The Rotation Continues as Tech Sells Off Again

Markets Overview 07/12/2024

S&P 500 - 0.83%

DOW + 0.75%

Nasdaq -2.56%

Russell 2000 +3.40%

Notable Sector Performance

Utilities +1.48%

Healthcare +1.41%

Materials +1.35%

Earnings

Tesla reports more than 40% loss of profit as they report very lackluster earnings. A bit driven by the weak EV demand as they delivered less Model Y’s than they did last year.

Everyone was blaming Google for the huge tech sell-off as the tech giant beat top and bottom line estimates but YouTube ad revenue came in below estimates, this made investors think companies are holding back their marketing budgets. The stock sold off after CEO Sundar Pichai stated that he’d rather spend too much than too little on artificial intelligence and investors started to question when they will see returns from the massive capex investments.

Traditional automakers are struggling as General Motors is down 9%, Stellantis is down 13%, and Ford is down 20% all on the week. Even though GM saw an earnings and revenue beat while hiking their guidance, a slowdown in China sales led the stock to sell off as investors questioned the rising competition and a delay in EV projects also lowered sales estimates as they are expected to generate a lot of future revenue. Ford had a huge miss on both top and bottom line estimates. Ford maintained its guidance for 2024 though but the stock sold off due to rising EV competition and quality issues. Jeep maker Stellantis sold off after a wide earnings miss which led to investors questioning their demand

Chipotle reported a beat on both top and bottom line numbers which led the stock to soar about 10% after the market, which then went down due to them saying they expect their margins to be under pressure for the next couple of quarters. They ended the week down 6.5%.

Spotify stock ended the week up 8% after a huge earnings and revenue (up 20%) beat. They hiked prices earlier this year and have seen minimal churn in reaction to this, so they are thinking about doing it again (please no).

Hoka maker Deckers saw a huge beat further confirming my thesis of Nike getting market share snatched from them and that these niche players are the play currently. Revenue increased 20% and EPS saw an increase of 87%, their CEO stated, “HOKA and UGG continue to drive robust full-price demand in the global marketplace by delivering compelling product that consumers love.” Hoka sales increased 29% to $545 million. $ONON benefitted from this also as they went up about 4% aftermarket when Deckers reported, they report in a couple of weeks and I am expecting something very similar to Deckers.

Overall, it was a tough week again for the mega-cap and most noticeably, Nvidia is down 6% on the week. Small Caps continue to be the beneficiary of this shift in the markets. The rotation continues.