On Tuesday, August 13, 2024, stock markets rallied sharply. Nasdaq gained 2.43%, while S&P 500 (IVV) gained 1.68%. Markets reacted to soft producer price index – PPI – figures.
Producer prices are the cost of goods for sellers. The index increased in July by 2.2% over the year, compared to 2.7% in June. The data strongly suggests that the Federal Reserve will proceed with a much anticipated 25 bps rate cut next month.
Markets poured their cash back into pricy stocks. This includes Nvidia (NVDA), Broadcom (AVGO), Intel (INTC), Microsoft (MSFT), and Eli Lilly (LLY). Energy firms fell, pricing in the risk of a recession. Occidental Petroleum (OXY) lost 2.58% while EQT (EQT) fell by 3.44%.
Overall, the Information Technology and consumer discretionary sectors performed the best. Small companies, which the Russell 2000 Index (RUT) represents, rose by 1.6%. Readers need to exercise constraint when buying small-cap stocks. In a recession, the large-cap and mega-cap firms will fare better. They have the cash on hand, the staff, and the resources to sustain their business in a slowing economy.
In Tuesday’s trading, Home Depot (HD) shook off early selling pressure. The firm expects its annual profit to fall Y/Y. Comparable sales will also fall. Expect worried investors to resume selling their HD stock in the coming days.