Bulls, Bitcoin, & Beyond

Market Moves Yesterday

S&P 500 @5,588.27 ( ⬇️ 1.39%)

Nasdaq Composite @ 17,996.92 ( ⬇️ 2.77%)

Bitcoin @ $64,589.40 ( ⬇️ 1.68%)

Hey Scoopers,

Happy Thursday! Here’s what we’re covering today:

👉 Nvidia leads semiconductor decline

👉 Airline stocks continue to struggle

👉 Cathie Wood’s $14 billion fiasco

So, let’s go 🚀

Market Wrap 📉

Equity indices such as the S&P 500 and Nasdaq Composite retreated on Wednesday as the rotation out of tech stocks gained pace. Alternatively, the tech-light Dow Jones index bucked the downtrend, gaining 0.6%.

Gains for the Dow Jones were led by United Health, which rose by 4.5% following analyst upgrades based on strong Q2 results.

Comparatively, the S&P 500 and Nasdaq were weighed down by a pullback in big tech stocks, marking a turn after a monster run since 2023, fueled by the AI megatrend.

In fact, yesterday was the first session since 2001 in which the Nasdaq fell over 2.5%, while the Dow registered a gain. Within the S&P 500 index, information technology and communication services were the worst-performing sectors.

While chip stocks nosedived (more on this later), other notable losers include Meta Platforms, Netflix, Microsoft, and Apple.

Trending Stocks 🔥

Discover Financial Services- Shares are up 3.2% in pre-market after the bank posted net interest income of $3.52 billion in Q2, topping estimates of $3.46 billion. Its earnings per share of $6.06 also beat estimates of $3.10.

Kinder Morgan - Shares of the pipeline operator slumped by 2% after it reported Q2 earnings of $0.25 per share, below estimates of $0.26 per share.

United Airlines - The airline stock is down marginally after it posted earnings of $4.14 per share, above estimates of $3.93 per share. However, revenue of $14.99 billion was below estimates of $15.06 billion.

Nvidia Tanks Over 6%

The tech-heavy Nasdaq Composite index posted its worst day since December 2022, primarily due to the downward spiral of chip stocks.

While market bellwether Nvidia slumped 6.6%, stocks such as Taiwan Semiconductor, ASML, Broadcom, AMD, and Lam Research were down 8%, 11%, 7.9%, 10%, and 10%, respectively.

The VanEck Semiconductor ETF (SMH) fell over 7% after Bloomberg reported that the Biden administration is considering stricter trade restrictions if companies continue to grant China access to U.S.-made technology.

The SMH ETF posted its worst day since March 2020. Despite the pullback, the ETF has returned over 1,100% to shareholders in the last decade, easily outpacing the broader indices such as the Nasdaq and S&P 500.

Airline Stocks Are Struggling

According to Wall Street estimates, airline profits are expected to nosedive in Q2 of 2024.

Airline giants such as Delta and United have already reported results for the June quarter. While Delta Air Lines saw a 12% decline in profits, United reported a net income of $1.32 billion, higher than the year-ago number of $1.06 billion.

According to estimates, profits for peers such as Southwest Airlines, Alaska Airlines, and American Airlines are forecast to fall by 53%, 21%, and 45%, respectively.

Several carriers are struggling with increased domestic capacity that has weighed on airfares despite solid demand.

United and Delta also added international flights, which are in demand after COVID-19. Moreover, they are looking at premium offerings to boost their bottom lines.

Ark Invest Continues to Disappoint

A Morningstar report stated Cathie Wood’s Ark Invest destroyed $14.3 billion in wealth over the past decade.

Ark Invest attracted around $30 billion between 2020 and 2021 when the fund house placed concentrated bets on speculative tech companies, resulting in outsized gains.

The flagship ARKK ETF soared 150% in 2020 but was soon decimated during the 2022 bear market, plunging 67% from all-time highs.

The ARKK ETF destroyed $7.1 billion in wealth, followed by the ARK Genomic ETF, which burnt $4.2 billion.

Investors should note that Ark’s massive wealth destruction occurred at a time when the broader markets are trading near all-time highs.

The ARKK ETF is up 137% since its inception in 2014, while the Nasdaq Composite index has returned 333.5% in the last 10 years.

Despite its underperformance, Ark Invest manages $13 billion in assets as investors hope for a turnaround.

Headlines You Can't Miss!

TSMC reports strong Q2 results

Darden Restaurant to acquire Chuy’s for $605 million

Tinder launches new AI tool for dating

International buyers are moving away from the U.S. housing market

Cipher Mining is pursuing a sale

Chart of The Day

At the peak of the dot-com bubble, Cisco accounted for 5.5% of the U.S. GDP. Today, Nvidia’s market cap accounts for over 11% of the country’s GDP. So, are we in a bubble?

Well, probably not. Before the dot-com crash, Cisco’s trailing price-to-earnings ratio was close to 700x. Today, Nvidia’s trailing PE multiple is less than 100x, and the chip maker is on track to more than double its earnings in fiscal 2024.

Meme of the Day

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DISCLAIMER: None of this is financial advice. The newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.