Stock investors are treading cautiously ahead of a string of key big tech earnings and the Federal Reserve’s policy decision on Wednesday.

Many Wall Street insiders think this week’s big tech earnings could mark a turning point in this year’s AI-fueled rally, particularly for the so-called “Magnificent Seven” stocks -  Google-parent Alphabet, Amazon, Apple, Facebook-parent Meta Platforms, Microsoft, Nvidia, and Tesla.

These top AI players are set to spend billions, possibly trillions, on the technology and investors are ready to start seeing profits that justify the massive investments. Many insiders are concerned that meeting analyst expectations won’t be enough to drive this year’s top performing tech stocks higher because those expectations are already priced in. Meaning big tech companies this week may need to deliver blowout results for Q2 2024 as well as forward guidance in order for investors to regain confidence that AI can continue boosting profits from here.

Microsoft today is the first of four big tech behemoths reporting this week. Meta is up tomorrow, followed by Amazon and Apple on Thursday. All four report results after the market close so results are going to influence the next day’s trading.

Big tech stocks are also still under pressure from the ongoing rotation into smaller-cap companies that many on Wall Street believe will benefit more from a lower interest rate environment.

Remember, the big tech behemoths have massive cash stockpiles so don’t necessarily feel the same impacts from high borrowing rates as smaller companies that are reliant on credit to fuel growth. In fact, big tech has become somewhat of a “safe haven” against inflation and high interest rates for that very reason. With rate cuts on the horizon, investors that shifted money into tech for that reason may now be looking for better opportunities in less expensive parts of the stock market.

Other earnings of note today include Advanced Micro Devices, BP, Electronic Arts, Phillips66, Merck, Pfizer, Procter & Gamble, and Starbucks.

Turning to the economy, the Federal Reserve today begins its two-day policy meeting, which wraps up tomorrow afternoon with the central bank’s decision on interest rates and a follow-up press conference from Fed Chair Jerome Powell.

The data highlight today will be the Job Openings and Labor Turnover Survey (JOLTS) for June. The report last month showed employers added new positions in May versus a further pullback expected by Wall Street. Investors will be closely scrutinizing JOLTS and other jobs data this week - ADP’s private payroll report tomorrow and the official July jobs report on Friday - for clues as to how the labor market is holding up. Investors have recently grown a bit more concerned that the cooling US job market could be vulnerable to the Fed holding rates too high for too long. Consumer Confidence, the FHFA House Price Index, and the Case-Shiller Home Price Index are also due out today. 

America’s Post-Covid Factory Boom Is Running Out of Steam:  More U.S. manufacturers are rethinking their plans as they brace for an extended slump in demand. Higher interest rates, rising operating costs, a strong U.S. dollar and lower selling prices for commodities are dampening activity at factories across the country. Executives for the makers of long-lasting items such as cars, crop-harvesting combines and washing machines are projecting challenging business conditions for the remainder of the year. Deere & Co, the world’s largest manufacturer of farm equipment by sales, has shed about 2,100 production workers since November, or 15% of its hourly workforce. Rival equipment maker Agco said in June it would cut 6% of its salaried workforce worldwide, or about 800 people, by the end of the year. After years of elevated equipment sales, farmers’ buying power this year is being diminished by lower prices for corn, soybeans and other commodities that the Agriculture Department predicts will reduce farm income by about 25%. Retail sales of high-horsepower farm tractors in the U.S. and Canada were down 12% in June from the same month last year, while sales of harvesters dropped 29%, the Association of Equipment Manufacturers said. Illinois-based Deere said it decided to make deep cuts in production in hopes of avoiding large inventories of unsold equipment at dealers.  Recreational vehicle maker Polaris this week said it would adjust production to cut back on shipments to dealers. The disclosure came as it reported a 49% drop in quarterly income and noted that sales of its motorcycles, boats, and off-road vehicles all dropped as consumers pulled back on discretionary purchases. The cloudy picture in manufacturing comes as dozens of companies in the S&P 500 index make quarterly financial disclosures. Their results will be closely monitored as inflation moderates and the Federal Reserve considers cutting interest rates.  Source WSJ

NEW Blood Test to Screen for Colon Cancer (the silent killer) - The Food and Drug Administration on Monday approved Guardant Health’s blood test, called Shield, to screen for colon cancer. The test isn't meant to replace colonoscopies, but is generating enthusiasm among doctors who say it has the potential to boost the dismal rate of screenings for the second-highest cause of cancer death in the United States. Shield has previously been available to doctors as a screening tool, at an out-of-pocket cost of $895. With the FDA approval, Medicare and private insurance companies are much more likely to cover the cost of the blood test, making it more widely accessible for patients. The American Cancer Society estimates that more than 53,000 people will die of colorectal cancer this year.  The test would need to be given at least every three years, starting at age 45 — the same age it's recommended to begin colorectal screening. Get tested! Source NBC News

