Technology stocks are rebounding from a weak August as investors target a widening swath of companies like Intel and Western Digital.

The S&P 500 rose 2.5 percent between Friday, August 25, and Friday, September 1. But technology stocks rallied 4.4 percent, their biggest weekly gain in over two months. The surge came at the end of the sector’s worst month of the year (-1.7 percent in August). That may suggest buyers are returning to the group after a brief pause.

While megacaps like Apple (AAPL) and Nvidia (NVDA) rose last week, the big moves were in less-prominent names. Storage makers like Western Digital (WDC) and Seagate Technologies (STX) were the top performers in the S&P 500 on optimism about NAND flash memory prices. Dell Technologies (DELL) jumped to a new record high after Artificial Intelligence (AI) fueled demand for servers.

Intel (INTC) — another 1990s blast from the past — rallied after confirming it was on pace to meet or exceed guidance.

Companies outside major indexes also jumped. Identity-management firm Okta (OKTA) and biotech software maker Veeva Systems (VEEV) reported strong quarterly results. E-commerce player Shopify (SHOP) announced a new sales partnership with Amazon.com (AMZN).

Apple, Alphabet

Despite the shift of interest to smaller companies, at least least two of the “Magnificent 7” had important news.

Alphabet (GOOGL) jumped to a new 52-week high after announcing new AI functionality at its annual Cloud Next event. AAPL bounced after confirming September 12 as its product event. (New iPhones are widely expected.)

Chinese technology stocks also gained after officials in Beijing took steps to support their stock market. Homebuilders climbed as interest rates eased. Materials rebounded from a four-week slide. Energy, the only positive sector in August, advanced as crude oil futures (@CL) hit a nine-month high.

Utilities and consumer staples fell last week. Health care rose by just 0.1 percent. Those safe havens continue to struggle as investors favor riskier assets.

Dollar General (DG) was the worst-performing member of the S&P 500 after missing estimates and cutting guidance. Walgreens Boots Alliance (WBA) hit a 14-year low after CEO Rosalind Brewer resigned.

Economic Data and the Fed

Several data points last week suggested economic growth is easing. The most important was Friday’s non-payrolls report:

• Unemployment rose to 3.8 percent, above the 3.5 percent estimate and the highest level since February 2022.
• Hourly earnings increased 4.3 percent, less than the 4.4 percent expectation.
• Payroll growth from the previous two months was revised down by 110,000 jobs.
• The participation rate increased by 0.2 percentage point to 62.8 percent, the highest since February 2020.

ADP’s private sector payrolls report and consumer confidence were lower than forecast. The growth in second-quarter gross domestic product (GDP) was also revised down 2.1 percent from the preliminary reading of 2.4 percent. Another report from Challenger showed that announced job cuts tripled between July and August.

The data could argue against further interest-rate hikes by the Federal Reserve. (See the screenshot of CME’s Fedwatch tool above.)

Charting the Market

The S&P 500’s bounce in the last two weeks may help confirm the uptrend that began earlier in the year.

First, the index made a higher monthly low versus June. Both of those troughs were also above the peak from August 2022, which suggests new support has developed above old resistance. That’s potentially consistent with an uptrend.

Second, TradeStation data shows that more S&P 500 members are now above their 20-day moving averages than their 50-day moving averages. Similar crossovers in January, March and June preceded upward moves in the index.

Third, Cboe’s volatility index, or VIX, ended last week at its second-lowest closing level since January 2020. That may reflect less fear.

Fourth, sector performance is skewed toward risk appetite. Industries like energy and technology, which benefit from a strong economy and investor confidence, are gaining. Meanwhile, safe havens like utilities and consumer staples are lagging over most time frames.

In the near-term chart watchers may expect resistance around 4528, which was a low on July 20 and July 27.

The Week Ahead

This week is relatively quiet. It’s shortened by Labor Day, which pushes crude-oil inventories from Wednesday to Thursday.

Monthly vehicle sales are due today, which may have some impact on automakers. Zscaler (ZS) reports earnings after the closing bell.

