Market Snapshot
| Dow | 44111.74 | -61.90 | (-0.14%) | | Nasdaq | 20915.17 | -137.03 | (-0.65%) | | SP 500 | 6299.19 | -30.75 | (-0.49%) | | 10-yr Note |
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| | NYSE | Adv 1538 | Dec 1170 | Vol 1.19 bln | | Nasdaq | Adv 2174 | Dec 2303 | Vol 8.02 bln |
Industry Watch
| Strong: Consumer Discretionary, Materials, Real Estate, Energy |
| | Weak: Health Care, Financials, Information Technology, Utilities, Industrials, Communication Services, Consumer Staples, |
Moving the Market
Sizable batch of earnings reports with Palantir Technologies (PLTR) continuing to impress
Increased expectations for a 25-basis-point rate cut at the September FOMC meeting
ISM Services PMI for July teetering on contraction reading, with contraction in employment and increase in prices hinting at stagflation concerns
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Softer economic data spurs retreat from yesterday's highs
05-Aug-25 16:30 ET
Dow -61.90 at 44111.74, Nasdaq -137.03 at 20915.17, S&P -30.75 at 6299.19
[BRIEFING.COM] The stock market saw its modest opening gains quickly reversed in the wake of a halting July ISM Services PMI, with the major averages drifting below their opening levels and closing with modest losses.
While yesterday's advance was impressive in its magnitude, there was little in the way of tangible developments to substantiate the gains, a notion that was swiftly reiterated by the market's reaction to today's softer economic data.
The July Services PMI registered at 50.1%, just barely above the 50.0% benchmark for contraction. A faster rate of contraction in the employment index and a faster increase in the prices index combined to prompt stagflation concerns, which become especially relevant when last week's underwhelming payrolls report is taken into consideration.
As a result, losses were relatively broad-based today, with seven S&P 500 sectors finishing in negative territory.
The utilities (-1.1%), communication services (-0.9%), and information technology (-0.9%) sectors faced the widest losses among S&P 500 sectors today, though today's retreats were modest in comparison to yesterday's advance. Only the energy sector (+0.2%), which closed higher today, holds a week-to-date loss (-0.3%).
The materials (+0.8%), consumer discretionary (+0.3%), and real estate (+0.3%) sectors were the other three sectors that closed with a gain.
Small-cap stocks also furthered their advance today, with the Russell 2000 closing with a gain of 0.6%. The S&P 500 Equal Weighted Index (-0.3%) outperformed the market-weighted S&P 500 (-0.5%), while the Vanguard Megacap Growth ETF finished with a loss of 0.8% after yesterday's 2.0% gain.
Today's economic data notwithstanding, there was a lack of major developments to sway the market from a sideways drift after the early losses.
Trade headlines were notably slim, though President Trump stated in a CNBC interview before the open that he will soon announce a separate tariff plan for semiconductor and pharmaceutical imports.
The PHLX Semiconductor Index was down 1.1%, with losses in the broader technology sector masking an impressive earnings report from Palantir Technologies (PLTR 173.27, +12.61, +7.9%).
Tariff concerns were reflected in today's June Trade Balance report, as a notable decrease in imports hints at impeded global trade activity.
In the same CNBC interview, President Trump indicated that he may be announcing a replacement for Fed Governor Kugler soon and that there is a possibility whoever fills her seat could eventually be nominated for Fed Chair. The president also indicated that Treasury Secretary Bessent does not want the Fed Chair job and that he has taken Mr. Bessent's name "off the list," which currently includes four people being considered by the president, including former Fed Governor Warsh and NEC Director Hassett.
U.S. Treasuries had a mixed outing in a curve-flattening trade that was dictated by the underperformance of the front end of the curve versus the back end. Today's trade featured a relatively disappointing 3-year note auction that saw weak interest on the part of indirect bidders.
The 2-year note yield settled up four basis points to 3.72%, and the 10-year note yield finished unchanged at 4.20%.
