Big Movers In August 2023
Arista Networks (ANET): The cloud-computing stock beat consensus estimates after introducing new Artificial Intelligence (AI) services.
SolarEdge Technologies (SEDG): The alternate-energy stock issued weak results and guidance as higher interest rates hurt demand.
Eli Lilly (LLY). The pharmaceutical maker jumped to new record highs after strong demand for its Mounjaro drug pushed quarterly results past expectations.
Insulet (PODD): The diabetes company issued weak guidance amid competition from weight-loss drugs like Eli Lilly’s Mounjaro.
Global Payments (GPN): The payment-processing company’s quarterly results beat estimates as costs fell. Full-year guidance was also raised.
ResMed (RMD): The medical-device maker missed consensus estimates as margins narrowed.
Key Economic Events 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. (1/8)
July Inflation Matches Estimates
The consumer price index (CPI) rose 0.2% in July, matching estimates. Rising shelter costs continue to drive inflation. (10/8)
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 fueled the increase. (15/8)
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 has been made against prices and noted policymakers were “navigating by the stars under cloudy skies.” (25/8)
Key Futures Contracts
| Product Name | Current Month | Expiration | Next Month | 1-Mon% |
|---|---|---|---|---|
| S&P 500 E-Mini (@ES) | ESU23 (Sep) | 15 Sep 23 | ESZ23 (Dec) | -2.1% |
| *S&P 500 E-Mini Micro (@MES) | MESU23 (Sep) | 15 Sep 23 | MESZ23 (Dec) | -2.1% |
| Nasdaq-100 E-Mini (@NQ) | NQU23 (Sep) | 15 Sep 23 | NQZ23 (Dec) | -2% |
| *Nasdaq-100 E-Mini Micro (@MNQ) | MNQU23 (Sep) | 15 Sep 23 | MNQZ23 (Dec) | -2% |
| Dow Jones E-Mini (@YM) | YMU23 (Sep) | 15 Sep 23 | YMZ23 (Dec) | -2.5% |
| *Dow Jones E-Mini Micro (@MYM) | MYMU23 (Sep) | 15 Sep 23 | MYMZ23 (Dec) | -2.5% |
* Micro contracts are one-tenth the size of standard e-minis.
Events to Watch This Month
| Date | Event | What to Watch |
|---|---|---|
| Fri, 1-Sep | Non-farm payrolls | Job-market conditions: unemployment, wages, hours worked. |
| Tue, 12-Sep | Apple Product Event | Potential launch of iPhone 15, new Apple Watch. |
| Wed, 13-Sep | Consumer price index | Inflation trends |
| Thu, 14-Sep | Retail sales | Strength of consumer spending |
| Wed, 20-Sep | Fed meeting | Interest-rate statement, economic projections, press conference. |
Sector Watch
Energy rose the most as tight inventories boosted crude-oil prices.
Health care fell in absolute terms, but outperformed as pharmaceutical stocks like Eli Lilly advanced.
Consumer Staples fell as strong economic data reduced demand for safe havens.
Utilities performed the worst as interest rates rose and investors shunned safe havens.
Noteworthy Calls & Predictions
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.
U.S. economyMoody’s lowered the credit ratings on several smaller U.S. banks, citing narrower margins between funding costs and lending rates. Some midsized institutions were placed on review for potential downgrade. Fitch Ratings took a similar step one week later.
Bank credit ratingsGoldman 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.
Interest ratesWells Fargo sees year-end gains in megacap growth stocks like Apple and Microsoft. Dan Ives of Wedbush made a similar call six days later, anticipating increased growth in AI.
Interest ratesBloomberg News reported that U.S. Treasuries “are proving irresistible to some investors” because of “attractive yields.” The article noted that bonds may gain value if inflation slows.
U.S. TreasuriesDisclosure
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