Markets ended the first full trading week of July on a positive note, with all three main equity indexes posting gains on Friday. Investors, traders and speculators welcomed another hot initial public offering (IPO) as they look forward to the acceleration of earnings reporting season and new Fed Chair Kevin Warsh’s first testimony on Capitol Hill since taking over at the world’s most important central bank.
Materials stocks took the lead on Friday, as 10 of 11 sectors closed in the green. Tech stocks were higher, too, while Nvidia (NVDA, +4.0%) and Nike (NKE, +3.8%) were the top-performing Dow Jones stocks.
SK Hynix (SKHYV, +17.0%) started trading late in the morning and immediately popped to an intraday of $176.34, 18.3% above its IPO price. After raising $26.5 billion this week, SK Hynix now ranks among the biggest IPOs in U.S. history.
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Financial stocks added more than 1%, with Bank of America (BAC, +0.7%), Citigroup (C, +0.7%), Goldman Sachs (GS, -0.1%), JPMorgan Chase (JPM, +0.3%) and Wells Fargo (WFC, +0.2%) scheduled to report second-quarter earnings before the opening bell next Tuesday.
By the closing bell, the Nasdaq Composite had added 0.3% to 26,281, finishing with a 1.7% weekly gain. The broad-based S&P 500 rose 0.4% on Friday and 1.2% for the week to 7,575. The blue-chip Dow Jones Industrial Average ticked up 0.3% to 52,673 but tracked back 0.5% over the five days.
What will Warsh tell Congress?
As Louis Navellier of Navellier & Associates foreshadows, next week is a big one for the earnings calendar: “We are locked and loaded for another earnings announcement season,” Navellier writes, noting that valuations for “fundamentally superior stocks” are being compressed.
It’s also a big one for the economic calendar: “I think it is safe to say that Fed Chairman Warsh is planning to turn the Fed inside out, streamline it and make it operate more efficiently,” Navellier writes.
Warsh is scheduled to testify before the House Financial Services Committee on Tuesday and at the Senate Banking Committee on Wednesday.
As Navellier explains, Warsh is putting together five task forces to “re-examine how the central bank operates.” The task forces will focus on AI, productivity and jobs; Fed communications; the Fed’s balance sheet, inflation and economic data.
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The front-month West Texas Intermediate crude oil futures contract was down 1.3% to $71.56 per barrel. WTI ticked up 4.2% this week, though markets’ main concerns right now are top- and bottom-line growth and forward guidance.
At the same time, markets want to know from Warsh how the Fed will respond amid continuing uncertainty about energy prices, inflation and interest rates.
Note that the Bureau of Labor Statistics (BLS) will release the June Consumer Price Index (CPI) report less than two hours before Warsh testifies on Tuesday.
Meta Platforms (META, +6.2%) led S&P 500 stocks on Friday, as the Facebook and Instagram parent surged amid reports that it plans to enter the cloud computing market using its excess AI capacity and that it wants to build a new AI chip in partnership with Broadcom (AVGO, -0.3%).
Broadcom, which is not one of the Magnificent 7 stocks but is one of the top 10 companies in the world based on market cap, was up 11% this week, helped by confirmation by Apple (AAPL, -0.3%) that it will spend $30 billion for its own U.S.-made chips.
“Meta has been a significant beneficiary from the advances in AI by selling more ads at higher prices, which has driven significant revenue acceleration,” DA Davidson analyst Gil Luria observes. “It has not gotten credit because it has increased capex even more. If Meta slows down capex and starts monetizing it, we see significant upside to revenue and cash flow.”
WD-40 stock was up 11% today
WD-40 (WDFC, +10.7%) made the case for mid-cap stocks on Friday, as management of the multiuse petroleum-based spray maker beat Wall Street expectations for its third quarter and raised guidance for the full year.
“We delivered an exceptional third quarter,” CEO Steve Brass said in WD-40’s earnings announcement (pdf), “with net sales increasing 24% and operating income increasing 47%, demonstrating the operating leverage inherent in our business model.” Brass cited double-digit growth across WD-40’s businesses, as well as “continued progress” in its “Must-Win Battles.”
“While the cost backdrop remains fluid,” a team of William Blair analysts led by Jon Andersen writes in a post-report note, “we believe in our thesis that WD-40 represents a singular and attractive business and investment opportunity.”
Andersen & Co. reiterated their Overweight (Buy) rating, noting WD-40’s “unique heritage, brand equity and product efficacy, geographic and channel reach, and go-to-market capabilities,” as well as “superior organic sales growth” and “reliable free cash flow generation.”