The Institute for Supply Management’s manufacturing index is tomorrow morning. The Fed’s Beige Book report on economic confidence follows in the afternoon. C3.ai (AI) and Gamestop (GME) announce quarterly results.

Thursday brings initial jobless claims and crude-oil inventories. Nothing important is scheduled for Friday.

Next week is more active, with AAPL expected to launch new iPhones and key inflation data due. The following week brings a big Fed meeting.

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The stock market pulled back in August after a five-month rally. Energy was the only positive sector, thanks to rising oil prices.

The S&P 500 was down 5.5 percent at its low on August 18, but rebounded to end the month with a 1.8 percent decline. More than two-thirds of the index’s members lost value as a lack of catalysts sidelined buyers. Still, the index held its June low and remained above its peak from August 2022. Has old resistance become new support?

Higher borrowing costs weighed on the market in August. The yield on the 10-year Treasury note climbed to its highest level since November 2007 as the government issued new debt and strong economic data reduced the odds of rate cuts soon. However, yields reversed after forming a potential “double top” pattern. Further downside in yields could support stocks.

Last month also saw big drops in sentiment gauges published by the American Association of Individual Investors and the National Association of Active Investment Managers. That may suggest money remains on the sidelines, with potentially limited selling pressure.

Energy stocks quietly pushed higher as tightening inventories lifted crude-oil prices. The sector could remain in focus with Saudi Arabia continuing to limit exports.

There are several potentially important events this month. The week beginning on September 11 is especially active. Apple (AAPL) is expected to unveil new iPhones and key inflation numbers are due. The following week brings an important Fed meeting. See the table below for more.

Big Movers in August

Sector Watch

Key Economic Events in August

Below are some key economic events from last month.

• Fitch cuts U.S. credit rating: Fitch Ratings cut the U.S.’s sovereign credit rating from AAA to AA+. The agency cited growing debt loads and political uncertainty. (8/1)
• July inflation matches estimates: The consumer price index (CPI) rose 0.2% in July, matching estimates. Rising shelter costs continue to drive inflation. (8/10)
• Retail sales surprise to the upside: Retail sales increased by 0.7% in July, nearly twice the amount expected by economists. E-commerce and restaurants drove the increase. (8/15)
• Powell walks a middle line at Jackson Hole: Federal Reserve Chairman Jerome Powell continued to say inflation was “too high” in his annual Jackson Hole, Wyoming, speech. But he also said progress had been made against prices and noted policymakers were “navigating by the stars under cloudy skies.” (8/25)

What Experts Are Saying

Below are some noteworthy commentaries.

• JPMorgan retracted its prediction of a recession in 2023 because the economy is growing at a “healthy pace.” The move followed successful resolutions of bank runs and the debt ceiling earlier in the year. Bank of America made a similar call two days earlier. (8/4)
• Moody’s lowered the credit ratings on several U.S. banks, citing narrower margins between funding costs and lending rates. Some midsized lenders were placed on review for potential downgrade. Fitch Ratings took a similar step one week later. (8/8)
• Goldman Sachs expects the Fed to start cutting interest rates in the second quarter of 2024. The economists, led by Jan Hatzius, cited milder core inflation and the potential need to soften restrictive policy. (8/13)
• Wells Fargo sees yearend gains in megacap growth stocks like Apple and Microsoft. Dan Ives of Wedbush made a similar call six days later, anticipating increased growth in Artificial Intelligence (AI). (8/23)
• Bloomberg News reported that U.S. Treasuries “are proving irresistible to some investors” because of “attractive yields.” The article said that bonds may appreciate if inflation slows. (8/28)

Popular Futures Contracts in August

Newsworthy Events This Month

Security futures are not suitable for all investors. To obtain a copy of the security futures risk disclosure statement Investment and Trading Disclosures Booklet – Futures.

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Tesla skidded lower after its last earnings report on July 19, but now the EV giant could be turning a corner.

The first pattern on today’s chart is the dive toward $212 on August 18. It was the lowest level in more than two months, but TSLA gapped back to the upside a day later. The result is a potential “abandoned baby” candlestick.

Second …

For more, please click here to view the related idea and chart analysis on TradingView.

