- It was a brutal day for the markets: The Nasdaq slipped into correction territory right out of the gate, the Dow took a nosedive, dropping 1,237 points early on, and the S&P 500 endured its roughest day in nearly two years. Although all three indexes clawed back some losses by midday, they stayed firmly in the red.
- Investors flocked to the safety of bonds, pushing 10-year Treasury yields to their lowest levels since June 2023, as the stock market took a beating.
- Even gold, typically the go-to safe haven, wasn’t immune—investors had to sell off their gold holdings to cover margin calls on their stock positions.
- Bitcoin wasn’t spared either, plummeting as traders unloaded a record $1 billion in the cryptocurrency to lock in profits.
Winners & Losers
What’s up 📈
- Kellanova ($K) surged 16.23% following reports that it might be acquired by snack giant Mars.
- Tyson Foods ($TSN) climbed 2.09% after delivering a robust third-quarter earnings report.
- ON Semiconductor ($ON) edged up 1.50%, defying the broader semiconductor selloff.
What’s down 📉
- Intel ($INTC) tumbled 6.38%, continuing its decline in the aftermath of a dismal second-quarter earnings report.
- Nvidia ($NVDA) slumped 6.36% after news surfaced that its latest chips could be delayed by three months or more due to design flaws.
- MicroStrategy ($MSTR) dropped 9.60%, Coinbase ($COIN) fell 7.32%, and Robinhood ($HOOD) slid 8.17% as Bitcoin-related stocks tanked in response to a significant cryptocurrency selloff.
- Apple ($AAPL) dipped 4.82% after Warren Buffett’s Berkshire Hathaway disclosed it had slashed its stake in the tech giant by nearly half.
- Tesla ($TSLA) decreased 4.23% amid growing concerns over the company’s global expansion, despite recent optimism from Elon Musk.
Global Market Sell-Off — Why Your Portfolio is Bleeding Red Today
If you’ve been checking your portfolio today, you’ve probably noticed it’s looking like a murder scene—red, red, and more red. Spoiler: It’s not just you. Investors across the globe are feeling the pain, and the culprit? Japan’s Nikkei 225, which just experienced its worst single-day drop since 1987’s Black Monday, plummeting a jaw-dropping 12.4%.
What’s a Carry Trade, and Why Should You Care?
Let’s dive into the cause of this market madness. It all circles back to something called the “carry trade.” In simple terms, a carry trade is like borrowing money at a super low interest rate in one country—say, Japan—and then investing it in a country where returns are higher, like the U.S. For years, this has been a winning strategy for many investors, with the yen being the cheap currency of choice. Japan’s interest rates were kept ultra-low to boost exports, making it dirt-cheap to borrow yen and invest in U.S. assets, where the returns were much more attractive.
But here’s the kicker: Last week, Japan raised interest rates for the first time in 17 years. Suddenly, that dirt-cheap yen isn’t so cheap anymore. And to make matters worse, the U.S. is expected to cut rates soon, potentially making U.S. assets less attractive. The result? Investors are scrambling to unwind their carry trades, dumping assets like there’s no tomorrow—and dragging global markets down with them.
Should You Be Worried?
So, is it time to freak out? According to analysts like Wedbush’s Dan Ives, the answer is no. “It’s scary, but we navigate through the turbulence,” Ives said, implying that while today’s sell-off is jarring, it’s more about fear than a sign of deeper economic trouble. In other words, this could be just another episode of market overreaction rather than the beginning of a full-blown crisis.
Sure, the U.S. jobs report last week showed weaker-than-expected hiring, raising concerns about an economic slowdown. And yes, the Fed’s aggressive rate hikes have some people worried that the economy might tip into a recession. But at the end of the day, these concerns are nothing new. The market has weathered similar storms before and will likely do so again.
The Bottom Line: Keep Calm and Carry On
Today’s market turmoil might feel like a nightmare, but it’s important to remember that volatility is part of the investing game. The global sell-off is unsettling, but for long-term investors, it’s more of a speed bump than a brick wall. If you’re invested in quality assets with strong fundamentals, today’s dip could even be seen as a buying opportunity rather than a reason to panic. So before you rush to make any drastic changes, take a deep breath and remember: the market’s ups and downs are normal. Stick to your plan, stay informed, and keep an eye on the bigger picture. The headlines today will be forgotten tomorrow, but smart investment decisions will pay off in the long run.
