The Buzz on Business for July 25th, 2024 

Wednesday was a brutal day for stocks. There is no two ways about it. The major indexes gapped down at the open and closed at their lows for the day. Volume soared as declining stocks crushed advancers by over four to one. 

It seems that maybe The Street wants to blame Google and Tesla, which reported second quarter results after the bell on Tuesday, but we’re not so sure. 

Tesla did indeed miss its mark and by a wide margin. The EV maker was expected to have earned $0.61 a share on $24.5 billion in sales, and while it did exceed consensus estimates for the top line, it reported just $0.52 cents per share. That’s a significant miss and an unforgivable miss for one of the Magnificent Seven which was very much priced for perfection. This is the fourth consecutive quarter in which Tesla has missed expectations. The stock was down over 12% on the day. 

Tesla probably deserves the shellacking it took along with whatever blame it is getting for all the selling market wide but we’re not so sure about Google parent Alphabet. 

Alphabet also reported yesterday after the close but to us, its numbers looked pretty good. The company earned $1.89 a share on sales of $84.7 billion both numbers exceeded expectations by a substantial margin. 

Further, while not perfect, the company has consistently beaten expectations and has grown its earnings by well over 400% in the last eight years or so, (which was as far back as we could easily get data.) 

There are any number of reasons why a market or a particular stock might go up or down. But to us, Google’s second quarter numbers are not among them. 

Stock Market Report 

A dramatic selloff on Wall Street on Wednesday results in the biggest declines for the market that we’ve seen in over two years. 

• The Dow Jones Industrials were off 504 points, and believe it or not, the Dow had a better day than the rest of the market. It closed back below 40,000 at 39,854, down 1.25%. 

• The S&P 500 was off 2.3%, that’s 129 points, and it closed at 5,427. 

• The NASDAQ Composite got crushed. Led lower by the big cap techs, it closed at 17,342, down over 3.6% or 655 points. 

• And the small caps were not spared from the carnage. The Russell 2000 was off 2.1%, that’s 48 points, and it closed at 2,195. 

Bond Market Report 

Bonds were mixed on the session with short term paper rising and yields falling while rates farther out on the yield curve rose. That’s not what we would expect in an end-of-world scenario, where a flight to safety play would have pushed short-term rates higher. We will have to see how it plays out. 

• Regardless, the yield on the s-year treasury fell fairly dramatically. It was off six basis points and closed at 4.431%. 

• The 20-year was up a bit over five ticks and it now stands at 4.632% 

Oil, Gold, and Bitcoin 

• Oil got back some of its recent losses. It was up $0.49, and a barrel now changes hands at $77.48. 

• Gold fell $9.50 and a troy ounce will now set you back $2,399.00 even. 

• And Bitcoin was up $220.85 and at 4:00 PM ET stood at $65,671.85. 

Looking for a Reason for the Crash? You Might Be Deluded 

One of our favorite books about the world of investing is “Extraordinary Popular Delusions and the Madness of Crowds.” It was written by Charles Mackay and published in 1841. If you haven’t read it, well, you should. It probably better explains days like yesterday better than a lower Manhattan skyscraper full of Wall Street analysts or all the cable news talking heads on Earth. 

In times of high stress, markets behave like mobs or schools of fish. The actions of one become the actions of the whole. Once selling starts, everyone sells, often mindlessly and, just as quickly the whole thing can turn around and the mob cannot buy fast enough. 

Now, we are not saying that the buying starts at 9:30 AM today, although that would not surprise us. Instead, we’re saying that those searching for a rational explanation for this brutal day yesterday are likely to be frustrated in that search. 

It’s early but earnings season seemed to be going okay to us. The economy is hardly gangbusters, but it seems to be going okay to us. We’ll get some more data to chew on later today and tomorrow. Political uncertainty is high but that is nothing new. 

So, what is the rational investor to do? Stick with your plan. If you don’t have a plan, make a plan. And then stick to that. 

We’ve seen days like this before—many days like this before. And, while we don’t make predictions on this podcast, we predict we’ll see them again. 

In the meantime, all rational investors should keep it right here on the Buzz.