This Past Week In Markets ⚡️ 07/29 - 08/02

Good Afternoon! Intel, once the king of chipmaking, is slashing 15% of its workforce as part of a $10 billion cost-cutting plan, aiming to realign its operations in the face of declining revenues and missed opportunities.

CEO Pat Gelsinger acknowledged that the company’s revenue of $12.8 billion in Q2, down 1% year-over-year, reflects its struggle to capitalize on trends like AI and maintain competitive margins. Intel, which has been outpaced by rivals like Nvidia in the AI boom, is betting big on transforming its business model by manufacturing chips for other companies.

However, this pivot, which includes cutting 15,000 jobs and suspending its dividend, is rife with risk. Intel’s stock, which remains stuck at the same level it reached back in 1997, reflects the company’s ongoing challenges in its attempt to regain its former dominance.

MARKETS

• This week in the markets was a rollercoaster ride, with a mix of optimism and sharp declines. The week started on a positive note for the S&P 500 and Nasdaq, propelled by anticipation of tech earnings, while the Dow struggled to keep up. However, the tide quickly turned as tech stocks saw a significant selloff ahead of major earnings reports, dragging the S&P 500 and Nasdaq lower.

• Despite a brief midweek rally fueled by strong semiconductor earnings, the markets ended on a sour note. Economic data revealed worse-than-expected jobless claims, leading to the biggest decline of the year for the Dow and continued losses for the S&P 500 and Nasdaq.

• By week's end, the Dow broke its four-week winning streak, the Nasdaq reached its lowest point since May, and market volatility surged, with the VIX spiking to an 18-month high.

STOCK
🍎 Buffett Takes a Massive Bite Out of Apple — Slashing His Biggest Stake In Half

Warren Buffett, the Oracle of Omaha, just made a move that’s got everyone scratching their heads—he slashed Berkshire Hathaway’s ($AAPL) stake in Apple by nearly 50%. That’s right, the man who’s famous for his buy-and-hold strategy just went on a selling spree, chopping his beloved Apple shares down to $84.2 billion. But when you're Warren Buffett, even after cutting back, you're still holding a pretty hefty portion.

Apple Picking in a Bull Market

So, why did the Oracle suddenly go on a tech diet? Back in May, Buffett hinted that a bit of Apple selling might make sense if capital gains taxes were on the rise. But this isn’t just a small trim—it’s a full-blown pruning. Apple shares surged by 23% in the second quarter, riding the wave of investor excitement over artificial intelligence. With Apple’s stock flying high, Buffett seized the moment to cash in, perhaps seeing a rare opportunity to capitalize on the tech giant’s lofty valuation.

Berkshire’s Apple sell-off is part of a broader trend. The company unloaded more than $75 billion in equities last quarter, boosting its cash reserves to a record-breaking $277 billion. That’s the financial equivalent of stockpiling for winter—Buffett’s clearly preparing for something, or maybe just playing it safe with a market that’s been a bit too hot to handle.

Berkshire’s Defensive Play

Buffett’s been tightening his belt across the board. Alongside Apple, he’s been downsizing his second-largest holding, Bank of America ($BAC), shedding $3.8 billion worth of shares in a mere 12 days. And it’s not just about cashing out—it’s about making sure Berkshire isn’t overexposed if things go south. By trimming these top holdings, Buffett is spreading out risk, ensuring that no single stock dominates Berkshire’s portfolio.

Even with all the selling, Buffett’s love for Apple hasn’t waned. It remains Berkshire’s largest stock position, and the 93-year-old investor has praised the iPhone maker for its strong pricing power and loyal customer base. But this sell-off suggests that Buffett might be taking a more cautious stance, preparing for potential turbulence in the market—or just making sure Berkshire’s cash pile is ready for whatever opportunities or challenges lie ahead.

What’s Next for the Oracle?

So, what’s driving Buffett’s sudden shift from stocks to cash? Analysts speculate that Buffett could be getting nervous about the U.S. economy or stock market valuations that are starting to look a little frothy. After all, the S&P 500 has been on a tear, reaching new heights as investors bet on a “soft landing” for the economy. But with a weaker-than-expected jobs report and rising concerns about whether the Federal Reserve has waited too long to cut interest rates, Buffett’s cautious approach might just be the right call.

Buffett’s long-time strategy has been to hold onto great companies for the long haul, and Apple has been one of his crown jewels. But with nearly half of that jewel now polished off and Berkshire sitting on a mountain of cash, it’s clear that Buffett is ready for whatever comes next—whether it’s a market correction, a buying opportunity, or just a little more peace of mind in uncertain times.

In true Buffett fashion, the Oracle has played his cards close to the vest, leaving us all guessing what his next move might be. But one thing’s for sure—when Warren Buffett makes a move, the world pays attention.

PAST WEEK
Market Movements

• Nvidia ($NVDA) CEO Jensen Huang has sold $424 million worth of company stock from June 13 - July 24

• The DOJ laid out its case for banning TikTok, accusing ByteDance, TikTok’s Beijing-based parent company, of sending U.S. user data to China

• Spirit Airlines ($SAVE) will begin offering premium seating options for its passengers

• McDonald's ($MCD) reported a 1% drop in same-store sales, marking its first decline since 2020

• Boeing ($BA) named former Collins Aerospace CEO Kelly Ortberg as the replacement for Dave Calhoun.

