US equities finished higher in Friday trading, with the Dow up 0.72%, S&P 500 up 0.54%, Nasdaq up 0.65%, and the Russell 2000 surging 2.49%. This marked the fifth consecutive day of gains, with the Nasdaq having its best week since November 2023 and the S&P 500 now within 1% of its July record close. All sectors posted gains, with standout performances in semiconductors, homebuilders, retail, energy, machinery, regional banks, credit cards, media, airlines, cruise lines, chemicals, and industrial metals. The Mag 7 tech giants had a mixed finish after a strong week.
The positive sentiment was driven by growing expectations for a 50-basis point rate cut from the Fed at next week’s FOMC meeting. The rally built on optimism around AI and easing inflation concerns, as Michigan’s inflation expectations returned to pre-surge levels. Lower-end consumer fears have subsided, while higher-end demand remains resilient.
Macroeconomic Outlook
Stocks ended the week higher on increasing expectations for a 50 bp rate cut at the Fed’s upcoming FOMC meeting. UMich consumer sentiment data beat expectations, with improving conditions for durables purchases. Import and export prices also fell more than expected. Next week, key retail sales and housing data will be in focus, along with the FOMC decision. Small Cap. stocks are acting particularly sensitive to policy expectations with increased volatility of daily returns for the Russell 2000. Yields on the 2yr and 10yr Treasury fell below the 3.66% level.
At the sector level….
Information Technology
- Oracle (ORCL-US) extended its post-earnings rally, after guiding FY29 revenue to $104B, well above the $88B consensus, with a 45% operating margin target.
- Adobe (ADBE-US) fell 8.5% despite beating Q3 EPS and revenue estimates. Q4 guidance disappointed, with analysts expressing concerns over FY25 outlook and AI monetization.
- Upwork (UPWK-US) jumped 10% on news that activist investor Engine Capital has a 4% stake and is pushing for board changes.
Industrials
- Boeing (BA-US) declined 3.7% after 33K Seattle factory workers voted to strike. Rating agencies are also reportedly considering debt downgrades for the company.
- Talen Energy (TLN-US) rose 6.9% after Jefferies initiated a “buy” rating, citing tailwinds from data center deals.
- United States Steel (X-US) climbed 3.8% on reports that White House officials have delayed a decision on a deal with Nippon Steel.
Consumer Discretionary
- Restoration Hardware (RH-US) surged 25.5% after beating Q2 EPS and revenue estimates. Analysts are optimistic about higher-end consumer demand and improving margins, despite lowering 2024 guidance.
- Etsy (ETSY-US) rose 7.6% after reports surfaced that the White House is planning new rules to close trade loopholes exploited by Shein and Temu.
- Uber (UBER-US) gained 6.5% after announcing an expanded autonomous ride-hailing partnership with Waymo, with services expected to launch in Austin and Atlanta in 2025.
Financials
- Fannie Mae (FNMA-US) and Freddie Mac (FMCC-US) both rose 6.4% after media reports suggested Trump allies may be planning to privatize the mortgage finance firms if he wins the election.
Materials
- Vistra (VST-US) advanced 6.3% after Jefferies initiated coverage with a “buy” rating, expressing optimism about potential data-center transactions by 2025.
Healthcare
- Moderna (MRNA-US) fell 2% following multiple downgrades after its R&D Day. Concerns were raised about its melanoma candidate and potential need for an equity raise.
Communication Services
- PDD Holdings (PDD-US) slipped 2.4% following reports of potential new White House rules to close trade loopholes exploited by Shein and Temu.
Utilities
- Viasat (VSAT-US) plunged 14.9% after United Airlines signed an agreement with Starlink to provide free wi-fi on all aircraft, posing a competitive threat.
Eco Data Releases | Monday September 16th, 2024
S&P 500 Constituent Earnings Announcements | Monday September 15th, 2024
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