Stocks remained relatively quiet on Monday as investors braced for a significant week featuring a key Federal Reserve meeting and earnings reports from major tech companies. The subdued market activity comes amid a sparse economic calendar and mixed corporate updates.
Key Takeaways
- McDonald’s Earnings Miss: McDonald’s reported lower-than-expected earnings and revenue, attributing the miss to consumer pushback on price hikes.
- ON Semiconductor Gains: ON Semiconductor saw a significant rise in its stock price after reporting better-than-expected earnings.
- Tesla Named Top Pick: Morgan Stanley named Tesla as a top pick among U.S. auto stocks, boosting its share price.
- Fed Meeting Anticipation: Investors are closely watching the upcoming Federal Open Market Committee (FOMC) meeting for clues on future interest rate policies.
- Mixed Market Performance: The Nasdaq Composite, S&P 500, and Dow Jones Industrial Average showed mixed results.
McDonald’s Earnings Miss
McDonald’s reported earnings of $2.97 per share on revenue of $6.49 billion for its second quarter, falling short of analysts’ expectations of $3.07 per share and $6.62 billion in revenue. Same-store sales also declined by 1%, missing the anticipated 0.4% increase. CEO Chris Kempczinski attributed the miss to consumer resistance to price hikes, which disrupted long-standing value programs. To counter this, McDonald’s is extending its $5 value meal offering. Despite the earnings miss, McDonald’s stock jumped 3.7%, making it the best-performing Dow Jones stock of the day.
ON Semiconductor Gains
ON Semiconductor emerged as the biggest gainer in the S&P 500, with its stock rising 11.5% after reporting higher-than-expected earnings of 96 cents per share on $1.74 billion in revenue. The company also provided a positive outlook for the third quarter, aligning with Wall Street’s expectations. Following the results, B. Riley raised its price target for ON Semiconductor to $106, indicating a 35% upside from current levels.
Tesla Named Top Pick
Tesla’s stock surged 5.6% after Morgan Stanley analyst Adam Jonas named the electric vehicle maker as a top pick among U.S. auto stocks. Jonas set a price target of $310 for Tesla, which is more than 30% above its current level.
Fed Meeting Anticipation
The upcoming Federal Open Market Committee (FOMC) meeting, concluding on Wednesday with a policy statement and press conference from Fed Chair Jerome Powell, is a focal point for investors. Brent Schutte, Chief Investment Officer at Northwestern Mutual Wealth Management Company, believes it is unlikely that the Fed will cut rates. Instead, investors will look for clues on future rate policies during the press conference. Schutte suggests that the Fed will need more evidence of controlled inflation or a weakening labor market before considering rate cuts.
Mixed Market Performance
The Nasdaq Composite rose 0.07% to 17,370, the S&P 500 added 0.08% to 5,463, and the Dow Jones Industrial Average slipped 0.1% to 40,539. The mixed performance reflects the market’s cautious stance ahead of the Fed meeting and Big Tech earnings reports.
Upcoming Big Tech Earnings
The week will also see earnings reports from major tech companies, including Microsoft and Apple. Quincy Krosby, Chief Global Strategist for LPL Financial, noted that these reports would be a crucial test for a market seeking direction. The results from these mega-cap tech names could significantly influence market sentiment.
Economic Indicators
Tuesday’s economic calendar includes the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, which showed a year-over-year increase in home prices by 5.9% in May, down from 6.4% in April. New York City saw the largest increase, while Portland, Oregon, saw the smallest. Additionally, the Conference Board’s Consumer Confidence Index rose to 100.3 in July from 97.8 in June, indicating a slight improvement in consumer sentiment.
Job Market Data
The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) revealed that job openings remained unchanged at 8.2 million in June. This is notably lower than a year ago but still elevated compared to pre-pandemic levels. The data will be closely watched ahead of the Fed’s policy announcement and the upcoming nonfarm payrolls report.
Single-Stock News
- Howmet Aerospace: The stock jumped 13.2% after reporting better-than-expected earnings and revenue. However, CFRA Research downgraded the stock due to its high valuation.
- PayPal: Shares rose 8.6% after the company beat earnings expectations and increased its share repurchase program to $6 billion.
- Pfizer: The stock gained 2.2% after reporting its first year-over-year revenue increase since Q4 2022 and raising its full-year forecast.
- Procter & Gamble: Shares fell 4.8% after missing revenue estimates for its fiscal fourth quarter.
The stock market remains in a state of cautious anticipation as investors await key economic indicators and corporate earnings reports that could set the tone for the coming weeks.
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