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By any standard measure, the second quarter was good for stocks, especially large-cap stocks, with a number of record performers.
There was Nvidia (NVDA) , “it” stock rose 10.3% during the month and 149% year over year. But the monthly gain, as nice as it was, It wasn’t the best among S&P 500 stocks.
Or Arm Holding (arm) a chip designer, is important for mobile phones. It went public last fall. It rose 36% in June and is up nearly 118% on the year.
What about a super micro computer (SMCI) ? It rose 4.4% in June but fell 18.9% in the second quarter but is up 188.24% for the year. And oh yeah, shares jumped 255.3% in the first quarter.
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Meanwhile, Walgreen Boots alliance (World Football Association) Medicare Pharmacies was dropped from the Dow Jones Industrial Average this winter. The drugstore chain announced this week that it would close thousands of stores. Its shares fell 25% in June alone, from $12.10 on June 28. They are down 54% this year.
Troubled aviation giant Boeing (Bachelor’s) It ended June up 2.5%. There’s not much to cheer about when the stock is down 30% by 2024. It could be worse. Intel (NTC) once a chip giant, has fallen 38% this year.
Markets in brief
What the stock market will look like in 2024: It’s all about tech and big-cap stocks. These companies have made big gains. But many of them are overbought and are still swinging in the same direction.
The S&P 500 rose a respectable 3.5% in June, with a 3.9% gain in the second quarter. For the year, the index is up 14.5% — after a 10.2% gain in the first quarter.
There are two sectors that are the biggest drivers of the S&P: technology services and communications, led by Alphabet, the parent company of Google. (Google) Meta’s parent platform for Facebook (Meta) Both are up more than 25% this year.
The Nasdaq Composite rose nearly 6% in June and is up 18.1% for the year. In theory, the pace is on pace to match 2023’s gain of 39%.
The Dow Jones is also a heavily weighted index of Intel, Boeing, and Nike. (to) all of which are down more than 30% this year. The venerable index looks tired. It rose just 1.3% in June, fell 1.6% in the second quarter, and will rise just 4% in 2024.
A Very Weird Day for the Nasdaq 100
The Nasdaq 100, also known as the Nasdaq Enhanced, offers a glimpse of the risks. The index is up 17% for the year, 6.2% in June and 7.8% in the quarter.
Components include Microsoft, Apple, Amazon, and the native Meta platforms of Facebook and Alphabet. In addition to Nvidia and Tesla (Tesla) and Costco wholesale (it costs) .
June 28 was a strange day for the Nasdaq 100, and the story makes one wonder if the markets were just too nervous.
The index jumped more than 200 points immediately after the open on June 28, crossing the 20,000-point level for the first time, peaking at 20,018 points.
Then many investors (or their computers) sold large amounts, and the index fell more than 351 points.
Perhaps the options expiration had something to do with the decline. But the selling seemed extreme.
The index closed at 19,683, down 0.5% and 226 points from its highest record close of 19,909 on June 18.
Market tops often look like this.
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Risks for the rest of 2024
Wall Street is full of bulls, boosting their year-end targets on, say, the S&P 500. They see the index ending the year perhaps at 6,000, perhaps higher. But the stock market attracted many analysts to these numbers because many of them assumed a recession this year.
Now they say they expect many years of economic growth, job creation, and huge stock price increases.
They don’t worry about war or even politics.
There are increasingly skeptics.
Yes, the big-cap stocks have gone up big, maybe too big. Ten stocks now account for nearly 36% of the S&P 500’s market cap. Especially tech stocks and stocks like pharmaceutical giant Eli Lilly. (Layla) Apple shares have risen 55.3% this year and has a market value of $860.5 billion.
But markets, frankly, stumbled out of June and may struggle to recover. Mid- and small-cap stocks aren’t rising. Interest rates may stay on hold if the Fed doesn’t cut rates.
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The market slowdown may reflect economic pressures, says David Rosenberg, former North America chief economist at Merrill Lynch and now heads a Toronto-based consulting firm.
There are two economies at work now: an economy that is good for the wealthy, and a stagnant economy that hurts middle-class and low-income workers the most, according to Rosenberg.
It gets worse because the Fed is so data-driven that it seems it wants absolute confirmation that inflation is indeed heading toward its 2% per year target.
Waiting can create its own problems. Many families cannot survive, and many will be in dire straits if they remain without work for more than three months. Clearly, the pressures faced by small businesses in the regular news are mounting: restaurants, butcher shops, toy makers.
Rosenberg’s advice to Jerome Powell: Don’t wait to cut rates. The economy needs help now. He doubts the Fed will act. “They’re too afraid to move rates too soon.”
What awaits us this week?
I hate to say it, but this week is going to be slow. The July 4 holiday is on Thursday. Markets will close early on Wednesday. Canadian markets will be closed on Monday. Lots of investors will be heading to the beach.
The biggest economic report for July will come on Friday with the Federal Reserve’s monthly jobs report Bureau of Labor StatisticsAgreed estimates indicate that job numbers will rise in June by about 180,000 jobs, with the unemployment rate stabilizing at 4%.
The jobs portion of the report will be closely watched because the May report estimated that 272,000 jobs were created, much more than expected.
There are a few earnings reports that could move the markets. One of them is Constellation Brands. (STZ) the marketer of Corona beer as well as a large group of wineries and Svedka vodka.
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