Stocks continued their volatile trend on Tuesday, with major indexes like the S&P 500, Nasdaq Composite, and Russell 2000 all rising around 1%, while the Dow Jones Industrial Average was up 0.76%. This marks the fifth consecutive day of significant moves in the market, with volatility decreasing as the VIX fell 28% to below 23 in premarket activity. Despite the high volatility, the market saw its longest streak of 1% or more moves since February 2023, according to Dow Jones Market Data.
In terms of earnings, Disney reported better-than-expected earnings and revenues, with its streaming unit, which includes Disney+, Hulu, and ESPN+, posting a profit for the first time ever and exceeding expectations. The company also raised its full-year guidance. However, other companies like CVS, Rivian, and Lyft saw declines in their stock prices after their earnings reports. CVS missed on revenue and lowered its full-year guidance, Rivian reported widening net losses, and Lyft offered a weaker forecast despite better-than-expected revenue and a net profit.
Companies dependent on consumer spending, such as Airbnb and Hilton, also reported earnings and expressed less optimism about future consumer demand. Airbnb mentioned that consumers were holding back on booking reservations due to uncertain spending plans. As a result, Airbnb shares were down nearly 15% in premarket trading, while Hilton was indicated to be down around 1%. The weakening outlook for consumer demand aligns with recent economic data showing signs of softening.
Looking ahead, investors are waiting to hear from members of the Fed and upcoming economic reports, including the Consumer Price Index (CPI) report next week. Many Fed watchers are expecting a fifty-basis point interest rate cut at the Fed’s September meeting due to the weakening outlook for consumer demand and recent economic data. Futures are currently indicating a higher open, with volatility remaining elevated but below 23. This decrease in volatility can benefit option sellers, as the fear premium priced into options decreases as volatility contracts.
Investors are advised to stick with their investing plans and long-term objectives, as the base case for stocks remains strong despite the recent market fluctuations. While confidence in the market has been shaken, a winning streak could help ease fears and provide perspective. Earnings reports continue to be positive overall, and economic data, while slowing, remains positive. It is essential for investors to remain vigilant and stay informed about developments in the market to make informed decisions about their investments.
