Strong Micron update highlights the importance of Q3 results for the markets

The US Indices were soft on Wednesday with all market caps bands down, Mag7 held up the Nasdaq. The VIX was down slightly to 15 - it hit 65 intraday on 5 August, its highest level since Covid in 2020. The main indices were; DJIA -0.70%, S&P 500 -0.19% and Nasdaq +0.04% (Mag7 +0.45%). On an equal weighted basis (our measure) the overall market was weak at -0.88%. Breadth was also weak at 27% (range of 12% to 88% over the last six weeks) combined with flat volumes of 7.7b (the average daily volume over the last year of 7.8b and hit 15bn on Friday 8/20). 

One day returns as follows - equal weight basis: Mag7 +0.45% (NVDA 2.2%, TSLA +1.1%), large cap -0.68%, medium cap -1.02%, small cap -1.11% and micro cap -0.77%. On a 1 and 2 week equal weight basis respectively; Market flat% and +3%, Mag7 +5% and +6.4%, Large caps +1.4% and +3.7%, Medium cap +1.2% and +5%, small cap -0.2% and +4.2% and finally Micro cap -0.7% and +1.5%.

All the sectors were in negative territory on Wednesday. The sector bias was towards defensive/ Bear sectors meaning they were the best performers in a weak market although Micron update helped the Tech sector. Basic Materials continue to outperform, Gold stocks +0.4%. Micro Tech (FinTech) and Large Utilities (Multiline, Electric and Natural Gas) were up in a weak markets. Healthcare continues to be the worst performing sector and has underperformed the Market by 4.3% over the last two weeks and 11.1% over the last 6 months. Uranium was up again yesterday and is the best performing Industry over 3 days, 1 week and 4 weeks.

A notable number of 52 week highs in the following sectors: Basic Materials (Gold again), Industrials (across the sector again ex Passenger Transport Services), Real Estate (Residential and Commercials REITs again) and Technology (Software and IT Services again) and Utilities (Electric & IPPs again). Notable high volumes across the Market ex Utilities.

The Markets are still struggling to work out the underlying direction following last Wednesday's interest rate cut. Softness post the cut on Wednesday was followed by a broad advance on Thursday and mixed performance thereafter. A strong update from Micron yesterday pushed the shares ahead during the day and after hours following the update - this helped Asian stocks recover. This highlights the importance of the Q3 updates as whilst the Market will react to unexpected inflationary / recessionary news we are now in a down cycle for interest rates and so the company guidance will be more important in driving the markets.