- Russell 2000: +2.7% WTD
- Nasdaq Composite: +1.3% WTD
- S&P Mid Cap 400: +1.2% WTD
- S&P 500: +1.0% WTD
Reviewing today's data:
- June Trade Balance -$60.2 bln (Briefing.com consensus -$62.0 bln); Prior was revised to -$71.7 bln from -$71.5 bln
- The key takeaway from the report is that it reflects the fact that tariff actions by the U.S. and the uncertainty related to the tariffs have impeded global trade activity.
- July S&P Global U.S. Service PMI - Final 55.7; Prior 52.9
- July ISM Services 50.1% (Briefing.com consensus 51.5%); Prior 50.8%
- The key takeaway from the report is that it reflects a slowdown in growth for the country's largest sector, accompanied by a faster contraction in employment and a faster increase in prices. It is a combination that will provoke stagflation chatter.
Small-cap stocks perform amid broad based losses
05-Aug-25 15:30 ET
Dow -25.57 at 44148.07, Nasdaq -115.75 at 20936.45, S&P -22.96 at 6306.98
[BRIEFING.COM] The DJIA (-0.1%) has returned to its opening level in the final half hour of trading, while the S&P 500 (-0.4%) and Nasdaq Composite (-0.6%) post wider losses.
Today's losses are modest but broad-based and have had a slightly larger impact on larger stocks. The S&P 500 Equal Weighted Index (-0.2%) outperforms the market-weighted S&P 500 (-0.3%), while the Vanguard Megacap Growth ETF is down 0.7% after yesterday's 2.0% advance.
Small-cap stocks have outperformed, with the Russell 2000 (+0.5%) now leading the major averages in week-to-date gains (+2.6%).
Major averages in sideways drift below opening levels
05-Aug-25 15:05 ET
Dow -52.16 at 44121.48, Nasdaq -124.51 at 20927.69, S&P -26.86 at 6303.08
[BRIEFING.COM] The major averages are little changed from previous levels as the market enters the final hour of trading.
Stocks got off to a decent start out of the gate, but softened economic data quickly reversed early gains in most sectors, keeping the major averages in negative territory for the majority of the session.
The market anticipates another sizable round of earnings reports after today's close, including some notable names in the semiconductor space. Advanced Micro Devices (AMD 175.70, -1.08, -0.61%) and Cirrus Logic (CRUS 104.08, -1.50, -1.42%) will look to give chipmakers a boost, as the PHLX Semiconductor Index is down 1.2% today.
Separately, Dow component Amgen (AMGN 298.71, -3.23, -1.1%) is also set to report earnings this afternoon.
S&P 500 slips as Gartner, Vertex, and TDG plunge post-earnings; Leidos shines on raised outlook
05-Aug-25 14:25 ET
Dow -54.25 at 44119.39, Nasdaq -80.78 at 20971.42, S&P -21.41 at 6308.53
[BRIEFING.COM] The S&P 500 (-0.34%) is in second place on Tuesday afternoon, down about 20 points.
Briefly, S&P 500 constituents Gartner (IT 236.34, -100.37, -29.81%), Vertex Pharma (VRTX 382.83, -89.44, -18.94%), and Transdigm Group (TDG 1385.93, -223.05, -13.86%) dot the bottom of the standings following earnings.
Meanwhile, Leidos (LDOS 172.14, +11.19, +6.95%) is one of today's top performers after delivering a strong Q2 earnings beat, raising its FY25 guidance, and highlighting record margins and strategic alignment with federal priorities.
Gold gains 0.8% as Fed cut bets, geopolitical tensions fuel safe-haven demand
05-Aug-25 14:00 ET
Dow +30.84 at 44204.48, Nasdaq -42.16 at 21010.04, S&P -9.15 at 6320.79
[BRIEFING.COM] The Nasdaq Composite (-0.20%) is in last place on Tuesday afternoon, down now about 40 points.
