Strong Q2 Earnings Wrap-Up, September Seasonality and More

Good Afternoon. The S&P 500 posted its fourth straight winning month. The S&P 500 and Nadaq indices fell during the week, and Dow 30 closed at a new record high.

For the week:

• The S&P 500 is up 0.24%, the Nasdaq is down 0.92%, and the Dow 30 is up 0.94%.

  

  Source - Barchart

CNN's Fear & Greed Index moved from Neutral to Greed category and now stands at 63 out of 100, an increase of 10 points from last week. Details here

The top five trending stocks on Reddit are Nvidia, SPY, Intuitive Machines, Intel, and QQQ. Read More

Solid Q2 24 earnings season is about to conclude :

• The overall earnings growth for 24Q2 is projected to be 13.0%. Excluding the energy sector, the growth estimate increases slightly to 13.8%.

• Out of the 493 companies in the S&P 500 that have reported their earnings for 24Q2, 79.3% have exceeded analyst expectations, surpassing the long-term average of 66%.

• The revenue growth estimate for 24Q2 is 5.5%. This growth rate adjusts to 5.2% when the energy sector is excluded. Read More

  

  Source - CNBC

Next month is crucial for the markets. Historically, September is the worst-performing month and the second most volatile after August. In addition to normal seasonality, the Fed is expected to start cutting rates on September 18th, and we will move closer to the upcoming US election in November. It will be interesting to see if the rate cut expectations help buck this trend.

Source: The Motley Fool

Source - All Star Charts

Warren Buffett’s Berkshire Hathaway reached a $1 trillion market capitalization on Wednesday, the first nontechnology company in the U.S. to score the coveted milestone. Read More

The Personal Consumption Expenditures price index (which the Fed uses for its 2% target rate) was up 2.5% for the year ended in July. Read More

U.S. mortgage rates continued their downward trend last week, reaching the lowest point since April 2023. This decrease has sparked a modest uptick in home purchase applications.

• The contract rate on a 30-year fixed mortgage fell to 6.44%, marking the fourth consecutive week of declines.

• According to the latest data from the Mortgage Bankers Association, released on Wednesday, this represents the longest stretch of falling rates this year. Read More

  

The Federal Reserve has announced the final individual capital requirements for large banks. Six banks received the lowest Common Equity Tier 1 (CET1) capital requirement of 7%, while Deutsche Bank USA Corp was assigned the highest requirement at 18.3%.  Read More

AI server maker Super Micro Computer delayed filing its annual report, citing a need to assess "its internal controls over financial reporting." The delay comes one day after short-seller Hindenburg Research said it had taken a short position in the stock, alleging "accounting manipulation" at the company. Read More

Speculative traders are increasingly shorting the US dollar as expectations grow for the Federal Reserve to cut interest rates. Read More

Nvidia earnings beat Wall Street expectations and provided stronger-than-expected guidance for the current quarter.

• Earnings Per Share (EPS): $0.68, beating expectations by $0.04.

• Revenue: $30.04 billion, up 122.40% year-over-year (Y/Y), beating expectations by $1.29 billion.

• Data Center Revenue: $26.3 billion, a record high, up 16% sequentially and 154% Y/Y.

• Q3 2025 Revenue Guidance: Expected to be $32.5 billion, plus or minus 2%.

• Nvidia also said it approved $50 billion in additional share buybacks. Read More

Salesforce reported robust fiscal second-quarter results that beat estimates and raised its full-year profit outlook. The company also said its finance chief, Amy Weaver, will step down. Read More

Dollar General missed Wall Street’s expectations on the top and bottom lines. The company said part of the issue is its core: lower-income consumers are under financial pressure, but some of its problems are also self-inflicted. Read More

YTD Asset Performance:

• Gold has been one of the best-performing asset classes for a couple of years. In a recent interview, Ruchir Sharma (Chair, Rockefeller International) explained how the US sanctions on Russia after the Ukraine war made the rest of the world cautious about over-dependence on the US dollar. Central Bank gold buying surged post-Russian sanctions.

  

• In 2023, central banks added 1,037 metric tons of gold—the second-highest annual purchase in history, following 1,082 tons in 2022. Read More

Market Rally Broadens:

• Historically, US small-cap stocks have gained most after the Fed rate cuts. Rate cuts should help small caps more, as 30% of the outstanding debt of Russell 2000 companies is floating rate debt.

  

• MAG7’s contribution to the $SPX EPS growth began to shrink as the Other 493 emerged from the earnings recession in 2Q (+8% YoY). This helped broaden the market rally as 61% of stocks in the S&P 500 outperformed the index in the past month, compared to 14% outperformed over the past year, Charles Schwab data.

  

  Source - Carl Quintanilla

• The analysis from Janus Henderson provides insights into the current trends and historical perspective for small-cap stocks. The key points below:

  • Small caps have outperformed large caps since last month.

    

    Source - Janus Henderson

  • The relative valuation of small vs. large caps is at the 16th percentile. Small caps were this cheap in 1998, which preceded 11-year outperformance.

  • Small caps have historically thrived when their market capitalization as a percentage of the total market falls below 5%, a threshold that has recently been crossed. Read More

As per Richmond Fed, even as inflation returns to trend and monetary policy normalizes, policy rates may remain above their pre-pandemic level. Long-term bond prices indicate that r* (natural rate of interest) may be closer to 2 percent, putting the neutral nominal policy rate at 4 percent. Such a rise in r* is consistent with recent economic and social trends. Read More