What we learned last week:
“On your mark, ready, set let’s go, Dancefloor pro, I know you know…just can’t sit, Gotta get jiggy wit’ it” – ‘Getting’ Jiggy Wit It’, Will Smith, 1997
A strong performance on Wall Street last week with the Dow Jones Industrial Average and S&P 500 finishing the week at all-time highs. Eight of 11 sectors joined the party with positive returns.
The technology sector, specifically AI related stocks led indexes onto the dance floor with strong earnings reports from Palantir and Caterpillar. Friday’s non-farm payroll report kept the music going as investors’ concerns over price hikes eased.
Starting with corporate earnings you may be wondering what Caterpillar has to do with the AI mega trend. Caterpillar lifted the Dow to record highs on higher revenue growth forecast after beating second-quarter estimates last week. A leader in manufacturing construction and mining has seen a surge in orders for construction equipment amid a nationwide buildout of data centers as well as the backup power equipment needed for such buildings.
Below, in this week’s ‘Did You Know’ you’ll find more about the data center buildout story.
Continuing with the earnings, AI software giant and defense contractor, Palantir’s stock jumped 29.5% on Tuesday showing it is still a force in the AI application space. The company delivered 149% revenue growth in the commercial business and 93% total revenue growth as firms look to Palantir for help with applying and protecting their enterprise data when using AI.
Both Caterpillar and Palantir provided a buttress to an AI mega trend that had been dealing with concerns and questions over demand and use application.
Turning to the economy, we will wrap this week with the labor market and Friday’s non-farm payroll report. The monthly report is being looked through by investors for signals of how the Federal Reserve may approach future rate decisions.
Last week’s report showed 23,000 lost jobs in July, compared to economists’ expectations for a gain of 80,000. Additionally, June’s gains were revised lower to 20,000 jobs gained (from 57,000) and May’s growth of 129,000 jobs was lowered to 63,000.
Under the hood of these headline numbers, average hourly earnings and weekly earnings in July increased 3.2% and 3.5% respectively from last year. Earnings growth has slowed each month this year but at a rate that shows the labor market is stable and with job losses coming from seasonal industries (World Cup hiring and the education sector).
Markets reacted positively as the report reduces expectations for rate hikes from the Federal Reserve and shifts focus on next week’s CPI report.
A couple tech companies connected to AI will be reporting earnings, but the Consumer Price Index report this week may be the headline event as investors weigh the potential for rate hikes to cool rising prices. With oil prices and tensions easing in Iran investors will keep an eye on this rollercoaster of a story to peak back up with the potential to disrupt the music.
What’s ahead this week:
Economic Reports
- Wednesday CPI report will be an important inflation data point for investors as it will capture the impact of higher oil prices
- Retail Sales are expected to gain 0.2% for the month of July, an important indicator for the consumer economy
Earnings
- Earning reports start to slow down but companies engaged in AI are scheduled to report:
- Cisco Systems, a networking hardware company, famous for its contributions to building out the modern-day internet is back in focus with increased sales for AI infrastructure products to hyperscalers
- Applied Materials equipment is essential to the buildout of chip manufacturing
My goal is for you to feel educated and informed about variables we do and don’t have control over and find ourselves working within. I hope to do it in an informative and relatable way. As always, I value your relationship and planning objectives – my door is always open for conversation.