• U.S. National Debt surpassed $35 trillion for the first time

• The Federal Reserve again held interest rates between 5.25% to 5.5%, the same as it’s been for the last year, but suggested a cut could be near. All eyes will be on the Fed’s Sept. 18 meeting

• The sports streaming platform planned by ESPN, Fox, and Warner Bros. Discovery ($WBD) — called Venu Sports will be available for $42.99 per monthwith its planned launch in the fall

• Delta ($DAL) CEO Ed Bastian said last month’s IT outage will cost the company $500 million in revenue and compensation for canceled flights and hotel stays

• Intel ($INTC) announced it’s cutting 15,000 jobs, or 15% of its workforce, as it falls behind in chip manufacturing. Intel stock plunged, marking its steepest decline in 40 years amid massive restructuring

• Apple ($AAPL) reported a 5% increase in sales last quarter, driven by strong performance in iPads and services. However, iPhone sales, which account for nearly half of the company’s total revenue, declined as upgrades slowed

• Job growth totaled 114,000 in July, much lower than expected, as the unemployment rate rose to 4.3%

ECONOMY
Fed Faces Heat After Disappointing July Jobs Report

July’s scorching heat didn’t just make your weekend plans unbearable—it also put a damper on the U.S. job market. Last month’s job growth took a nosedive, adding just 114,000 jobs, a far cry from the 185,000 expected by economists. And with the unemployment rate inching up to 4.3%—its highest since October 2021—everyone’s looking at the Fed and asking, "What’s the hold-up?"

The Job Market’s Report Card: A Solid D+

If the U.S. job market had to bring home its July report card, let’s just say there wouldn’t be any celebratory pizza dinners. With only 114,000 jobs added, the numbers were well below what anyone was hoping for. This sluggish growth, coupled with a rise in unemployment, has triggered the Sahm Rule—a recession signal that economists definitely didn’t want to see flashing red right now.

But not everyone’s hitting the panic button. Claudia Sahm, the economist behind the rule, argues that we’re not necessarily plunging into a recession just yet. Unusual economic conditions, including the lingering effects of the pandemic, have skewed the numbers. So, while the job market’s cooling off, it’s not quite time to batten down the hatches.

Powell Under Pressure: Time to Cut Rates?

Federal Reserve Chair Jerome Powell might want to rethink his summer vacation plans. After the Fed opted not to cut interest rates at its latest meeting, Powell hinted that a September rate cut was possible—if more data suggested inflation was under control. But with July’s job report looking lackluster, critics are wondering how much more data Powell needs before taking action.

Wall Street wasn’t happy either. The Dow plunged over 900 points, and the S&P 500 had its worst reaction to a jobs report in nearly two years. Senator Elizabeth Warren didn’t hold back, either, tweeting that Powell should “cut rates now—not wait six weeks.”

Looking ahead, the market is so confident in an upcoming rate cut that you’d think it’s already in the bag. Citigroup and JPMorgan are even betting on half-point cuts in both September and November. If Powell needed a push to make a move, July’s job report might just be it.

Calendar
On The Horizon

This Week

After a turbulent week filled with economic announcements, next week appears set to offer a bit of relief. While a few data releases—such as July's ISM services on Monday, June's trade balance on Tuesday, and June's consumer credit on Wednesday—are on the calendar, none are expected to significantly impact the market. The spotlight, however, will be on Thursday's initial jobless claims report. Given how this week's job figures shook investor confidence, these reports are now critical in signaling the market’s potential direction.

Upcoming Earnings:

Monday: Tyson Foods ($TSN), Hims & Hers Health ($HIMS), Palantir Technologies ($PLTR), The Carlyle Group ($CG)

Tuesday: Caterpillar ($CAT), Uber ($UBER), Marathon Petroleum ($MPC), Yum! Brands ($YUM), Planet Fitness ($PLNT), Amgen ($AMGN), Airbnb ($ABNB), Reddit, Wynn Resorts ($WYNN), TripAdvisor ($TRIP)

Wednesday: Disney ($DIS), Novo Nordisk ($NVO), Sony ($SONY), Shopify ($SHOP), CVS Health ($CVS), Hilton Worldwide ($HLT), Lyft ($LYFT), Monster Beverage ($MNST), Warner Bros. Discovery ($WBD), Robinhood ($HOOD), Duolingo ($DUOL)

Thursday: Eli Lilly ($LLY), Brookfield ($BAM), US Foods ($USFD), Six Flags Entertainment ($SIX), Yeti ($YETI), Under Armour ($UA), Warby Parker ($WRBY), Krispy Kreme ($DNUT), Paramount Global ($PARA), Sweetgreen ($SG)

Friday: Hawaiian Electric Industries ($HE), Getty Images ($GETY), Canopy Growth ($CGC), Soho House & Co. ($SHCO)