Weak Economic Data Weighs On Indexes; Google, Affirm, MercadoLibre In Focus | Stock Market Today

0:00This podcast is brought to you by MassMutual. For 175 years, MassMutual has stood for strength and stability, helping people secure their future and protect the ones they love. Learn more at MassMutual.com. That's MassMutual.com.

0:25Ed Carson:Good afternoon, everyone, and welcome to Stock Market Today for Tuesday, August 5th. It's Alyssa Coram here and downside reversals for the major indexes today after some weak economic data, and we have more high-profile earnings reports to check in on after the close. Joining me now to do just that and break down today's market action is my colleague Ed Carson. Ed, what do you have for us? Yeah, I'd like to take a look at Google, Affirm, and MercadoLibre. Okay, we'll check in on those stocks. But first, let's take a closer look at the major indexes. So the Nasdaq today down almost 7 tenths of a percent by the close, reversing lower.

1:06Ed Carson:Same for the S &P 500, a downside reversal leading to a decline of about a half a percent. We're still holding above that 21 day, it looks like. And the Dow down about one tenth of a percent. So not quite as bad of a decline as the S &P and NASDAQ. And the bright spot today, small caps, the Russell 2000, up about six tenths of a percent headed into the close. So Ed, what was weighing on stocks today? Yeah, the ISM Services Index came out, and that basically came down to break even. The employment showed weaker, more of a decline. Prices showed more pressure, sort of had sort of a stagflation vibe.

1:50So that seemed to hit. There was also some things like little pieces of news on chips that may have given reason for people to maybe sell some growth names. I mean, I think if you look at the chart, like the last few days look more volatile, But that's partly because it was such a smooth ascent for several weeks. It's not like there's been this radical moves. I mean, the move from Thursday morning to Friday's close, that was not fun. But really, this isn't that big of a range. All the indexes, including the Russell 2000, they're all around the 21-day line, which is fine. So, I mean, if we paused here for a little bit of time, I think that could be very healthy.

2:29But we'll just have to see. But yeah, it was just something to bring things down because I don't think the investors want to see cooler economy to get some Fed rate cuts, but they don't want to see it turn cold.

2:40Ed Carson:Exactly. All right. And you make a good point about the trading range. So this week so far, we're still inside that action from Thursday and Friday of last week. The Nasdaq still above that key 21 day line for the power trend back above it as of Monday. and we're hanging on up about six tenths of a percent above that key level even with the downside reversal today. The S &P a little closer. It's just two tenths of a percent above the 21 day and still inside last week's action as well. So it could be an interesting weekend to see how this is going to play out after we did get that character change late last week.

3:23Ed Carson:Are we going to hold key support or at least hold Fridays low and trade in a range here? Are we going to snap back? And if we do, what could those potential catalysts be? What are you seeing out there? Yeah, I agree. And also with these swings back and forth, we've seen a lot of reversals. You know, stocks will start off strong, reverse lower, start off weak, reverse higher. so that makes it more difficult with their decisions so maybe lightening up in the last few days just taking a raising a little bit of cash still being fairly heavily invested not being too aggressive about new buys given given the back and forth and just waiting to see how things shake out totally agree we'll wait for the dust to settle here a little bit see if we can get some cleaner entry points and let's just get quick thoughts on blue chips and small caps.

4:16You know, it's nice to see the Dow bouncing back up. It needs to get a little stronger here. It's nice to see the Russell. I think it was going to close above the 21-day line. So that's a nice thing because that was one of the uglier parts. That started off weaker. That fell earlier than the other indexes and got further down. So nice to see that bounce a little bit.

4:36Ed Carson:Okay. Let's take a quick look at some equal weight indexes. So QQQ first, just to get a frame of reference here, tracking the NASDAQ 100, down about 7 tenths of a percent on the day. Meanwhile, QQEW, its equal weighted counterpart, down about 9 tenths of a percent. What's your assessment? Yeah, that one's a little closer down to the 50-day line. So that one is probably the most disappointing of that. I mean, outside of some of the mega caps, which didn't necessarily have a big great day, it's just in general it didn't fall that much, there was some weakness in growth stocks. You definitely did see some names that were down 4%, 5%.

5:16Yeah, some of it was on earnings, but some were not, and they were just down. So it's just something to note. There was a little bit of weakness. While the Russell was strong today, there has been some weakness in breadth at times in recent days.

5:28Ed Carson:Yeah. So speaking of, we can take a look at RSP, looking a little bit better than QQEW. This is the equal weighted S &P 500 ETF, still below the 21 day, but above the 50 day. And you mentioned some chip news. So let's check in on SMH. Chips down about 1.1 % on the day. Overall, hanging in there right around that 21 day line. We do have some key chip sector reports this week. Yeah, and a lot of them are tonight. But yeah, so this is down. But you know, it's still within that range. Again, Most things are around their 21-day line. So, you know, you look at that chart and today's action didn't really change anything.

