US Stocks Set To Extend Gains Despite Mixed Earnings, VIX Dips Back Toward Pre-Sell-Off Levels: Analyst Says Pullback Is A 'Growth Scare' And Not 'Calamity'
Author: Shanthi Rexaline | August 07, 2024 07:45am
Wall Street could go from strength to strength as the index futures point to another session in the green as investors seek to put the worst behind. Volatility continued to drop, as evidenced by another sharp slide in the CBOE Volatility Index, which is now approaching pre-sell-off levels. Earnings news of the day has been mixed, with the Dow Jones Industrials likely to take a hit from negative reactions to earnings reports from Walt Disney Company (NYSE:DIS) and Amgen, Inc. (NASDAQ:AMGN).
Super Micro Computer, Inc. (NASDAQ:SMCI) may weigh down on AI-levered stocks as traders sold the AI server maker due to margin contraction. That said, the broader sentiment appears to be positive as traders pile into beaten-down stocks to position themselves for a strong rebound they factor in for later this year.
Futures
Performance (+/-)
Nasdaq 100
+1.50%
S&P 500
+1.22%
Dow
+0.85%
R2K
+1.74%
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) gained 1.30% to $528.95, and the Invesco QQQ ETF (NASDAQ:QQQ) jumped 1.58% to $446.48, according to Benzinga Pro data.
Cues From Last Session:
Stocks rebounded from multi-week lows and launched into a rally as traders scrambled to pick bargains across sectors. The market slowly got over the trauma inflicted by weakening domestic economic fundamentals and the selling set in motion by the unwinding of the yen carry trades.
The major averages opened mostly lower and saw some indecision in early trading. They took off, benefiting from across-the-board buying, and hovered in positive territory all through the remainder of the session. The gains were led by real-estate stocks.
Small-caps outperformed their bigger peers, with the Russell 2,000 Index ending 1.23% higher for the day.
Index
Performance (+/)
Value
Nasdaq Composite
+1.03%
16,366.85
S&P 500 Index
+1.04%
5,240.03
Dow Industrials
+0.76%
38,997.66
Russell 2000
+1.23%
2,064.30
Insights From Analysts:
Following Tuesday’s comeback, Fund Strat said the rebound by equities is very constructive and strongly supports the idea the ‘worst of the selling is behind us,’ according to excerpts of the note shared on X, formerly Twitter. Tom Lee, Head Of Research at the firm, said in a separate post that it was a “rough 3 days of relentless selling but instead of breaking equity markets, VIX falling, BOJ pausing hikes, stocks finding footing.”
“Seems more ‘growth scare’ not calamity.”
George Smith, portfolio strategist at LPL Financial, said dips, pullbacks and corrections of 10% or more are a “normal and healthy part of any bull market.” Falling back on historical data, Smith noted that on average, stocks experience a pullback of over 5% over three times per year and a correction of 10% or more around once per year, even in positive years.
“We believe that how common these occurrences are should provide comfort to equity investors, allowing them to be patient, stay invested, and most importantly, to not panic,” he added.
Upcoming Economic Data:
The Energy Information Administration will release its weekly petroleum status report at 10:30 a.m. EDT.
The Federal Reserve is scheduled to release its report on June consumer credit at 3 p.m. EDT. Economists, on average, expect the outstanding consumer credit to decline from $11.3 billion in May to $9.7 billion in June.
Airbnb, Inc. (NASDAQ:ABNB) fell over 16% in premarket trading following its quarterly results, while Super Micro plunged over 14%, also on earnings.
The other stocks moving on earnings are Devon Energy Corporation (NYSE:DVN) (up over 4.50%), Amgen (down over 4.50%), Cirrus Logic, Inc. (NASDAQ:CRUS) (up nearly 12%), Exelixis, Inc. (NASDAQ:EXEL) (up over 6.50%), Fortinet, Inc. (NASDAQ:FTNT) (up over 16%), Illumina, Inc. (NASDAQ:ILMN) (up over 6%), Tripadvisor, Inc. (NASDAQ:TRIP) (down over 16%), Reddit, Inc. (NYSE:RDDT) (down over 6.50%), Rivian Automotive, Inc. (NASDAQ:RIVN) (down nearly 8%), Sunrun Inc. (NASDAQ:RUN) (up over 12%), Trex Company, Inc. (NYSE:TREX) (down nearly 17%), and Wynn Resorts, Limited (NASDAQ:WYNN) (up over 4.50%).
Those reporting after the close are AppLovin Corporation (NASDAQ:APP), Bumble Inc. (NASDAQ:BMBL), Beyond Meat, Inc. (NASDAQ:BYND), Blink Charging Co. (NASDAQ:BLNK), Fastly, Inc. (NYSE:FSLY), Forward Air Corporation (NASDAQ:FWRD), HubSpot, Inc. (NYSE:HUBS), Kulicke and Soffa Industries, Inc. (NASDAQ:KLIC), Marathon Oil Corporation (NYSE:MRO), Monster Beverage Corporation (NASDAQ:MNST), Occidental Petroleum Corporation (NYSE:OXY), Robinhood Markets, Inc. (NASDAQ:HOOD) and Warner Bros. Discovery, Inc. (NASDAQ:WBD).
Commodities, Bonds And Global Equity Markets:
Crude oil futures rose sharply, extending the gains from the previous session, and gold futures rebounded, while the yield on the 10-year Treasury note rose 4.9 basis points to 3.936%. Bitcoin (CRYPTO: BTC) pushed up about 4%, past the $57K mark.
Asian markets climbed across the board, led by the Taiwanese, South Korean, Singaporean and Hong Kong markets. The Australian and Chinese markets underperformed with much more modest gains, with the latter stymied by weak export data that offset the rebound in imports.
European stocks also rallied hard in early trading.
