Stock Market Update Tuesday July 30, 2024 Equities experienced a downturn, with the S&P 500 and Nasdaq 100 declining 0.5% and 1.4%, respectively, although they managed to recover slightly from their intraday lows. Conversely, the small-cap Russell 2000 index bucked the trend, posting a 0.4% gain.
Away From Stocks: Treasurys saw some buying interest, with the two-year yield slipping to 4.35%, its lowest level since early February, while the yield on the long bond dipped two basis points to 4.4%. Commodities markets were mixed, with WTI crude oil declining to $75 per barrel, while gold prices advanced to $2,409 per ounce. In the cryptocurrency space, Bitcoin experienced a pullback to $66,100, and the VIX volatility index rose back above 17.
We advised our premium members to maintain a cautious stance with Nvidia $NVDA until our algorithm generates a buy alert. We recommend against attempting to time the market bottom or catch a falling knife.
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We anticipate a more dovish stance from the Federal Reserve (Fed) given the recent weakening of economic data and softer inflation reports since the last FOMC meeting in June. Notably, the Fed seemingly overlooked the May CPI report, released on the same day as the June meeting, suggesting a potential shift towards a more accommodative monetary policy.
From a broader perspective, a rate cut by the Fed would be beneficial for cyclical sectors. Sectors like durable goods, auto sales, and housing demand should pick up with lower interest rates. This, in turn, would most strongly benefit small-caps (IWM), financials (XLF, KRE), and industrials (XLI).
Our strategy recommendation remains focused on what is working. This includes concentrating on ETFs in financials, industrials, and small-caps, while anticipating a potential short-term rotation away from technology.
Bullish Consolidation
