Next Day Prep: Fed Rate Cut Lock-In Sparks Sector Split
A quick analysis of today’s market outlook and key trading opportunities to start your day.
Intro & Market Mood
Welcome to Next Day Prep – What We Are Watching Tomorrow. Today’s session was quite dynamic with the S&P 500 and Nasdaq hitting new all-time highs early on but then retracing those gains. The market reacted to the August jobs report, which fell significantly short of expectations, signaling a high probability of a rate cut at the upcoming Fed meeting.
Overnight Headlines
- The August jobs report came in at 22,000 nonfarm payrolls, far below the expected 78,000, leading to market speculation of a 25-basis-point rate cut in September.
- Broadcom (AVGO) announced a successful quarter with a new AI partner, possibly OpenAI, propelling its stock up over 9%, but negatively impacting competitors like NVIDIA and AMD.
- Lululemon (LULU) suffered a major downturn despite an earnings beat, citing weak guidance and product innovation challenges.
Economic Announcements
The market is anticipating key inflation data next week with the Producer Price Index (PPI) and Consumer Price Index (CPI) releases, crucial for risk management and trading strategies.
Earnings Highlights
- LULU (Lululemon) plummeted nearly 19% to a five-year low due to disappointing guidance and product innovation setbacks.
- AVGO (Broadcom) surged over 9% post-earnings on strong performance and a significant AI partnership announcement.
Top Movers
- Winners: Rate-sensitive sectors like Real Estate and small-cap stocks outperformed.
- Losers: Energy and Financials faced declines, influenced by concerns of a cooling economy and lower loan demand.
Quick Trade Ideas
Continuation Plays:
- UUUU: Watch for a move through $11.60 targeting $11.80 in the energy sector.
- HUBS (HubSpot): Potential breakout above $490 in the software segment.
- TSLA (Tesla): Stability seen after volatility; target $354 with a push over $352.
Anticipation Setups:
- GOOGL (Alphabet): Building a base; could target mid-$230s with a move over $234.50.
- TTWO (Take-Two Interactive): Watching for a breakout above $241 in the gaming sector.
- BURL (Burlington Stores): Potential breakout over $293 in consumer discretionary.
Key Takeaway
The market sentiment remains cautiously bullish with a focus on tech and discretionary sectors. Look for leadership stocks, monitor continuation plays for strength, and keep anticipation setups in check. Pay close attention to upcoming inflation data for risk management.