Market Movements
- Warren Buffett’s Berkshire Hathaway sold 49% of its $84.2B Apple ($AAPL) stake last quarter, boosting the conglomerate’s cash pile to $277B. Despite the sale, Apple remains its largest holding.
- Wall Street’s “fear gauge,” the VIX, rose to its highest level since the pandemic market plunge in 2020.
- Bitcoin is experiencing its worst week since the collapse of FTX.
- Google ($GOOGL) lost an antitrust trial over its search and ad business dominance to the DOJ.
- Chevron ($CVX) is relocating its headquarters from San Ramon, California—where it has been since 2002—to Houston, Texas.
- Airbnb’s ($ABNB) chief business officer suggested the company may start offering luxury amenities like personal chefs and massages to lure customers back from hotels.
- Google ($GOOGL) pulled its ad for Gemini, which featured a child using the chatbot to write to U.S. Olympian Sydney McLaughlin-Levrone, following backlash over concerns it encouraged relying on AI over authenticity.
- Nintendo’s ($NTDOY) profit fell 55% as sales dropped while consumers await a new console.
- Neuralink successfully implanted its brain chip into a second trial patient.
Cut to the Chase — Wall Street’s Whisper
It seems Wall Street is sending a loud and clear message to the Federal Reserve: it’s time to slash those interest rates, and fast. The recent selloff on Wall Street, coupled with a lackluster jobs report, has stoked fears of an impending recession, and traders are now placing bets on more aggressive rate cuts through the rest of 2024.
The New Rate Cut Playbook
The expectation? A half-percent cut in both September and November, followed by another quarter-point in December. This is a notable shift from the earlier forecasts, which anticipated just two quarter-point cuts before the year’s end.
JPMorgan’s chief economist, Michael Feroli, isn’t ruling out an even quicker move. He’s suggesting the Fed might act before its next scheduled meeting in mid-September, arguing that they’re “materially behind the curve.” Feroli’s calling for a 50-basis-point cut in September, followed by another in November.
Emergency Rate Cut? Not So Fast
But not everyone is on board with a pre-meeting cut. Wilmer Stith, a bond portfolio manager at Wilmington Trust, believes such a move could spook investors, typically reserved for times of extreme crisis. While he acknowledges that “anything is possible” if market conditions deteriorate further, he doubts the Fed will make an emergency move.
Federal Reserve Chair Jay Powell also downplayed the idea of a hefty 50-basis-point cut, hinting instead that a 25-basis-point trim is more likely—if the Fed decides to take action at all.
The Jobs Report that Sparked the Fire
The pressure on the Fed ramped up last Friday when the latest jobs data showed the US economy added just 114,000 nonfarm payroll jobs in July, well short of the 175,000 expected. To top it off, the unemployment rate ticked up to 4.3%, the highest since October 2021. The weak labor market data has some Fed watchers convinced that the central bank missed the boat by not cutting rates at its last meeting.
Despite the cooling jobs market, policymakers chose to keep rates at a 23-year high in July, much to the dismay of traders who hadn’t priced in an economic slowdown.
What’s Next for the Fed?
Chicago Fed President Austan Goolsbee made it clear last week that the central bank wouldn’t overreact to a single report. He emphasized that there’s plenty of data to come before the Fed’s next meeting, though he did hint that if unemployment continues to rise, a policy response might be necessary.
Baird strategist Ross Mayfield chimed in, saying a 50-basis-point cut “should be on the table,” and reflecting on the Fed’s missed opportunity in July: “With hindsight, it’s clear they probably should’ve started cutting then.”
All eyes will be on Jay Powell when he takes the stage in Jackson Hole, Wyoming, in a couple of weeks or whether they will intervene and hold an emergency meeting. Will he stick to his cautious approach, or will he finally bow to Wall Street’s growing calls for a more aggressive rate cut? Let’s stay tuned and see.