Investors Embrace Bond Funds Before Rates Start to Fall: Bonds are paying the highest yields in a generation and interest rates are poised to come down. Meanwhile, a record number of retirees are looking to cut risk in their portfolios. That combination has investors pouring money into both indexed and actively managed funds. U.S.-listed fixed-income exchange-traded funds have taken in nearly $150 billion through late July, a record through this point in a year. When looking at mutual funds and ETFs together, taxable bond funds were responsible for nearly 90% of net U.S. fund inflows in the first half, according to Morningstar. A crucial factor shifting bond prices is investors’ expectations for short-term interest rates. As Wall Street bets that rate cuts later this year are all but certain, investors are looking toward bonds instead, grabbing for yields that have already started to descend as bond prices rise.  Source WSJ

The Places Where It Paid Most to Sell Your Home This Spring: Homeowners who sold in the second quarter earned a median +55.8% more than the house’s prior purchase price, according to an analysis of home sale data from property and real estate information company Attom. That gain is based on homes’ sale price history and doesn’t account for other expenses like closing costs. Those who sold cashed in on close to a decade of home price gains: the average seller spent nearly eight years in the home they sold, according to the report. This year was the worst spring for existing-home sales in more than a decade, with previously owned homes selling at their slowest June pace in at least 25 years, according to National Association of Realtors data. Homes that did sell, however, changed hands at record high prices. The median existing home sold for $426,900 in June, the Realtors group data show, the most expensive on record. While homeowner profit rose as high as +64% in the years following the onset of the Covid-19 pandemic, at +55.8%, profit remains well above the 2019 average of +30%. Homeowners in some metros earned even more, even as their profit margins fell short of recent highs. Sellers in San Jose, Calif.; Barnstable, Mass.; and Ocala, Fla., saw gains over +100%, the data show. Profit was smallest in Shreveport, LA; Beaumont, Tex.; and Lubbock, Tex., where homeowners earned between +5.1% and +21.3% compared with the homes’ previous sale price. Source Barrons

US Treasury Cuts Borrowing Estimate: The US Treasury reduced its estimate for federal borrowing for the current quarter and projected the government’s cash buffer to decline toward year-end, just ahead of a possible fresh fight over the debt limit. The Treasury Department said in a statement Monday that it now estimates $740 billion in net borrowing for July through September, down from a previous prediction of $847 billion released on April 29. The decrease was expected by most bond dealers. Also, in a forecast that will be closely watched by dealers because it has potential implications for any upcoming debt-limit battle, the Treasury penciled in a year-end cash balance of $700 billion. That stockpile would then be whittled down after the debt ceiling by law kicks back in at the start of next year — unless Congress passes an increase or new suspension. Source Bloomberg

The Experiences of U.S. Adults Who Don’t Have Children: The U.S. fertility rate reached a historic low in 2023, with a growing share of women ages 25 to 44 having never given birth. And the share of U.S. adults younger than 50 without children who say they are unlikely to ever have kids rose 10 percentage points between 2018 and 2023 (from 37% to 47%), according to a Pew Research Center survey. About four-in-ten of those in the older group (38%) say there was a time when they wanted to have children. A smaller but sizable share (32%) say they never wanted children, and 25% say they weren’t sure one way or the other. The top response for those ages 50 and older is that it just didn’t happen. Meanwhile, those in the younger group are most likely to say they just don’t want to have kids. Women younger than 50 are especially likely to say they just don’t want to have children (64% vs. 50% of men in this group). In the younger group, about six-in-ten also say not having kids has made it easier for them to be successful in their job or career and to have an active social life.  Adults ages 50 and older who don’t have children are less likely to have ever been married. They are more likely to have a bachelor’s degree or more education. This difference in educational attainment is especially pronounced among women. Older women who don’t have children have higher median monthly wages than mothers. The opposite is true among older men; those without children tend to earn less than fathers. Source Pew Research

NO FALLEN HEROES FOUNDATION

Futures trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Futures trading is not suitable for all investors.

Nell Sloane, Capital Trading Group, LLLP is not affiliated with nor do they endorse, sponsor, or recommend any product or service advertised herein, unless otherwise specifically noted.

The information contained herein was taken from financial information sources deemed to be reliable and accurate at the time it was published, but changes in the marketplace may cause this information to become out dated and obsolete.

It should be noted that Capital Trading Group, LLLP nor Nell Sloane has verified the completeness of the information contained herein. Statements of opinion and recommendations, will be introduced as such, and generally reflect the judgment and opinions of Nell Sloane, these opinions may change at any time without written notice, and Capital Trading Group, LLLP assumes no duty or responsibility to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice.

Any references to products offered by Capital Trading Group, LLLP are not a solicitation for any investment. Readers are urged to contact your account representative for more information about the unique risks associated with futures trading and we encourage you to review all disclosures before making any decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Nell Sloane, Capital Trading Group, LLP and their officers, directors, and/or employees may or may not have investments in markets or programs mentioned herein.