Market scorecard
US markets opened sharply lower yesterday, mirroring declines across the globe, before partially recovering in the afternoon. The tech-focused Nasdaq took the hardest hit, ending down 3.4% on the day. Every sector within the S&P 500 declined, with the index experiencing its steepest drop in about two years. Nothing is broken yet, so there's no need to panic. For context, the S&P 500 is only down 8.5% from its peak.
Over the past 40 years, the S&P 500 has typically experienced an average intra-year pullback of 14%. Despite these fluctuations, stocks have delivered a positive average annual return of 13% and have risen in 33 out of those 40 years, or 83% of the time. Hold the line!
In company news, Palantir (NYSE:PLTR) jumped 12.2% in after-hours trading following strong quarterly results and an upward revision of its annual outlook, driven by high demand for its AI software. Kellanova (NYSE:K) (recently spun out of Kellogg's) snapped, crackled and popped by 16.2% on a report that the company is preparing to be acquired by fellow snack foods maker Mars. Lastly, Intel (NASDAQ:INTC) continued to slide, falling another 6.4% as it suffers the after-effects of its awful second-quarter earnings.
In the end, the JSE All-share closed down 1.19%, the S&P 500 lost 3.00%, and the Nasdaq was 3.43% lower. Could have been worse.
One thing, from Paul
I've been following markets since 1987, investing in shares personally since 1992, and managing client money since 1997, so I've seen a good number of Wall Street crashes. The drop in recent days isn't special, just a series of garden variety 3% sell-offs. These are jitters, followed by some profit taking. There is nothing like price to change sentiment, and the financial media is being very noisy.
I'm feeling quite relaxed. As someone pointed out, when balding men are panicking about the markets, they are probably worried about the wrong recession.
I don't expect the Fed to announce an emergency rate cut. Austan Goolsbee (below), a member of the Fed from Chicago said today: "There's no need for that. There's no economic or financial emergency. Economic growth continues despite one month of weaker jobs."
The S&P 500 isn't even in correction territory yet. It's only down about 8% from recent all-time highs, and US unemployment is still hovering at multi-decade lows. It seems to me that some hot-money traders were due for an old-style panic attack.
If you're watching the current market volatility at home and feeling antsy, dial it down a bit. Stop looking for horror headlines on the stock market websites, and quit watching reruns of movies like Margin Call and The Big Short. Ignore those stories about Warren Buffett selling Apple shares (NASDAQ:AAPL) at Berkshire Hathaway (NYSE:BRKa). He has his own cash-flow pressures and strategies, that are not relevant to you or me. Apple is doing fine.
They say that you should buy stocks when there's blood in the streets, but you can't do that if you are fully invested. As you should be, if you are a Vestact client. We accumulate quality and then stick to our guns.
Byron's beats
Last week Amazon (NASDAQ:AMZN) released results that had many positives and a few negatives. Weak overall market sentiment has been more influential than earnings releases in recent days, so Amazon got pulled down with the rest.
In these quarterly numbers for the period to the end of June, overall retail sales slightly missed expectations, due to moderating international turnover, but US retail was solid. Importantly, sales at AWS came in better than expected.
The image below says more than a 1000 words. Take a look at the divisional breakdown on the left which shows the contribution from each segment of the business. AWS (up 19% year-on-year) and advertising (up 20%) were the standout winners.. It looks like AWS actually stole some market share back from Microsoft (NASDAQ:MSFT) Azure this past quarter which is against the recent trend.
CEO Andy Jassy and his team plan to keep on spending big on AI infrastructure. This is in line with the other big tech giants, as no one wants to be left behind. Like Meta (NASDAQ:META), Amazon also offers an AI platform, "LLM as a service", which is expensive and requires huge data centres. Amazon has both the money and the existing infrastructure to be a really big player in this exciting new sector.
Amazon is a market leader in both online retail and cloud services. It ticks all our boxes and we are happy to carry on accumulating this stock, especially into the recent weakness.
Bright's banter
In a disappointing ruling last night, Judge Amit P. Mehta found Google (NASDAQ:GOOGL) guilty of violating antitrust laws by maintaining a monopoly in the search engine market. This was the first major antitrust victory against a tech giant since the 1990s Microsoft case.
The decision concludes a case initiated in 2020 by the DOJ and 38 states, who argued that Google's payments to be the default search engine on Apple and Samsung (KS:005930) devices stifled competition. This is madness honestly, Google is being punished for creating a great platform and then using it to their advantage. No one asked those smartphone makers to use Google search, instead of creating their own.
The ruling is expected to impact ongoing antitrust efforts against other tech companies like Apple, Amazon, and Meta.
Monday's ruling did not include remedies for Google's supposed misbehaviour. That comes next and may include banning the arrangement between Apple and Google. Regardless of what the judge comes up with, we are holding on to our Google (aka. Alphabet) shares.
Kent Walker, Google's president of global affairs, said the company would appeal the ruling. "This decision recognizes that Google offers the best search engine, but concludes that we shouldn't be allowed to make it easily available." Well said, what a cheek!
Signing off
Asian markets have rebounded this morning, retracing some of the losses sustained yesterday. Equity benchmarks rose in Hong Kong, India, Japan, Taiwan, and South Korea. Markets in China ebbed. The stand-out performers were Japan (+8.9%), South Korea (+3.7%), and Taiwan (+3.4%).
In local company news, Copper 360 has commenced underground mining at its Rietberg Mine in the Northern Cape which is expected to be a big contributor to earnings. Meanwhile, Telkom (JO:TKGJ) reported solid financial results, with revenue increasing by 4% to R10.9 billion.
The Rand is trading at around R18.48 to the US Dollar.
US equity futures are in the green pre-market, so maybe the bounce is on! Today we'll see earnings reports from Amgen (NASDAQ:AMGN), Caterpillar (NYSE:CAT), Uber (NYSE:UBER), and Airbnb (NASDAQ:ABNB).
Kamala Harris likely to announce her running mate today. Our money is on Josh Shapiro, currently Governor of Pennsylvania. The guy is an epic public speaker.
All the best!