Weekend Update, August 7th, 2023
The equity markets were down last week on a negative Fitch downgrade, earnings, and the post July month end. The S&P 500 fell -2.3%. Fitch Rating downgraded its credit rating on the US to one notch below the top AAA grade, citing an “erosion of governance”. The downgrade of the US credit rating by Fitch to AA+ startled foreign investors as it represents the country’s first downgrade by a major ratings firm since 2011. It comes about two months after the US came close to a default that was ultimately averted after lawmakers agreed to raise the debt ceiling. The US is still rated AAA by the other major ratings firms, Standard & Poor’s and Moody’s.
The cash S&P 500 index ended the week at 4478, down from the prior Friday’s closing price of 4,582. The decline in the index came after an above average +3.1% for gain for July and it’s now up +17% year to date.
Quarterly results added to investor concerns. Apple’s (AAPL) fiscal Q3 revenue met the Street’s consensus estimate, but forecasts for 3q23 were tepid due to a gap in products pre-iPhone 15 introduction. Semiconductor and wireless telecommunications company Qualcomm’s (QCOM) fiscal Q3 revenue missed analysts’ mean estimate amid declines in its semiconductor and licensing businesses.
With longer term interest rates rising last week, the utilities sector had the largest percentage drop, falling -4.7%, followed by a -4.1% slide in technology and a -2.9% drop in communication services. The only sector that managed to end the week in positive territory was energy, up +1.1%.
Apple’s shares weighed on the technology sector, falling -7.1%. Apple warned that the company expects fiscal Q4 revenue for its Mac and iPad products to fall by double-digits year-over-year. Qualcomm was also among the technology sector’s decliners. The company’s shares shed -6.2% amid the fiscal Q3 revenue miss even as its adjusted earnings per share for the quarter came in above analysts’ mean estimate.
In communication services, shares of Electronic Arts (EA) declined -11% as the game developer reported fiscal Q1 net bookings slightly below analysts’ mean estimate and forecast the current quarter’s adjusted revenue below the street.
This week’s earnings calendar slows down but features Eli Lilly (LLY), United Parcel Service (UPS), Walt Disney (DIS) and Duke Energy (DUK).
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