The Buzz on Business for July 18th, 2024

We had thought that stocks were beginning to straighten themselves out. Apparently, we were wrong.

Beginning in mid-May, we took note of divergences between the Dow and the NASDAQ, the indexes and volume, and the indexes and the Advance/Decline line. We took note of these divergences on this podcast.

These divergences were, perhaps, explained by the fact that the broad market was pausing, consolidating even correcting, while a narrow slice of the tech sector, particularly the chip stocks, particularly the Magnificent Seven, particularly NVIDIA continued to rally. While we worried over these developments a bit, we finally concluded that markets were waiting for evidence that the Fed would start cutting rates at which time, we hypothesized that stocks might continue the rally that began back in October.

That hypothesis seemed confirmed over the last week or so as all the major indexes rallied and rallied in unison, and as long dormant volume expanded and as the advance decline line moved solidly into positive territory.

But, Wednesday’s market action, and we’ll get into the numbers in just a minute, presented some countervailing evidence, and then some.

We think our hypothesis remains solid, if perhaps requiring some refinement and nuance, or maybe just some time for these forces to play out.

What is clear is that these things never unfold in a straight line and to steal a baseball analogy, yesterday, markets put up some crooked numbers.

Stock Market Report

Stocks broke down on Wednesday in a rather dramatic sell-off and on rising, above average volume.

• The exception to the bad news was the Dow Jones Industrials. The Dow was up six tenths of a percent, that’s 244 points and it closed, in record territory, at 41,198.
• Could this have been a flight to safety because the rest of the market got crushed. The S&P 500 was off 1.4%, 79 points, and it closed at 5,588.
• The NASDAQ Composite gapped down and the open and sold off all day long. It was off 512 points, almost 2.8%, and it closed at 17,997.
• The Russell 2000 was also off and off sharply but its chart looks much better than either the NASDAQ or the S&P. It was 1.1%, that’s 24 points and it starts the day today at 2,240.

Bond Market Report

Interest rates were mixed but mostly little changed on the day.

• The yield on the 2-year treasury was up just two basis points and it closed at 4.440%.
• The 20-year closed basically flat. It now yields 4.478%

Oil, Gold, and Bitcoin

• Oil soared on a bit of bullish news. It was up $2.16, and a barrel now changes hands at $82.92.
• Gold was off $11.20, and a troy ounce will now set you back $2,462.30.
• And Bitcoin gave back a bit of its recent, solid gains. It was off $618.70 and at 4:00 PM ET stood at $64,607.77.

No News to Explain the Selling

There was little in the way of news to explain the dramatic sell-off in stocks, and what news we had was pretty good.

Building permits and housing starts both came in well above expectations on Wednesday and Industrial production likewise surprised, especially us, to the upside.

Industrial production is a peek inside manufacturing, but it also considers the output of mines and utilities.

Today we get an unadulterated look at the manufacturing sector with the release of the Philadelphia Federal Reserve Bank’s Manufacturing Index so far for July. Hope springs eternal here at the Buzz on Business!

It’s Thursday so we also get Initial and Continuing Jobless Claims. Expectations are that unemployment claims have ticked up modestly in the last week. We shall see.

Sixteen companies made it through the filters here at the Ministry of Truth and all but two exceeded expectations for second quarter profits.

A bunch more report today including Netflix, after the bell. Netflix always seems to generate some excitement on Wall Street. Analysts expect that the company earned $4.74 per share on sales of $9.53 billion in the second quarter.

We’ll be watching, so all you’ve got to do is keep it right here on the Buzz.