6:11Ed Carson:Yeah. Okay. And let's check in on gold miners. I know to start off the week, it was a very strong start. And boy, did they follow up today. GDX up another 2.8%, bringing its two-day weekly gain so far already to 7.6%, Ed. So a great week so far for gold miners. Yeah, really powerful today. You know, yesterday you could say, well, they were catching up to maybe the treasury yields coming down and this and that. I don't know what drove it today, but really strong move because the 10-year yield was flat. I don't think the dollar was doing much, but really, really strong action today for gold. And, you know, it's tricky.

6:54I always have trouble with gold, but, man, did it make a move off the 50-day line so far this week.

6:59Ed Carson:Exactly. Those pullbacks to the 50-day always, you know, in hindsight, seem to be where to pick up this area of the market, the gold miners, really kicking it up a gear in today's session. I'm Steve Booth, CEO of Baird, an independent wealth, asset management, and global capital markets firm. At Baird, our 5 ,000-plus employees are united by an unwavering commitment to excellence and a genuine passion for helping our clients and each other succeed. As a privately held, truly employee-owned company, we treasure our independence since we can focus on delivering results to clients and taking care of our people throughout the cycles in our serve markets.

7:40Learn more at rwbear.com slash wsj.

7:43Ed Carson:Okay, let's take a look at some stocks. You mentioned Google. So let's go there. Google Parent Alphabet. A little bit of a downside reversal here, just fractionally lower on the day, but overall, holding up really well. Yeah, it's done pretty well. There was an earlier cup with handle on this daily that you see, but that was pretty low in the base. And the relative strength line just really wasn't that good. Now, relative strength line has picked up a little bit. And this is an alternate handle on a weekly chart. That is the handle. So it's definitely a proper buy point. So it's just something to note.

8:19It's not going to set the world on fire. It's probably not going to lead, but it could be a solid performer here. A lot of the other sums, they sort of slowly have been creeping up. Some of these mega caps, you know, they often with sluggish RS lines initially. So this is one, especially with some of the volatility right now that we're seeing, you know, some of those high beta names. Do you want that when the market is so whippy? This is one that's going to be a little less. It did reverse a little lower today. So it's not like it's immune. It's not like you can shrug it off, but still a solid performer.

8:52And I just thought it was worth looking at.

8:55Ed Carson:Yeah. And we do have earnings out of the way. And also, if there are concerns about breadth, right, Ed, if you're seeing money being allocated more to these mega caps, well, you know, this is one that's setting up. Absolutely. All right. Next on our list, let's check out something with a little bit more heat. And that is Affirm. It's already up almost 13 % for the week, Ed. Most of that coming from yesterday's session. But this is something that we've been talking about lately. Justin and I were covering this on Monday's show where you saw some of that hidden strength with a lot of names on Friday.

9:34Ed Carson:Now, some have followed up on that strength this week. Others have reversed and had a tough time. But this is one that really followed up on that upside reversal Friday with a strong gain to kick off the week and really closed nicely off the lows today as well. Yeah, I thought I was impressed because there was a lot of other payment stocks. There were some that fell on earnings and there was, you know, the ISM number wasn't particularly encouraging for, say, consumer spending. But yeah, I think that trend line was where it would have been the ideal spot to buy it because it is already a fair amount above the 21-day line.

10:10I liked this one better when it was pulling back a little bit. But this is our stock of the day. It's showing strength here. Earnings are not for a ways out. I will say that one of its rivals, Sezzle, reports on Thursday. And Block, which is ticker XYZ, they have a pretty big after, you know, buy now, pay later. So what they have to say could affect a firm, even though you'd say, oh, earnings aren't for weeks. It's like, well, we'll see. But yeah, this one's strong growth. You can look at those numbers, really tremendous growth. Some of it's just the shifting over to profitability now. I mean, you know, confirmed profitability is still solid revenue growth.

10:49Yeah, this one's volatile. I mean, this is not, you probably don't want a portfolio entirely of a firm or stocks of that kind of up and down, but really strong action here.

11:00Ed Carson:And so speaking of, so what do you do if you're interested in a stock, you think the story is compelling, but perhaps it is a little bit more volatile. How do you manage risk, right? Well, a couple of things you can do. One, think about your position size. How big of a position is it in relation to your overall portfolio? And then where are you setting your stop? If you think it's more volatile, you want to be more patient, maybe you give it a wider stop. That's also where a smaller position helps. But you have to make sure that wherever it is that you're getting in, it makes sense from a risk management and dollar loss perspective if you were to take that hit.

11:39And one other thing I completely agree with those. Another one is that you can take almost a quasi-swing trader approach where if you get a gain, like a 5%, 10 % to sell a sliver, because then if you did get a reversal, it just makes it a little easier. So that could be something, you know, that isn't for everyone, but that's one way to try to lock in some gains, especially if you don't go for a smaller position side. If you don't like doing that, then you may want to cash in a little bit earlier. But yeah, you definitely need to have to manage, you know, each stock a little differently.

