July 29, 2024

After three awful days for the now trailing S&P and Nasdaq, all areas of the market decided to have a strong higher day to end a mixed week.

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The Dow was the leader once again with a very powerful 654 point rally to 44,589 led by a historic earnings-related advance in lagging 3M, in addition to another humungous gain in DECK also on earnings, plus earnings gains in NSC and BMY in addition to TXRH and NUL.

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The S&P finally joined in the upside fun with a 60 point gain to 5459 for its best gain in seven weeks led by then ones mentioned above as the former technology heroes struggled to get going on the upside.

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The Nasdaq gained 176 led by MSFT, which finally showed to advantage after a rough going lately plus former heroes AAPL, AMZN AND NVDA struggled to stay positive.

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The better-performing Russell 2000 Index of small stocks also continued doing well with a 37 point advance to 2260 while the VIX finally took it on the chin with a large decline down to 16.39 as it is going in the opposite direction from the market now the way it is supposed to be.

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This situation where both the large and small indices did well which is a departure from the trading, where a divide deepened between the handful of elite stocks that dominated the market for much of this year and almost everyone else.

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These former elites were under pressure after the latest profit reports from TSLA and GOOG raised worries that investors had gotten carried away in their frenzy around artificial intelligence technology and taken the Magnificent Seven prices too high. Because those seven stocks are so massive in size, they were the main reason the S&P set dozens of all-time highs this masked weakness elsewhere in the market.

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As those Big Tech stocks atop the market’s leaderboard tumbled, formerly downtrodden areas of the market turned higher, and that momentum kept rolling Friday. The Russell 2000 index of smaller stocks climbed 1.7% to bring its gain for the month so far to 10.4%. That towers over the roughly flat performance for the big stocks in the S&P.

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Industrial companies and other businesses whose profits are closely tied to the strength of the economy also rallied. They had lagged earlier this year under the weight of high interest rates meant to get inflation under control.

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NSC gained 10% to erase what had been a loss for the year so far after the rail company reported better profit for the latest quarter than analysts expected. It got a boost from insurance payments related to last year’s disastrous East Palestine derailment. The company also made progress in reducing its expenses and improving efficiency.

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MMM leaped 23% after reporting stronger profit and revenue for the latest quarter than analysts expected. The company behind the Scotch-Brite and Nexcare brands also raised the bottom end of its forecasted range for profit for the full year of 2024.

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Market watchers have been hoping for just such a broadening of gains because a market with many stocks rising is seen as healthier than one lifted by just a handful of dominating elites.

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The market broadly got a boost from Friday’s latest update on inflation, which further cemented investors’ expectations for coming cuts to interest rates as the June P.C.E. report said that consumers paid prices that were 2.5% higher than a year earlier, down from May’s inflation rate of 2.6%.

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With inflation resuming its slowdown following a discouraging start to the year, traders are banking on a 100% probability the Fed will begin easing its main interest rate in September, according to data from CME Group. The Fed has been keeping its federal funds rate at the highest level in more than two decades.

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The yield on the 10-year Treasury fell to 4.19% from 4.25% late Thursday and from 4.70% in April. That is a significant move for the bond market and offers support for stock prices.

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Among the other winners where nearly 90% of the stocks in the S&P rose, DECK climbed 6% after breezing past earnings expectations on the strength of its Ugg and Hoka brands of footwear. The California company also raised its full-year profit forecast.

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NUL soared 40% after the owner of Coleman camping supplies and Sharpie markers easily topped analysts’ profit targets.

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Among the relatively few stocks to drop was DXCM, which tumbled by 40%. The diabetes care company reported stronger profit for the latest quarter than expected, but its revenue fell short of analysts’ expectations. So did its forecast for revenue in the current quarter.

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In stock markets abroad, stock indexes were higher across much of Europe and Asia. Japan’s Nikkei 225 was an outlier and slipped 0.5% amid expectations the Bank of Japan may raise interest rates at a policy meeting this week.

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Earnings reports are important this week as four of the Mag Seven report and considering how soft they have been lately, if they do not do better on this, then there are going to be real problems with them going forward, and their lineup is as follows: Tuesday – MSFT; Wednesday – META; Thursday – AAPL and AMZN. In addition, there are tons of others which we will list on a day to day basis, such as: today – Dow component MCD higher plus ON and FFIV tonight.

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Economic reports will have: Tuesday – July Consumer Confidence, June JOLTS jobs opening report; Wednesday – results of the latest Fed interest rate meeting; Thursday – June construction spending, weekly jobless claims; Friday – June jobs report for which the estimate is 180K versus last month’s 206K, June factory orders.