Market Resilience: S&P 500 and Nasdaq Extend Gains Amid Election Uncertainty
Market Resilience: S&P 500 and Nasdaq Extend Gains Amid Election Uncertainty
By:JJ Kinahan
Amazon hits record highs and new fashion venture sparks optimism, but Nike and Walgreens disappoint
- The S&P 500 and Nasdaq extended gains despite election ambiguity.
- Nike and Walgreens report miss, affecting market sentiment and investor confidence.
- Amazon's new fashion service has propelled its stock to an all-time high.
Stocks continued their upward trend for the third consecutive day, with the S&P 500 gaining 0.1% and the Nasdaq Composite rising by 0.3%. The day appeared relatively subdued, which I attribute to traders awaiting the aftermath of the previous night's presidential debate and the release of the morning's personal consumption expenditures (PCE) index report.
Elections can significantly influence markets because of the impact an administration’s priorities have on various industries. However, last night's debate left many uncertainties regarding the upcoming administration. Neither candidate presented a compelling performance in this unusually early debate for the election season. It was akin to preseason form rather than contenders. This could heighten the significance of future debates as the stakes amplify exponentially.
A crucial development this morning was the PCE index report, aligning closely with analysts' expectations: core PCE prices rose 2.6% year-over-year and 0.1% month-over-month. This data maintained a 64% forecast for a rate cut in September, unchanged from before the report's release, signaling stability in market expectations.
Individual stocks
Turning to individual stocks, Nike (NKE) saw a stark decline of 16% following disappointing earnings, accompanied by a downward adjustment in forward-looking guidance citing uncertainties in consumer spending. Nike attributed a 2% revenue decrease, contrary to a projected 1% increase, to softness in the Chinese market.
Similarly, Walgreens Boots Alliance (WBA) reported dismal metrics and revised guidance, resulting in a 22% drop in its shares by the end of yesterday.
Contrasting with these setbacks, stock in Amazon (AMZN) soared by 4% during the week, reaching an all-time high of $197.85 by yesterday's close. Amazon's strategic move involves launching a new low-cost fashion wear service directly shipping from Chinese warehouses to compete with privately-held e-commerce giants like Shein and Temu.
The crystal ball
Looking ahead, the markets face challenges in interpreting the PCE report's implications. Investors anticipating weaker figures that could boost prospects for an interest rate cut might be disappointed. Despite slower price growth reported in yesterday's GDP data, marking the economy's slowest expansion since mid-2022, I advise maintaining focus on long-term investment strategies amid fluctuating short-term trends.
In summary, the market's recent trajectory reflects cautious optimism despite uncertainties stemming from electoral dynamics and economic indicators. As investors navigate earnings surprises and strategic shifts among major corporations, the broader economic context remains pivotal in shaping market sentiments and decisions.
JJ Kinahan is CEO of IG North America—which includes tastylive, tastytrade and IG's FX Business. Kinahan traded for 21 years at the Chicago Board Options Exchange. He serves on the CBOE Advisory Board and the SIFMA Options Committee. @thejjkinahan
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