Happy Friday!
Olympics start, stocks slide and inflation moderates. Technology companies down, but not out. Orange Crush – an orange lobster is rescued in Denver.
#1 – Weekly Market Recap
Stocks appear poised to end the week on a more positive note after a brutal week that saw all three major US indices in negative territory through Thursday’s close.
The S&P 500 and Nasdaq both had back-to-back negative weeks for the first time since April, declining -1.9% and -3.5% respectively. The Dow Jones held up proportionally better but could not escape the selloff and fell -0.9%.
Technology stocks led the decline amidst company earnings releases that appeared to fall short of sky-high investor expectations. Smaller companies benefited from anticipated rate cuts, but ultimately succumbed to overall market volatility.
This morning, investors welcomed the release of the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) Index, that showed inflation (ex-food and energy) rose at a +2.6% annual rate in June, slightly higher than the +2.5% expected.
Next week investors await more company earnings releases and the next Federal Reserve meeting. Investors will be paying close attention to the Federal Reserve, whether direction on the prospect of rate cuts could rejuvenate the stock market.
#2 – Summer Slide
The past two weeks have been tough for technology stocks and the tech heavy Nasdaq index. As shown in the chart below, the Nasdaq has dropped -8.9% over the last two weeks. While we understand that stock declines are not fun for investors, they are a reality of investing — stocks don’t go up every day.
To provide context for our readers, we analyzed the Nasdaq 100 over the last 30 years to determine the largest drawdown in each year. As shown in the chart below, the average intra-year decline for the Nasdaq over the past 30 years was -21%.
We took our analysis one step further and eliminated the “outlier” years of 2001 – 2003, 2008, 2020 and 2022 when the Nasdaq losses exceeded -30% to get a more “typical” intra-year loss profile. We determined that in these 24 “normal” years, the average intra-year decline was -15%.
With this context, investors can hopefully find solace in knowing that the current decline of around -10% is not atypical. In fact, a -10% intra-year loss in the Nasdaq has occurred in 27 out of the past 30 years.
One reason for the current decline in technology companies may simply be “momentum exhaustion.” As we wrote in our Q2 summary, the technology sector entered “Extremely Strong” momentum territory (noted in purple in the chart below) at the end of the quarter.
This was the fourth time over the past 12 months that the technology sector reached “Extremely Strong” momentum. Levels in this range denote a 2-standard deviation reading and are often followed by periods of weakness.
#3 – Orange “Crush”
The Denver Downtown Aquarium has a new resident – a rare orange lobster named Crush! The uniquely colored crustacean was rescued from a shipment of live lobsters delivered to a Red Lobster restaurant in Pueblo, Colorado. An eagle-eyed employee spied the bright orange lobster while unpacking a shipment of lobsters destined for a holding tank…and then the dinner table. The staff named the uniquely colored lobster “Crush” after the Denver Broncos’ legendary Orange Crush defense from 1976 to 1986.
“Myself and many of my team are born and raised Denver Broncos fans, so as soon as we saw that orange color, we knew that Crush would be an excellent representation,” said Kendra Kastendieck, the Red Lobster general manager.
The local Pueblo Zoo couldn’t take the orange lobster, however the Downtown Aquarium immediately stepped up and offered Crush a home. Last week, Kastendieck packed Crush in ice and delivered it to the aquarium. The aquarium staff set up a quarantine tank with a Denver Broncos helmet inside for Crush to climb inside and explore in his new home.
Crush will be examined by a veterinarian, and after 30 days in quarantine, will be moved to the “Lurks” exhibit that houses cold water North Atlantic Ocean species.
Source: AP News
#4 – Opening Ceremony Today
The Paris Olympics are finally here! The 2024 Summer Olympics will officially kick off today with the Opening Ceremony. The parade of countries followed by the Olympic cauldron lighting ceremony will be broadcast live at 1:30 pm ET (7:30 pm in Paris).
A flotilla of 100 boats will carry over ten thousand athletes and performers down a 3.7 mile stretch of the Seine River through the heart of Paris toward the Eiffel Tower. Spectators will gather on the riverbanks to cheer on the procession of athletes from all over the world.
The floating parade of athletes will end at the Trocadéro, the gardens and buildings built for the 1937 Universal Exhibition, across from the Eiffel Tower. French President Emmanuel Macron will deliver a welcome speech and the Olympic cauldron will be lit to officially signal the beginning of the Games.
Olympic organizers indicate that this is the first opening ceremony to be held in a city center and the first outdoor ceremony in modern Olympic history.
NBC will be covering all aspects of the Olympics. Live coverage will be hosted by Mike Tirico, Peyton Manning and Kelly Clarkson with contributions from Today hosts Savannah Guthrie and Hoda Kotb stationed along the river.
Who will be performing at the opening ceremony? The entertainment acts are still a closely guarded secret. It is, however, being reported that Celine Dion and Lady Gaga both arrived in Paris and there is speculation that one or both of the singers will be performing at the opening ceremony.
Over the next 16 days the world will be watching exhilarating athletic competitions among the world’s top athletes. Closing ceremonies will take place on August 11th.
Hopefully the infamous 100% recyclable cardboard beds provided for the athletes (which debuted at the 2020 Tokyo Summer Games) won’t thwart any athletic performances!
Source: AP News
Source: NPR