Traders work on the floor of the New York Stock Exchange (NYSE) as a picture of Vice President Kamala Harris is displayed on a television screen on July 22, 2024 in New York City.
Spencer Platt | Getty Images
Stock futures rose modestly on Thursday evening as the major averages head for weekly losses and investors anticipated a reading of the Federal Reserve’s preferred inflation gauge.
Futures tied to the Dow Jones Industrial Average advanced 69 points, or nearly 0.2%. S&P 500 futures and Nasdaq 100 futures climbed just over 0.1% each.
In after-hours trading, medical device maker Dexcom plunged about 38% after releasing disappointing fiscal full-year guidance. Footwear company Deckers reported fiscal first-quarter earnings and revenue that exceeded analysts’ expectations, boosting shares by roughly 10%.
Stocks are poised to end the week with declines, as investors on Thursday added to the previous session’s steep losses by dumping some megacap tech and artificial intelligence-tied stocks. The activity seemed to be part of a broader rotation into small caps and more cyclical areas of the market.
The S&P 500 and tech-heavy Nasdaq Composite slid by about 0.5% and 0.9%, respectively, on Thursday. The 30-stock Dow bucked the trend and added roughly 81 points, or just 0.2%.
“Volatility came back with a vengeance this week as selling pressure in the megacap space dragged down the broader market,” LPL Financial chief technical strategist Adam Turnquist said in a note to clients, adding that overbought conditions have also contributed to the recent weakness. “Counterbalancing weakness in these heavyweight names poses a challenge for the rest of the market.”
The broad-market index is down 1.9% this week, while the Nasdaq has lost nearly 3.1%. The Dow is down roughly 0.9% week to date.
On Friday at 8:30 a.m. ET, traders will watch for June’s personal consumption expenditures report, an inflation reading that’s preferred by central bank policymakers. On a monthly basis, headline PCE is expected to have grown by 0.1% and by 2.5% from 12 months earlier, according to economists polled by Dow Jones. The final Michigan sentiment survey will be released at 10 a.m.
On the earnings front, Bristol Myers Squibb, Colgate-Palmolive and 3M are slated to post quarterly results.
Historic small cap rally has lasting power, according to Principal Asset Management
The current strength of the small cap sector is a “significant rotation not seen in decades,” according to George Maris, chief investment officer and global head of equities at Principal Asset Management.
Small caps have only managed to outperform large caps twice over the last 30 years; during the Covid-19 pandemic and during the dot-com bubble in 1999 to 2000, per Maris.
“Those are historical levels, and we are currently at such a point, so this rotation has staying power because everyone’s offside,” Maris said.
Broadening earnings will lead to more optimism around the small cap sector, the investor added. Looking ahead, earnings growth stemming from interest rate cuts will help small businesses, noted Maris.
“The market, outside of the Mag 7, looks relatively normal long-term and in fact in small cap looks pretty interesting. … There’s a very optimistic case for going long on small caps,” Maris said.
The Russell 2000 is up 1.8% week to date and roughly 8.6% in July.
— Hakyung Kim
Communication services sector heads for worst week since October 2023
The communication services sector is on track for its worst week since October 2023 as investors flee tech giants.
The sector’s weekly losses have totaled 4.63% as of Thursday’s close. Alphabet shares are among the notable losers, off 5.8% week to date, while Meta Platforms has dropped 4.9%.
The information technology sector is also limping into Friday, toting a 3.5% decline for the week. A 16.7% slide in CrowdStrike this week and a 4.8% tumble in Nvidia contributed to the sector’s losses.
Health care and utilities – traditionally deemed defensive plays – are the only two sectors in the S&P 500 that are positive for the week, up 0.77% and 0.48%, respectively.
–Darla Mercado, Chris Hayes
Steve Eisman calls recent pullback a psychological rotation
Steve Eisman of “The Big Short” fame believes the recent tech-led market pullback is driven by emotions instead of a fundamental deterioration.
“Rotations are always violent. They always catch everybody unawares. And it’s not a fundamental correction. It’s like a psychological rotation,” Eisman said on CNBC’s “Fast Money.”
The senior portfolio manager at Neuberger Berman said there hasn’t been anything alarming about the economy overall.
“I don’t think fundamentals have really changed all that much,” he said. “The only negative data point I would point to is that consumer spending seems to have slowed a little bit on the margin, and delinquencies are up a touch.”
— Yun Li
Dexcom, Coursera among stocks making biggest moves after hours
Check out the companies making headlines in after-hours trading.
- Dexcom — Shares of the medical device company plunged more than 35%. Dexcom’s fiscal full-year revenue guidance of $4 billion to $4.05 billion marked a reduction from the outlook it shared earlier in the year. Revenue in the second quarter missed analysts’ expectations, coming in at $1 billion versus consensus estimates of $1.04 billion, per LSEG. Insulet shares slipped 9.1% in sympathy.
- Boston Beer Company – The maker of Twisted Tea and Samuel Adams slid 5% after second quarter results missed the Street’s estimates. Boston Beer posted earnings of $4.39 per share on revenue of $579 million, while analysts sought $5.02 per share in earnings and $597 million in revenue, per LSEG.
- Coursera — Shares of the online course provider surged 16%. Second-quarter revenue came in at $170 million, surpassing analysts’ estimates for $164 million, per LSEG. Coursera posted a loss of 15 cents per share, while the Street called for earnings of one cent per share.
For the full list, read here.
— Pia Singh
Stock futures open higher on Thursday
Stock futures were higher shortly after 6 p.m. ET.
Futures tied to the Dow Jones Industrial Average added 64 points, or 0.16%. S&P futures and Nasdaq 100 futures each gained 0.1%.
— Pia Singh
