few large tech companies. Unlike traditional antitrust cases, which can drag on for years, the DMA is designed to expedite the regulatory process, aiming to complete investigations within a year. This swift approach is intended to quickly curb anti-competitive behaviors and promote a more open and contestable market.

In response to the charges, Apple has stated that it has already made changes to comply with the DMA, emphasizing its commitment to engaging with regulators and developers. However, European competition authorities remain unconvinced, pointing out that Apple's App Store rules still prevent developers from freely providing pricing information or directing users to external purchasing options.

This regulatory battle is not isolated to Europe. Earlier this year, the U.S. Department of Justice also sued Apple, alleging that its business practices stifle competition and lead to higher prices for consumers. These global regulatory challenges signify a growing consensus among international regulators about the need to rein in the market power of tech giants like Apple.

The outcome of these legal battles will have significant implications for Apple's business model, particularly its tightly controlled App Store ecosystem. For Europe, the enforcement of the DMA carries both potential benefits and risks. While it aims to create a more competitive digital marketplace, there is concern that stringent regulations might deter tech companies from rolling out innovative features in the region, as evidenced by Apple's hesitation to launch certain AI capabilities in Europe due to regulatory concerns.

As these investigations progress, the tech industry and market observers will be closely watching how Apple navigates these regulatory challenges. The EU's actions could set a precedent for future digital market regulations worldwide, influencing how tech giants operate and compete in the global market. The stakes are high, and the outcomes will likely reverberate across the entire digital economy.