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Stocks are trying to stabilize before three major economic events that could determine direction in coming months.

The S&P 500 rose 0.8 percent between Friday, August 18, and Friday, August 25. It was the first gain in the last four weeks, supported by large-cap growth stocks like Tesla (TSLA).

There were two big events: Nvidia (NVDA) earnings and Jerome Powell’s speech at Jackson Hole, Wyoming. Both were more or less as expected. NVDA was already the top-performing member of the S&P 500 this year thanks to its leadership in artificial intelligence (AI). It jumped to new highs after results topped estimates.

Federal Reserve Chairman Powell also walked a middle line between hawkish and dovish. He acknowledged progress on inflation, while pledging to hike interest rates again if the economy or job market run too hot. His speech was mostly consistent with earlier statements. He’s waiting for more news on the economy, including three big events this week:

• Wednesday: revised gross domestic product (GDP)
• Thursday: PCE inflation
• Friday: non-farm payrolls
• Note: all three are due at 8:30 a.m. ET.

Technology Rebounds

Last week was noteworthy because large-cap growth stocks and the Nasdaq-100 outperformed the S&P 500 after lagging for the previous three weeks. Technology, software, semiconductors and consumer discretionaries like TSLA led the move.

The electric-car giant started the week by rebounding from a 2-1/2 month low. Bullish notes from Wells Fargo and Wedbush Securities contributed to the rally. Wedbush’s call interestingly cited a new growth market for TSLA, its fleet of charging stations.

Vaccine maker Moderna (MRNA) climbed amid new cases of coronavirus. Palo Alto Networks (PANW) and Autodesk (ADSK) jumped on strong quarterly results. Hasbro (HAS) rallied on signs that its Monopoly Go game was thriving on the iOS app store.

Energy was the worst performer last week but remains the only positive sector this month.

Charting the Market

There were a few potentially noteworthy things on the charts.

First, the S&P 500 remained above its August 18 low. That was slightly higher than the June 26 low, which in turn was slightly above the peak from last summer. Further consolidation in this area could suggest new support is developing above old resistance — a potentially bullish pattern.

Second, the index made a higher low and lower high. That kind of “bullish inside week” may suggest its pullback is nearing an end.

Third, Friday’s close represented approximately a 50 percent retracement of the rally after Congress raised the debt ceiling in early June.

U.S. Treasuries are also potentially important because yields have returned to their highest levels in over a decade. That’s lifted mortgage rates and hurt sentiment toward stocks. However last week the 10-year Treasury’s yield tried and failed to pass its high from last October. Investors may watch for a potential “double-top” reversal pattern.

A move lower could confirm that pattern and lower borrowing costs. A breakout may trigger worries about higher rates and likely hurt stock-market sentiment. All three of this week’s three big events could impact yields at this key moment.

The Week Ahead

Consumer confidence comes out earlier, on Tuesday.

Revised second-quarter GDP is due on Wednesday morning. The earlier estimate on July 27 shot past expectations. Other items include ADP’s private-sector payrolls report, crude-oil inventories and pending home sales.

Thursday’s personal consumption expenditure (PCE) index is a measure of inflation often cited by the Fed. It’s included in the personal income and report. Initial jobless claims are also due.

The Labor Department’s non-farm payrolls report is on Friday morning. Investors are likely to watch wages and unemployment. They may view “good news” (high wages and low unemployment) as “bad” for stocks because it could cause more rate hikes.

The Institute for Supply Management’s manufacturing index and construction spending follow later in the morning.

The post Stocks Are Trying to Stabilize Before a Trio of Major Economic Events appeared first on Market Insights.

Stocks declined for a third week as investors grappled with a surging U.S. economy and spreading weakness in China.

The S&P 500 slid 2.1 percent between Friday, August 11, and Friday, August 18. More than 90 percent of the index’s members lost value, including every major sector. Interest rates continued to rise.

U.S. retail sales increased by almost twice the forecast amount in July (its third straight beat), while industrial production rose at triple the expected pace. Initial jobless claims and housing starts also surprised to the upside. That dispelled hopes of lower interest rates anytime soon.

