Weekend Update, August 14th, 2023
The cash S&P 500 index ended the week at 4464, down from the prior Friday’s closing price of 4,478. The decline in the index for August of -2.7% has come after an above average +3.1% gain for July. Call it a “Summer stall”. The S&P 500 is now up +16% year to date. Prospects for a soft landing were increased last week as a mild U.S. CPI number combined with a jobless rate at 3.5% The CPI data for July was released at .2%, inline with economists guesses. Core CPI, excluding food and energy prices, rose by .2% as well. The report also showed the rate for core CPI slowed to 4.7% from 4.8%. This is still well above the Federal Reserve’s 2% arbitrary goal.
The Monday session is seeing Asia down. The Hang Seng fell -1.6%, the Nikkei lost -1.3%, and the CSI 300 off -0.7%. Nervousness over the ongoing problems with China’s biggest property developer, Country Garden, are weighing after it asked for more time to make a debt payment and said that it would stop ten of its bonds from trading. All of this is prompting concerns about the property sector and questions about what further actions Beijing will take. This does resemble a possible “Lehman moment” for China.
Closer at home last week, the technology sector had the largest percentage drop sliding -2.9%, followed by a -1% decline in materials, a nearly -1% fall in consumer discretionary and slip of less than -0.1% in financials. Year to date laggards were in positive territory for the week, led by a +3.5% rise in energy and a +2.5% increase in health care, but the decliners more than offset them. Tech was weighed down by chip-makers, with shares of NVIDIA (NVDA) down -8.6% on the week, Micron Technology (MU) down -7.9%, and Advanced Micro Devices (AMD) down -7.1%.
Chefs and bakers look to be cooking at home less frequently as International Flavors & Fragrances (IFF) led the drop on the week wilting -20%. The flavor and fragrance company reported Q2 adjusted earnings per share and revenue below analysts’ mean estimates and reduced its 2023 sales guidance. Inventory overstocking post Covid has not been just a problem for cleaning products and outdoor athletic products.
The health care sector was boosted by an +18% weekly jump in the shares of Eli Lilly & Co. (LLY) amid the medicines company’s acquisition of DICE Therapeutics and more positive trial data on weight loss drugs.
This week’s earnings calendar slows down but retailers including Home Depot (HD), Target (TGT), Walmart (WMT) and TJX (TJX) will be releasing their latest quarterly results. Other companies on schedule to release results include Cisco Systems (CSCO), Applied Materials (AMAT) and Deere (DE).
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Click here to watch the Oak Harvest Weekly Stock Talk: Summer Seasonality, The Stall Comes
