The Buzz on Business for August 2nd, 2024

Stocks sold off, hard, from open to close on Thursday, in one of the biggest daily declines in over a year. It was brutal. But in a market that has become increasingly inscrutable in recent months, there was no doubt, in this case, as to the reasons why.

Just one day after Fed Chairman Jerome Powell did everything but pinky swear that interest rates would start coming down six weeks hence, bad economic data, from labor, from housing from manufacturing, bad economic data spooked investors and traders who then headed for the exits.

While there is no doubt the data was bad, every report missed expectations—we'll get into the specifics in just a minute—we're not so sure it was that bad. And whatever genuine weakness exists, further makes the case for rate cuts. As Chairman Powell stated at his press conference, with rates this high, there is a lot of room to move in response to any weakness.

We find all this fascinating. It wasn’t that long ago when bad news was good news and would send stocks skyward.

Will stocks bounce back anytime soon? Who knows? I mean besides every talking head on cable TV, who knows? It seems to us that the damage has been done and that it will probably take some time.

Still, earnings have been good; all year, earnings have been good. The economic data has mostly been good. Inflation seems to be in retreat. And rates will be coming down. I don’t think we’d be giving up on stocks just yet!

Stock Market Report

A brutal day on Wall Street on Thursday. The indexes were down across the board and closed near their lows of the day. Volume soared and the Advance/Decline line scrolled off the bottom of the Giant Quote Machine by the close.

• The Dow Jones Industrials were down 495 points. That’s 1.20% and they closed at 40,347.
• The S&P 500 was off 1.40%. They closed at 5,447, down 76 points.
• The NASDAQ Composite had a rough go of things. It was down 2.30%, that’s 405 points and closed at 17,194.
• The Small Caps got the worst of it. The Russell 2000 was off over three percent! It closed at 2,186, down 68 points.

Bond Market Report

Interest rates were down sharply and across the board. Not what we’d expect in a genuine panic.

• The yield on the 2-year treasury was down eleven basis points and it closed at 4.152%
• The 20-year was down five ticks and stands at 4.339%

Oil, Gold, and Bitcoin

• Oil gave back a lot of Wednesday’s gain. It was off $0.97, and a barrel now changes hands at $76.93.
• Interest rates were down but gold did not rally. It was off $7.90, and a troy ounce will now set you back $2,487.40.
• And Bitcoin joined the down trend, nothing but red numbers on the Giant Quote Machine on Thursday. Bitcoin was down $1,828.38 and at 4:00 PM ET stood at $63,441.35.

Economic Indicators Raise Red Flags

So, what is all this bad economic news everyone is talking about?

• Well after showing some improvement last week, Initial and Continuing Jobless Claims both came in above expectations, continuing a trend that began, from admittedly very low levels, in January.
• The S&P US Manufacturing Purchasing Managers Index came in better than expected. But the Institute for Supply Management Manufacturing publishes a similar report measuring basically the same thing. It missed by a wide margin. Manufacturing continues to confuse and disappoint.
• And the Atlanta Fed’s GDP Now Report, which had been expected to show that projected economic growth in the 3^rd quarter at 2.80%, a nice rebound from Q2, came below expectations.

Today, the big news is the Labor Department’s Jobs Report. It’s due out at 8:30 AM ET and it expected to show that the unemployment rate held steady at 4.1%, along with a bunch of other important numbers. Obviously, this report has taken on increased significance given yesterday's numbers and the market’s reaction to them.

The earnings calendar was nothing to write home about either, although most of these data came out after markets had closed.

• Dozens and dozens of companies reported. Most exceeded expectations
• Apple did what it does and beat both its top and bottom-line objectives.
• Amazon, not so much. It posted solid earnings but missed on sales and the stock has gotten hammered in the after-hours session.
• And Intel. YIKES. Intel missed all its numbers. And badly. The company suspended its dividend after the report. Expect the stock to get crushed during the day today.

We get a couple of key earnings reports later this morning but all of us here at the Ministry of Truth will be watching to see how the market follows through on yesterday’s sell-off. Will traders capitulate and sell everything including the kitchen sink? Or will bargain hunters rush in and buy up all these bargains?

We can’t wait to see what happens so we can report all of it to you, bright and early Monday morning, here on the Buzz!