S&P 500 Ends Down, Big Tech lifts Nasdaq to Record

Amgen Inc fell 2.1% and Merck & Co lost 1.6% after Morgan Stanley cut its rating on the stocks to “equal-weight” from “overweight.”

The Nasdaq was supported by Big Tech stocks that have fueled Wall Street’s gains in recent years. Apple rose 1.6% and Netflix added 2.7%, both hitting record highs.

“You could call it a gravitation toward Big Tech. As people feel a bit uncertain about how COVID will play out, you don’t have your reopening worries with those companies,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta.

Much of the rest of Wall Street fell. Eight of the eleven sub-indexes traded lower, with economy-sensitive sectors like industrials down 1.8% and utilities dipping 1.4%. The real estate index lost 1.1%.

Tepid August payrolls data on Friday last week raised concerns that the economic recovery was slowing down.

On Tuesday, Morgan Stanley cut its rating on U.S. stocks to underweight, pointing to risks related to economic growth, policy and legislation, and warning it expects the next two months to be “bumpy.”

Accommodative central bank policies and reopening optimism have pushed the S&P 500 and Nasdaq to record highs over the past few weeks, but concerns are growing about rising coronavirus infections due to the Delta variant and its impact on the economic recovery.

Analysts on average expect S&P 500 companies to increase their earnings per share by 30% in the September quarter, following a 96% surge in the second quarter, according to I/B/E/S data from Refinitiv.

Unofficially, the Dow Jones Industrial Average fell 0.76% to end at 35,100 points, while the S&P 500 lost 0.34% to 4,520.03.

The Nasdaq Composite climbed 0.07% to 15,374.33.

The S&P 500 remains up about 20% year to date, and the Nasdaq is up about 19%.

Boeing Co dropped 1.8% after Ireland’s Ryanair said it had ended talks with the planemaker over a purchase of 737 MAX 10 jets worth tens of billions of dollars due to differences over price.

Match Group Inc jumped over 7% after the S&P Dow Jones Indices said on Friday the Tinder parent will join the benchmark index.

Columbia Property Trust Inc surged 15% after Pacific Investment Management Company said it would buy the company for $2.2 billion.

Volume on U.S. exchanges was 9.2 billion shares, compared with the 9.0 billion average for the full session over the last 20 trading days.

Declining issues outnumbered advancing ones on the NYSE by a 2.27-to-1 ratio; on Nasdaq, a 1.65-to-1 ratio favored decliners.

The S&P 500 posted 19 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 120 new highs and 24 new lows.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Noel Randewich; Additional reporting by Shashank Nayar in Bengaluru; Editing by Anil D’Silva and Arun Koyyur; Editing by Aurora Ellis)

Match Shares Jump on S&P 500 Addition

The S&P 500 index has met its match. Online dating site Match is getting added to the broader stock market index, and its shares are soaring 9% in response during extended-hours trading. The stock took investors on a wild ride over the summer but is just about flat year-to-date. The changes in the S&P 500 are part of the index’s quarterly shufflings based on the latest market activity.

In & Out Index

S&P Dow Jones Indices announced that Match Group will replace the outgoing Perrigo Company, the latter of which will move to the S&P MidCap 400 index. In addition to Match Group, other newcomers to the S&P 500 index include insurer Brown & Brown and IT company Ceridian HCM Holding.

The Match stock bump could have something to do with the fact that index funds that track the S&P 500 must gain exposure to the stock by design. In order for Match as well as Brown & Brown and Ceridian to keep their spots, they must maintain a minimum market cap of $13.1 billion. Match shouldn’t have any trouble as it currently boasts a market cap of $41 billion.

Going Steady

One of the companies that the trio of new S&P 500 members beat out was meme stock GameStop. The video game retailer recently joined the S&P MidCap 400 Index, and with a market cap of $15 billion could technically qualify for the S&P 500. The sticking point for GameStop, however, is its inherent volatility as a meme stock. S&P Global tends to select names that are more predictable in nature, such as insurance stock Brown & Brown.

Shares of Brown & Brown are up nearly 2% in after-hours trading on the index development. Year-to-date, the dividend-paying stock is up 24%. In the same period, GameStop’s stock is up more than 900%. Ceridian, the third stock to be added, tacked on just over 1% in after-hours trading on the index development.

Match is poised to generate revenues of $3 billion-plus this fiscal year. The company is among those to benefit from Apple’s recent decision to change its App Store fine print so that subscription-based companies can keep a larger piece of the sales pie. Match, which owns the popular dating app Tinder, is behind Tinder subscriptions tiers Tinder Plus, Tinder Gold and Tinder Platinum.

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Amazon executives noted shifting consumer habits as the pandemic eases and people become more mobile. Amazon forecasted the next quarter’s sales at between $106 billion and $112 billion, compared to Wall Street expectations for right around $119 billion.

Amazon’s projections would still represent growth of +10% to +16%. Keep in mind, bears are also pointing to ongoing fears of supply chain hiccups, higher-trending inflation, and new coronavirus outbreaks. Earnings come at a busy pace again today with results from Caterpillar, Cerner, Chevron, CNH Industrial, Colgate Palmolive, Enbridge, Exxon Mobil, Johnson Control, and Procter & Gamble.

The worry on Wall Street is that this new normal rate of growth will be slower than many analysts and trading firms are forecasting coupled with higher inflation and or supply chain dislocations corporate profits could fall under some pressure or in this case be less than Wall Street is forecasting for the next few quarters. Bulls expect more consumer spending will shift from goods and pandemic-related services (delivery, video games, cloud/collaboration software) but are still betting on pent-up demand for things people missed out on during lockdowns, as well as goods and services that are currently in short supply.

Data to watch

Updated inflation data is also on tap with the ISM Manufacturing Index on Monday and the Services Index on Wednesday.

There will be plenty more earnings next week too, including Simon Properties and Zoom on Monday; Activision Blizzard, Alibaba, Amgen, Clorox, ConocoPhillips, Eli Lilly, Fidelity, Match Group, Monster Beverage, Occidental Petroleum, and Phillips 66 on Tuesday; Allstate, CVS, Etsy, General Motors, Kraft Heinz, Marathon Petroleum, MetLife, MGM Resorts, Rocket Companies, Roku, Trane, and Uber on Wednesday; Adidas, AMC, Carvana, Cigna, Cloudflare, Corteva, Duke Energy, Kellogg, Moderna, Nintendo, Novo Nordisk, Siemens, Square, Wayfair, Zillow, and Zoetis on Thursday; and Dish Network, Dominion Energy, and DraftKings on Friday.

Insider Accumulation

ES ##-## (Daily) 2021_08_01 (19_25_02)

I have mixed feelings about SP500. There are a few signs of weakness. However, it might be the result of low summer activity. Advance-Decline Line is clearly bearish. Insider Accumulation is also not that strong. Moreover, the Volatility Index is very low and potentially it could bring a pullback. In any case, SP500 futures failed to close the week above Gann resistance. And that is also a negative sign.

The Federal Reserve policy is still supportive. But keep in mind, that SP500 has rallied around 100% since the pandemic bottom without any pullback. And the retest of key support zones near 4200 and 4000 is realistic.

On the other hand, the continuation of the rally is also possible but only if price sustains above 4400. If that happens, bulls will target 4500 and 4600 in extension.