“Upside risks to inflation … could require further tightening of monetary policy,” the Federal Reserve said in minutes from its last meeting.

Bond traders reacted by sending yields on 10-year Treasury notes back to their peaks from October, near 15-year highs. Mortgage rates also climbed to levels last seen in 2002.

The opposite thing is happening in China, where retail sales and industrial production missed estimates by a wide margin. One major developer (Evergrande) went bankrupt, while other (Country Garden) moved to delay interest payments. The People’s Bank of China responded by unexpectedly cutting interest rates.

The news starkly highlights changes in the global economy as the U.S. reindustrializes and China decelerates. Decades of globalization could be going into reverse, impacting trillions of dollars in trade and debt.

Tesla Tumbles

Every major sector fell last week. Consumer discretionaries led to the downside as Tesla (TSLA) had its biggest drop since March. The electric-vehicle maker lowered prices for some cars. It also has potential risk in China, which accounts for more than a quarter of its revenue and much of its expected future growth.

Financials struggled as higher Treasury yields reminded investors of conditions that triggered bank runs in March. Discover Financial Services (DFS), in particular, fell after its CEO resigned and credit-card delinquencies rose. Fitch Ratings also warned it may lower credit ratings on banks including JPMorgan Chase (JPM).

Solar energy and Chinese stocks also declined sharply. Clean energy continued to struggle with weaker demand. Gold miners slid as higher interest rates reduced the appeal of precious metals. Airlines, which are sensitive to higher interest rates because of their debt loads, fell. Homebuilders had their biggest weekly drop since September.

Technology fared the best as analysts issued bullish notes on Nvidia (NVDA) before its quarterly report on Wednesday.

Metals eked out a small gain after Cleveland Cliffs (CLF) moved to acquire U.S. Steel (X). The transaction would unite two businesses with 324 years of combined history.

Charting the Market

Last week’s pullback landed the S&P 500 at its lowest level since late June. The decline came after the index tried and failed to hold its June high around 4450. Traders may next eye roughly 4328, which was near a weekly low on June 26 and the peak from August 2022.

Attention is also likely to focus on Treasury yields given the strong economy and recent Fed rate hikes. The 10-year note’s yield ended last week near its high from October — four months after holding its June 2022 high. Further upside in the yield could draw money away from equities and raise concerns about stock-market valuations. (A similar process occurred in the bear market of 2022.)

Cboe’s volatility index (VIX) is another potentially important chart because it typically moves in the opposite direction as the S&P 500. The VIX has climbed since late July. It’s also back above the potentially important 15 level.

The Week Ahead

This week brings the last big group of quarterly earnings. Fed Chair Jerome Powell also speaks on Friday, which could be a major event.

Nothing important is scheduled for today.

Lowe’s (LOW), Macy’s (M) and Baidu (BIDU) issue results tomorrow. Existing home sales are also due.

Wednesday features new home sales and crude-oil inventories. Nvidia (NVDA), the most important earnings report, is scheduled for the post market.

Initial jobless claims and durable-goods orders are on Thursday morning. Dollar Tree (DLTR), Gap (GPS) and Ulta Beauty (ULTA) are some of the big quarterly reports.

Powell speaks on Friday at 10:05 a.m. ET from the Fed’s symposium in Jackson Hole, Wyoming.

The post Market Sputters as U.S. Economy Surges and China Struggles appeared first on Market Insights.

Banks make money by lending money. Did you know the same thing can be done with stocks held in your portfolio?

TradeStation Securities’ Fully Paid Lending Program lets investors collect income without any work on their part. Aside from having a normal brokerage account, they only need $25,000 of total net worth or a single year of trading experience.

It works because there is often demand in the market for borrowed shares. If a trader sells a stock short, he or she needs to borrow it before selling. If that stock is in your account, TradeStation can facilitate a loan and you could receive interest.

Investors participating in the program still have the right to exit positions at any time. However they lose the right to vote for company board members during the time of the loan. There can also be less advantageous treatment of dividends and shares lent out aren’t protected by the Securities Investor Protection Corporation (SIPC).

There are a few reasons why someone might borrow stock to go short.

