What a week it was for Wall Street! Sentiment swung from the depths of negativity at the beginning to the peaks of positivity by the end. The S&P 500 (SP500) slumped 3% on Monday, posting its worst trading session since September 2022 amid a global selloff, and then followed that up by notching its best day since November 2022 on Thursday.
The volatile journey eventually concluded on Friday with the benchmark index closing largely flat for the week. In fact, the gauge’s 0.04% loss is its smallest weekly decline in over six years.
Monday’s rout was caused by a combination of recession worries sparked by July’s U.S. nonfarm payrolls report, and turmoil in Japan which was ignited by the Bank of Japan’s surprise interest rate hike and an unwinding of the yen carry trade. The S&P (SP500) rebounded strongly over the rest of the week, with Thursday’s advance in particular on the back of strong labor market data – initial jobless claims declined by their largest level since September and helped becalm recession fears.
Amid all the selloff drama, the second quarter earnings season continued to chug along this week. Notable names and their performances included ride-hailing giant Uber’s (UBER) 19% Y/Y growth in gross bookings, industrial bellwether Caterpillar’s (CAT) improved annual profit outlook, vacation rental firm Airbnb’s (ABNB) weak current quarter guidance, and theme park and entertainment behemoth Walt Disney’s (DIS) combined streaming assets achieving a quarterly profit for the first time.
For the week, the S&P (SP500) slipped -0.04%, the Nasdaq Composite (COMP:IND) retreated -0.2%, and the blue-chip Dow (DJI) fell -0.6%. Read a preview of next week’s major events in Seeking Alpha’s Catalyst Watch.
In the crosshairs since 2020, Google (GOOG, GOOGL) finally received a direct hit from the U.S. Justice Department in a legal suit over its search and text advertising businesses. A decision by U.S. District Court Judge Amit Mehta ruled that Google’s exclusive search arrangements on Android and Apple devices reinforced its dominance, and effectively blocked search competitors from succeeding in the market. It means the tech giant violated Section 2 of the Sherman Act to become the world’s dominant search engine. While an appeal will mean additional years of legal wrangling, the most important outcome that investors are focused on is what kind of remedies will be proposed. (222 comments)
Consumer spending remains strong as a mountain of credit card debt continues to pile up, with Americans increasingly turning to plastic to fund their purchases. According to the Federal Reserve Bank of New York, credit card debt reached $1.14T in Q2, up 5.8% from a year earlier, or about $6,500 per person. While the steadily rising figure took a break during the pandemic years, it has soared since 2022 as many consumers use cards to counter their dwindling purchasing power. Swiping plastic could keep up if the Fed starts cutting rates, beginning with an easing cycle that’s likely to kick off at the next FOMC meeting in September. (39 comments)
Nasdaq (NDAQ) filed a proposal with the SEC that would allow it to impose stricter delisting rules on so-called “penny stocks.” The thinking here is that the popular exchange has become a home to hundreds of dodgy companies, and besides reputational worries, there are increasing concerns about investor protection. Under the new proposal, Nasdaq is calling for the suspension of a company’s stock after 360 days of non-compliance, even if it has been given a review process by a hearings panel. Nasdaq is also looking to target companies that try to get around the minimum stock price requirement by undertaking repeated reverse stock splits. (7 comments)
Thought the mega writedown by Warner Bros. Discovery (WBD) was a one-off for the industry? Guess again. Paramount Global (PARA) also recorded a hefty impairment charge of $6B on the value of its cable networks, which include channels like MTV, Comedy Central and Nickelodeon. “The challenges of the linear ecosystem are becoming even more apparent, especially given the pressure on linear advertising and the competition for ad budgets with connected TV and streaming players,” said MoffettNathanson analyst Robert Fishman. Paramount is taking it seriously. It slashed 15% of its U.S. workforce in an effort to achieve $500M in cost savings, sending PARA shares up 5.4% in AH trading on Thursday. (9 comments)
What goes up must come down, unless it’s a Boeing (BA) Starliner. The spacecraft has faced helium leaks and thruster issues since flying to the International Space Station in June, stranding astronauts Butch Wilmore and Sunita Williams in the far reaches of the thermosphere. The mission to the ISS was supposed to only last eight days, but two months have already passed, and there’s now talk of the situation lasting until early 2025. NASA leadership this week weighed a plan to bring back the astronauts via SpaceX, marking the latest in a series of reputation problems for Boeing (MAX jet crashes, door plug blowout and guilty plea) that will need to be resolved by new CEO Kelly Ortberg.