12:13Ed Carson:Great thoughts there, Ed. And let's go to Mercado Libre. This is Melly. Earnings came out. A little bit of a volatile day here, Ed. Yeah, and this is all over the place. And it's actually, when I picked it, it really dropped off in the last few minutes. Because last night, it was down like 6%. It opened not well, but it quickly recovered. Near the highs, it was starting to get close to that area where it's like, hey, if it goes a little bit more, you'd almost be thinking it's actionable. you know getting maybe like to the 2500 level would be decisively above that like it didn't get there but there's a lot of trading there but yeah it's interesting this is sometimes this is also why earnings are so difficult because you know i totally would have understood if somebody i mean i don't know this would hasn't really been in position for a while but if somebody was in it they could have said oh it's i'm down six percent i'm gonna sell because it was that uh the earnings weren't great uh it's you know some people are saying look past that they're spending on marketing and this and that.

13:11Well, I mean, is that, or is that because of really having to do margins, squeezing things that'll hurt them longer term? We'll see because they do have these lumpy earnings at times. Sometimes the earnings are well below views and they were well below views. Sales, sales were strong. So this is one, again, you, you know, this is, there's a lot of things. One, it's just like why you got to be cautious around earnings, why you don't react immediately to earnings out of the next day. Why you wait for the real strength? Oh, no, it's coming up. It's like, well, it didn't really punch through either.

13:43And it backed off. We'll see what happens tomorrow, next day. Maybe this sets up. Maybe the 50-day line, it gets up there. And now it's going to sell off. So it's been a strong growth story. This is an area where you might want to do it. 40-week has often been a good place for the 200-day line. But maybe in such a strong market, the 50-day would work in this situation. Right. I don't know. It was just something, it just intrigued me, this chart today. Like, honestly, I'm so excited about it. There's a lot of things going on with it.

14:14Ed Carson:Exactly. You always bring some stocks with good lessons behind them. I try to learn those lessons myself. I'm trying to tell that to myself, actually. Hey, we're always learning, right? You know, even if you've been doing this for a long time. Okay, let's check out some stocks with earnings out after the bell. Anything looking interesting off the bat to you, Ed? Well, AMD is the one. I don't know if they've reported yet, but they're up a little bit. So I just want to bring that up. That's the biggest name. I suppose if it pauses here for a while, there's a lot of these things. If they pause here for a while, maybe there'll be something, but it feels pretty extended.

14:49Asteril Ads, that one must be out because that sucker is flying. So that one is doing very well.

14:56Ed Carson:16%. Yeah. Yeah. Arista Anet is doing very well as well. And these all look similar, these three stocks. I mean, not necessarily close. SMCI, though, and this is why, like, that one missed. And this one has more accounting issues. Now, maybe something, I don't know what's going on, but this one giving back a lot of the gains that it made in the last few weeks. So that one's not so good. Exactly. Down 13%, just letting our Spotify listeners know. Meanwhile, Arista Networks, we checked in on that one, up about 13%, 14%. But yeah, with SMCI, my thinking on it is, of course, you could have done well off the lows here fishing this one.

15:39Ed Carson:But with those past accounting issues, there are so many other fish in the sea. That's just sort of my perspective. Why fiddle with something that has something questionable in its past, you know, even if it's in the rearview mirror? But investors clearly not liking the results here. No, they are not. And Toast is one that we've looked at a lot. And that was up initially. I have not looked at results now. I'm not sure if it's up. It looks like it's turned down. So we'll see. Another name is Hinge Health, H-N-G-E. That one's up about 10%. That one was bouncing around flirting. You could have maybe bought it, but it's right ahead earnings.

16:16You just don't know. And we'll still see how things go. And those are some, I guess, Halo. One more name, H-L-A-L-O. That one might be interesting. I mean, really ugly sell-off to the left-hand side of this base. But it's up about 6%, maybe clearing some early entries. Again, haven't looked at the details. But there's a lot of things moving overnight.

16:39Ed Carson:Yeah, some really big movers too. So it'll be fun to cover tomorrow morning on IABD Live. And in the meantime, we have a ton of coverage over at investors.com. So everyone should head there and check out IABD's take on some of these key earnings reports. Ed, thank you so much as always. Thanks everyone for tuning in. that's it from us for today but we will be back with more tomorrow morning on ibt live like i mentioned investors.com slash ibt live for all the details on our daily morning live stream we'll see there starting 10 minutes before the opening bell and then we'll also see you right back here tomorrow after the close

17:37This podcast is brought to you by Federated Hermes. We put our investments through a ruthless vetting process because the market can be unpredictable and we don't think your investments should be. Learn more at federatedhermes.com slash US. Investments are subject to risk and may lose value.