Securities Lending and Selling Short

One reason to sell short is simple bearishness. You might own a company and want to profit from it going up, but someone else thinks it’s going down. Without Fully Paid Lending you’ll only make money from the shares climbing. With it, you can make money from someone else being wrong — and you being right.

Furthermore, if you’re wrong and they’re right, you could still earn something by allowing it to be lent.

Stocks also get shorted as part of normal operations in the market. For example, investors often sell calls against stock they own. A market maker has to buy those calls, which makes him or her “long the stock.” They can manage that risk by shorting it to stay neutral.

In other cases, an insurance company or pension fund may know it will need cash at a future date to pay beneficiaries. If it wants to lock in certain funding levels at a specific moment in time, it may sell short companies it owns and then deliver stock later from its own portfolio.

Still, the program isn’t a sure thing because there’s no guarantee of market demand for your shares.

All new clients are automatically added to the program if eligible. Existing customers who opened their accounts before February 15, 2019, need to enroll via the Client Center.

In conclusion, borrowing and lending lie at the heart of finance. Most people only think of lending money, like with savings accounts or by investing in bonds. But there’s also a world of lending securities with the potential to profit. TradeStation’s Fully Paid Stock Program can let you benefit from this market without any effort of your part.

Shares lent out are not protected by SIPC. When shares are lent out, you’ll receive cash payments in lieu of dividends; these payments are treated as ordinary income rather than taxed at the dividend rate. Loan income is taxed as ordinary income. There’s no guarantee that your portfolio’s eligible securities will be lent out, as there may be no demand for the securities. When securities are on loan, you lose your ability to exercise voting rights. Other risks are outlined in the Fully Paid Stock Lending Risk Disclosures.

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Downloads are available here. TradeStation’s ideas on TradingView are available here.

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Sizing Up the S&P 500

• S&P 500 breaks June high as short-term bearishness grows
• 20-day moving average accelerates to downside
• Intermarket risks:
  • 10-year Treasury yield nears October high
  • U.S. Dollar index breaks downtrend from May
  • VIX holds 2021 closing low of 15
• Macro conditions potentially less favorable (more hawkish; see below)
• Potential levels:
  • 4328: June 26 low, near August 2022 high
  • 4200: February high and 50% retracement of March-July move.

Key News

• Hawkish comeback:
  • Retail sales +0.7% vs +0.4% estimate. Ex-auto +1% vs +0.1% estimate
  • Fed minutes: “upside risks to inflation … could require further tightening of monetary policy.”
  • Industrial production +1% vs +0.3% est
• But doves (deflation) lurking?
  • China slowdown: retail sales, industrial production, Country Garden collapse, PBOC rate cuts
  • Atlanta Fed inflation inflation expectations 2.5% in August vs 2.8% in July
  • Barchart.com: M2 money supply falling at fastest pace in at least 50 years
• U.S. Steel (X) jumps amid takeover reports

Mover of the Week: New York Times

• Earnings, revenue beat
• Subscriptions growing after business-model adjustments
• Potential transformation story
• NYT +31%

Upcoming Events

• Friday (8/17): DE earnings
• Wednesday (8/23): New home sales, crude-oil inventories
  • Earnings: NVDA, PTON KSS AAP ADI
• Thursday (8/24): Initial jobless claims
• Tuesday (8/15): Retail sales, NAHB housing index
  • Earnings: HD
• Wednesday (8/16): Oil inventories, Housing starts/permits, Fed minutes
  • Earnings: TGT, CSCO
• Thursday (8/17): Jobless claims, durable claims

Security futures are not suitable for all investors. To obtain a copy of the security futures risk disclosure statement Investment and Trading Disclosures Booklet – Futures.

Security futures are not suitable for all investors. To obtain a copy of the security futures risk disclosure statement Investment and Trading Disclosures Booklet – Futures.

Exchange Traded Funds (“ETFs”) are subject to management fees and other expenses. Before making investment decisions, investors should carefully read information found in the prospectus or summary prospectus, if available, including investment objectives, risks, charges, and expenses. Click here to find the prospectus.

Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See Characteristics and Risks of Standardized Options.