Palantir’s AI Revolution: Revenue Rockets Higher
By the Numbers:
- Revenue Forecast: Raised to $2.74B–$2.75B (from $2.68B–$2.69B)
- Q3 Revenue Forecast: $697M–$701M (Analyst estimate: $679.1M)
- Q2 Revenue: $678M (Up 27%, Beat estimate of $652.8M)
- Q2 Net Income: $134M (Analyst estimate: $82.8M)
- U.S. Commercial Sales: $159M (Up 55%)
- Government Sales: $371M (Up 23%, Beat estimate of $346.6M)
- Year-to-Date Stock Gain: +45.3%
- After-Hours Stock Surge: +13.74%
Riding the AI Wave
Palantir Technologies ($PLTR) is riding high on the AI wave, and the market is loving it. The data analytics giant has raised its annual revenue forecast—again—thanks to the growing demand for its generative AI-powered software. This has sent the stock soaring over 13% in extended trading, pushing its year-to-date gain to a hefty 39%. Not too shabby for a company that's been laser-focused on transforming businesses with AI.
Big Profits, Bigger Expectations
The April-to-June quarter was a blockbuster for Palantir. The company posted its largest quarterly profit ever, with adjusted earnings hitting 9 cents per share, surpassing Wall Street expectations. Revenue also shot up 27% to $678 million, easily beating forecasts. And it’s not just the past that’s looking bright—Palantir expects third-quarter revenue to land between $697 million and $701 million, well above analysts’ estimates.
But it’s not just the government contracts keeping the lights on. Palantir's U.S. commercial sales jumped 55% last quarter, showing that more and more enterprise customers are turning to Palantir to navigate the tricky waters of AI integration.
What’s Next?
Palantir’s CEO, Alex Karp, isn’t shy about where he sees the future—AI is the game-changer. In a letter to shareholders, he highlighted how the company’s AI platform, launched just over a year ago, has already "transformed" the business. And with U.S. military contracts piling up, Palantir’s role in defense is only growing.
The cherry on top? Palantir is eyeing a spot in the S&P 500 Index. CFO David Glazer hinted that the company’s strong performance could pave the way for this inclusion, a move that would surely keep the stock in the spotlight.
So, while the AI boom continues to fuel Palantir’s rise, the company’s strategy to expand its commercial footprint and bolster its government ties seems to be paying off big time. Investors, take note—Palantir’s just getting started.
On The Horizon
Tomorrow
This week’s economic calendar is pretty light, and after today’s market rollercoaster, a bit of quiet might be just what we need. Tomorrow’s main event? The U.S. trade balance report from the Bureau of Economic Analysis. This measures the gap between what the U.S. imports and exports. Last month, the U.S. ran a deficit, meaning exports fell more than imports. While this report won’t directly impact your portfolio, it’s a key indicator of the U.S.’s role in the global economy.
But let’s be honest, the real action this week is in earnings, with a flurry of companies set to report. Here are a few names to keep an eye on tomorrow.
Tuesday: Caterpillar ($CAT), Uber ($UBER), Marathon Petroleum ($MPC), Yum! Brands ($YUM), Planet Fitness ($PLNT), Amgen ($AMGN), Airbnb ($ABNB), Reddit, Wynn Resorts ($WYNN), TripAdvisor ($TRIP)
Before Market Open:
- Uber (UBER): Uber wasn’t exactly riding high before the pandemic, struggling with profitability issues. But fast forward a few years, and the company has made a remarkable turnaround, finally reaching profitability and expanding its services. Wall Street is bullish—32 out of 33 analysts rate it a “buy,” with a target price that’s over 50% higher than its current value. Consensus: $0.31 EPS, $10.54 billion in revenue.
- Caterpillar (CAT): As a barometer for the U.S. economy, Caterpillar’s performance is closely tied to construction and manufacturing activity. Given the recent struggles in the manufacturing sector, investors will be eager to hear how this has impacted Caterpillar’s business. Consensus: $5.58 EPS, $16.95 billion in revenue.
After Market Close:
- Reddit (RDDT): Still a newcomer to the public markets, Reddit has only one earnings report under its belt since its IPO in March. That debut report showed some promising numbers, including record daily active users and impressive revenue growth. However, profitability remains elusive, and Reddit has been busy forging new partnerships to address investor concerns. Tomorrow’s report will shed light on how close the company is to turning a profit. Consensus: -$0.33 EPS, $253.58 million in revenue.
- Airbnb (ABNB): Like Uber, Airbnb has had a turbulent post-pandemic ride. The stock soared when travel demand surged post-lockdowns, but it’s since come back down as travel spending stabilized. Investors are now looking for signs that consumers are still booking stays, despite ongoing regulatory challenges and travel uncertainties. The big question: Is Airbnb still a better deal than traditional hotels? Consensus: $0.90 EPS, $2.73 billion in revenue.
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