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Good morning. Yesterday gave us a Fed decision and a hard selloff. Today brings the economy's report card before the open, and Apple and Amazon after the close.
The Market Gauge
Wednesday was a rough one, and it got worse as the day went on. The Dow Jones Industrial Average fell 2.19% to 51,594.14, the tech-heavy Nasdaq lost 1.74% to 24,442.94, and the S&P 500 dropped 1.52% to 7,316.15. Small caps fell 1.6% and are now below their 50-day average line for the first time since early April. The Federal Reserve did what was expected and left interest rates alone, and stocks briefly turned positive during Chairman Warsh's press conference. They finished at the lows of the day instead. Two things pushed them there. Oil jumped 6.6% to $84.46 a barrel after a missile attack on a United States base in Jordan and the President's response to it. And bond yields climbed: the 10-year Treasury settled at 4.62% and kept rising after the close, while the 30-year reached 5.2%, its highest level since 2007. Chip stocks were hit hardest again, with one widely held semiconductor fund down 4.9%. Software was the exception, with Snowflake and Datadog both rising.
Beginner note: last night's lesson said a stock's price is the market's estimate of the earnings a business will produce in the future, converted into what those earnings are worth today. That conversion uses an interest rate, and that rate takes its cue from government bond yields. So when the 30-year yield reaches a level not seen since 2007, the exact same future earnings become worth less right now. Nothing about the companies changed on Wednesday. What changed was the rate you divide by. This is one of the most useful things a beginner can understand: a market can fall on a day when no company reported bad news.
On today's calendar
The economy's report card, before the open. Two big releases land together: the first estimate of how much the economy grew in the second quarter, and core PCE, the inflation measure the Fed watches most closely. Yesterday three regional Fed officials voted for higher rates. An inflation reading that comes in hot would strengthen their case, and the bond market is already nervous.
Apple and Amazon report after the close. Apple goes first at 5:00 PM ET, Amazon follows. These are the last two of the megacaps this week. Listen for what they say about capital spending on AI, because that is the exact thing that sent Microsoft up and Meta down last night.
Last night's reports are still settling. Microsoft beat expectations and rose in overnight trading. Meta's profit missed and its sales outlook came in light, and the stock fell. Fortinet and Starbucks were also overnight gainers. None of these are final until they trade in regular hours today.
Oil and the Middle East. Hostilities between the United States and Iran resumed Wednesday and were still developing overnight. Oil moved more than 6% in a single session on that news, so headlines are likely to carry more weight than usual today.
On the radar: Datadog
$DDOG ( ▲ 0.8% ) sells software that watches other companies' software. When an app slows down or a website stops working, Datadog is the tool engineers use to find out where the problem is. It is worth watching because of how it behaved yesterday. On a day the S&P 500 fell 1.5%, Datadog rose 5.31% to close at $264.20. Investor's Business Daily named it Wednesday's Stock of the Day, and it sits on the IBD 50 list of leading growth companies. On the chart it broke the downtrend inside a cup-with-handle, the pattern from our Day 7 lesson, and it now sits about 5% below its 52-week high of $278.70. Market value is roughly $94 billion.
Why it is worth watching: this is what relative strength looks like. When most of the market is being sold and a stock goes up 5% on heavy volume, that is institutional money choosing it over the alternatives, which is the accumulation footprint we covered on Day 24. Datadog reports its own earnings on August 6, and tonight's lesson tells you exactly which number to look at first when it does: how much profit per share grew compared with the same quarter a year ago, measured against a 25% bar. Put the date in your notes and check it yourself. That is the difference between reading about a rule and using one.
ONE FOR THE ROAD
Apple and Amazon both report after today's close. Before the numbers exist, write down one sentence describing what would make you call it a good report. Reply with it, then check yourself tomorrow. You will learn more from that one sentence than from any headline written afterward.
Educational content only. Not financial advice. Past performance does not predict future results. Read the full financial disclosure.