The post Stocks Fall as Strong Economy Sidelines Goldilocks: Market Trends appeared first on Market Insights.

Caterpillar has been leading a rally in industrial stocks, but now some traders may expect a pullback.

Notice the gap to new record levels on August 1 after earnings beat estimates. CAT pushed to another high the following session but …

For more, please click here to view the related idea and chart analysis on TradingView.

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Quarterly earnings and other important events have the potential to trigger sudden moves in stock prices. Call and put options can help investors manage the risk of these catalysts by positioning for directional moves or hedging against declines. Key strategies include vertical spreads and covered calls.

This educational webinar demonstrates how to construct various option strategies with TradeStation’s award winning platform. It covers use of our desktop application and web trading experience. Conversation focuses on active underliers like Meta Platforms (META) and Microsoft (MSFT). Techniques for identifying and tracking these high-volume symbols are also covered.

The webinar was hosted on July 24 by David Russell, VP of Market Intelligence at TradeStation Securities. Supporting materials are available for free download here.

Options trading is not suitable for all investors. Your TradeStation Securities’ account application to trade options will be considered and approved or disapproved based on all relevant factors, including your trading experience. See Characteristics and Risks of Standardized Options. Visit www.TradeStation.com/Pricing for full details on the costs and fees associated with options.

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Stocks are testing support as the venerable Dow Jones Industrial Average takes leadership from newer technology companies.

The 138-year-old benchmark rose 0.7 percent between Friday, August 4, and Friday, August 11. The Nasdaq-100, on the other hand, fell 1.4 percent. It was the third time in the last four weeks that the Dow outperformed the Nasdaq (which is exactly a century younger).

The moves represent a shift from the March-July period, when the Nasdaq surged 31 percent. Artificial intelligence and cost savings fueled that trend, while more recent buying has focused on older industries like health care, machinery and energy.

The consumer price index was probably the biggest news event last week. It showed inflationary pressures continuing to ease as predicted. Producer prices and initial jobless claims rose more than forecast. The headlines did little to impact expectations about Federal Reserve policy.

Energy Jumps

Energy was the top-performing sector again as crude-oil futures (@CL) hit a nine-month high. Tight inventories, reduced production and growing demand have fueled the move.

Healthcare took the No. 2 spot after results and guidance propelled Eli Lilly (LLY) to record highs and its biggest weekly gain ever. The pharma giant cited strong demand for its Mounjaro diabetes treatment and the potential approval of its donanemab Alzheimer’s drug this year.

Axon Enterprise (AXON), which provides Tasers and police-monitoring software, jumped after earnings and revenue beat estimates. Similar news lifted Akamai Technologies (AKAM) to a new 52-week high.

Utilities and real-estate investment trusts climbed slightly last week. Both lagged the market in the first half. Industrials continued to outperform as well.

Semiconductors, the top-performing group in the first half, led to the downside last week. Chinese technology stocks and software makers also fell.

Charting the Market

The S&P 500 slipped 0.3 percent, its second consecutive negative week. The index tried to rally on Thursday, but hit resistance near the July 27 low of 4528. It then probed and bounced at 4450, the high between mid-June and mid-July. Could old resistance become new support? That could suggest its uptrend remains intact — especially if prices remain above the 50-day moving average.

Wilder’s Relative Strength Index (RSI) fell to its lowest reading since early May. Chart watchers may consider that a sign it’s no longer overbought.

The Week Ahead

This week brings a mix of economic news and more earnings.

Nothing important is scheduled for today.

Retail sales and NAHB’s homebuilder sentiment index are due tomorrow, along with results from Home Depot (HD).

Wednesday brings housing starts, building permits and crude-oil inventories. Attention could also focus on minutes from the last Fed meeting at 2 p.m. ET. Cisco Systems (CSCO) and Target (TGT) report earnings.

Thursday features initial jobless claims. Walmart (WMT) and Applied Materials (AMAT) issue quarterly numbers.

Deere (DE) and Estee Lauder (EL) report on Friday morning.

The post Stocks Test Support as Blue Chips Take Leadership From Big Tech appeared first on Market Insights.