Next Day Prep: Rotation Alert Mega-Caps Slide, Broader Market Surge
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. A fascinating start to the third quarter with a tale of two markets today. The headline reads mega-caps down, broad market up, indicating a clear rotation under the surface. The equal-weighted S&P 500 gained over one percent, while the cap-weighted S&P was slightly negative.
Overnight Headlines
- The JOLTS report showed a big jump in job openings.
- ISM Manufacturing index indicated a slower pace of decline.
- The Senate passing its version of the “One Big, Beautiful Bill” spurred optimism.
Economic Announcements
The bond market reacted by pushing back on the idea of a July rate cut, with the 2-year note yield jumping five basis points. This suggests the positive data and Fed Chair Powell’s comments might keep the Fed on hold.
Earnings Highlights
- Tesla faced political headwinds and dropped over five percent.
- Progress Software beat earnings and raised guidance but saw a 13 percent stock drop due to high market expectations.
- Nike and Hasbro were upgraded to Buy, reflecting a shift towards opportunities outside of big tech.
Top Movers
Materials sector led with over two percent gains, followed by strong showings in healthcare. Big losers included Tesla, NVIDIA, Meta, and Microsoft, with Apple holding up among mega-caps.
Quick Trade Ideas
- Continuation Play: Consider Capital One (COF) for a potential rally if the broad market trend continues.
- Anticipation Setup: Watch NVIDIA (NVDA) at a critical support level for a possible bounce as a defined risk trade.
- Quick Hit: Amazon (AMZN) stands out for potential strength on a down day for big tech.
Key Takeaway
A divided market with uncertainty around the Fed’s next moves, but tactical opportunities include financials, anticipation plays on tech stocks like NVIDIA, and potential strength in Amazon. Stay alert for the ADP Employment report as a key driver for the upcoming session.