August 1st Market Overview

Happy Friday

I don’t know if it's the lack of oxygen in this Colorado air, but something is keeping me adding to UNH. Amazon and tech in general had great earnings this week but got crushed on Friday due to the job report debacle. Yesterday, I mentioned I expected volatility because the VIX was at an extremely low base. That thing can be a crystal ball more so then anything imo.

It wouldn’t surprise me if we see rate cuts come sooner rather then later.

Let's dig in...

Market Summary

Jobs Report Reveals Hidden Weakness
July’s 73,000 jobs added missed expectations, but massive revisions exposed the real problem. May was slashed to 19,000 from 125,000, June cut to 14,000 from 147,000. The economy has averaged just 106,000 jobs over three months → a significant slowdown that blindsided most economists.

Markets Price In Fed Rescue
September rate cut odds jumped to 83% while the 2-year Treasury posted its largest single-day drop since August 2024. Fed governors Waller and Bowman, who dissented for cuts at the last meeting, now appear vindicated. Waller stated he sees “no reason to hold rates at current levels and risk sudden labor market decline.”

Trump Shakes Up Data and Trade
President Trump fired BLS Commissioner Erika McEntarfer, claiming without evidence that jobs numbers were manipulated. Separately, new tariff rates from 10% to 41% take effect August 7th across dozens of countries. Switzerland faces 39% duties, Canada gets 35% on non-USMCA goods.

Key Earnings Moves
Apple posted record revenue with strong iPhone demand and China recovery, though tariff costs are rising. Amazon delivered solid revenue but AWS guidance disappointed. Reddit beat expectations as AI training data demand drove growth. Palantir secured a 10-year Army contract worth up to $10 billion.

Market Overview

U.S. Stock Indexes, This Week so Far

Stock Spotlight

Apple $AAPL ( ▲ 1.6% ) reported June quarter revenue of $94 billion with iPhone sales beating expectations. China showed recovery with government subsidies driving upgrade rates. The company ramped up AI investments for Apple Intelligence features, but tariff headwinds are building from $800 million this quarter to $1.1 billion expected next quarter.

Amazon $AMZN ( ▲ 1.4% ) delivered $167.7 billion in revenue, but AWS growth disappointed investors. Operating income guidance of $15.5-20.5 billion came in below the $19 billion estimate. Management emphasized AI demand exceeds capacity, suggesting infrastructure constraints rather than demand issues.

Reddit $RDDT ( ▲ 4.8% ) posted exceptional results with $499.6 million revenue against $427 million expectations. The platform’s central role in AI model training drove advertising revenue growth. Daily active users reached 110.4 million with strong international expansion through machine translation in 23 languages.

Palantir $PLTR ( ▼ 1.39% ) secured a major 10-year software framework deal with the U.S. Army valued up to $10 billion. The contract consolidates 75 separate agreements, giving the Army volume discounts while establishing Palantir’s largest military foothold.

Big Name Updates

Tesla $TSLA ( ▼ 0.43% ) Spain sales jumped in July while broader electric vehicle adoption accelerated across the region. New car sales rose while electrified vehicles showed strong growth momentum.

L3Harris $LHX ( ▲ 0.0% ) partnered with Joby Aviation $JOBY ( ▼ 1.22% ) to develop military-grade eVTOL aircraft based on Joby’s air taxi platform. The hybrid-powered aircraft targets low-altitude missions with flight testing beginning this year and operational demonstrations planned for 2026.

Eli Lilly $LLY ( ▲ 3.29% ) and Novo Nordisk $NVO ( ▲ 2.25% ) could benefit from Trump administration plans to pilot weight-loss drug coverage under Medicare and Medicaid. The policy shift could dramatically expand market access for GLP-1 medications.

Other Notable Company News

Netflix $NFLX ( ▼ 1.7% ) crossed $2 billion in annual run-rate revenue with large customers paying $100,000+ annually growing and representing revenue concentration. The milestone reflects strong enterprise momentum in the streaming infrastructure space.

Goldman Sachs $GS ( ▲ 0.18% ) downgraded Avis Budget Group $CAR ( ▲ 0.88% ) to sell from neutral, citing stretched valuations after the stock’s recent rally. The analyst expressed concerns about normalized EBITDA estimates and lack of near-term catalysts.

Sector Watch

Bond Market

Treasury yields fell sharply following employment data. The 10-year note dropped 16 basis points to 4.214% while the 2-year yield posted its largest single-day decline since August 2024, falling 24 basis points.

• The yield curve steepened significantly as markets anticipate aggressive easing cycles
• Bond market reaction suggests investors expect the Fed to prioritize employment over inflation concerns
• Corporate credit spreads could tighten if the Fed moves quickly to support economic growth

Policy Watch

Federal Reserve officials who advocated for rate cuts gained credibility as employment data validated their concerns. Governors Waller and Bowman, both dissenting votes at the last meeting, emphasized that maintaining current rates risks labor market damage.

• Trump’s firing of BLS Commissioner McEntarfer adds uncertainty to economic data interpretation
• New tariff rates take effect August 7th, with Switzerland facing 39% duties and Canada 35% on non-USMCA goods
• The 90-day extension for U.S.-China trade talks suggests ongoing complexity in negotiations

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What to Watch Out For

Federal Reserve Communication
Watch for additional Fed governor statements ahead of the September meeting. The central bank’s messaging will be crucial in managing expectations around rate cuts. Any hints about emergency inter-meeting action could signal deeper economic concerns.

Tariff Implementation Timeline
August 7th marks the effective date for new tariff rates. Monitor corporate guidance updates and supply chain adjustment strategies. Companies with international exposure may revise earnings forecasts based on final tariff structures.

Labor Market Data Quality
Following Trump’s BLS commissioner dismissal, pay attention to methodology changes in upcoming employment reports. Market confidence in economic statistics could impact how investors interpret future data releases.

Corporate Earnings Commentary
As Q3 earnings season approaches, focus on management commentary about tariff cost absorption versus pricing power. Companies with strong margins may outperform those facing compression from trade policy changes.

Thanks for reading 🙂

- John