Gold futures settled $8.30 higher (+0.2%) at $3,434.70/oz, as strength still persists following last week's weaker U.S. jobs data which fueled expectations for a Fed rate cut as early as September. Geopolitical uncertainty and lingering trade tensions with India also added to safe-haven interest, though technical resistance near $3,450 capped further gains.
Meanwhile, the U.S. Dollar Index is narrowly higher at $98.76.
Caterpillar flat after Q2 results; tariffs proving to be a headwind but backlog is healthy
Caterpillar (CAT +0.5%) is trading relatively flat after reporting its Q2 results this morning. This heavy construction equipment manufacturer fell short of EPS expectations, marking its second consecutive quarter of a double-digit EPS miss. Revenue declined slightly by 0.7% to $16.57 bln. Importantly, revenue exceeded analyst expectations for the first time in 5 quarters, and the yr/yr decline was less steep than in the previous 4 quarters.
- The decrease in revenue was primarily due to lower selling prices, which was partially offset by higher sales volume and financial product revenues. Additionally, CAT's profitability continues to be pressured by headwinds, with tariffs proving to be pretty significant. The net impact from tariffs was around the high end of CAT's estimated range of $250-350 mln. As a result, adjusted operating profit margin decreased 480 bps yr/yr to 17.6%, resulting in a 22% decrease in adjusted operating profit.
- CAT expects the net impact from incremental tariffs in FY25 to be around $1.3-1.5 bln. This number assumes a larger impact in Q3 and Q4 due to the timing of recent changes, and CAT notes that the headwind is likely to be larger in Q4 relative to Q3. CAT anticipates the Q3 headwind to be about $400-500 mln.
- What stood out to us was CAT's backlog. Backlog grew $2.5 bln sequentially to a record $37.5 bln, and saw increases across all three primary segments. Given the strength of the backlog, CAT expects FY25 revenue to increase slightly yr/yr.
- The Construction Industry (CI) segment continues to be a laggard. Sales fell 7% yr/yr to $6.19 bln primarily due to weak sale prices. Also, despite sales to users increasing, volume was slightly negative due to dealer inventory headwinds and prices being more unfavorable than CAT had anticipated. Its Resource Industries (RI) segment also struggled during the quarter, with sales decreasing 4% yr/yr and profit decreasing by 25%.
- That said, CAT's Energy and Transportation (ET) segment continues to be a bright spot. ET saw revenue increase 7% yr/yr, driven by higher sales volume and favorable pricing. Backlog growth was driven by robust order activity in power generation, oil & gas, and transportation. Power generation was particularly strong, with sales increasing 28% yr/yr. Encouragingly, Oil & gas sales increased +2% yr/yr, a nice acceleration from Q1, which was down -20% yr/yr.
We think investors were anticipating a challenging quarter from CAT heading into this report. The substantial tariff-related headwinds and continued weakness in its CI and RI segments are weighing on near term profitability. With that said, there are encouraging signs for investors, including the healthy backlog and continued strength in its ET segment. The stock sold off in early April when the reciprocal tariffs were announced but has been rallying since then. Not seeing much reaction to the report today as it more or less came in as expected.
Lemonade squeezing significantly higher following strong Q2 results and outlook (LMND)
Lemonade (LMND) delivered a robust Q2 earnings report, sparking a significant surge in its stock price, driven by strong in-force premium growth and a potent short squeeze with 32% of the float shorted. The insurtech’s asset-light, digital, and AI-native model continues to fuel impressive growth, resonating strongly with younger consumers who value its seamless, technology-driven insurance offerings. Despite a challenging competitive landscape, LMND’s Q2 results, and optimistic guidance underscore its ability to scale efficiently.
- In-force premium (IFP), a critical metric measuring the total annualized premium value of active policies underwritten by LMND and those placed with third-party insurers, surged 29% yr/yr to $1.08 bln in Q2, exceeding management’s guidance of $1.061–$1.064 bln. This growth was propelled by LMND’s strategic expansion into high-demand segments like car and pet insurance, which have broadened its product portfolio and customer base.
- Additionally, the company’s aggressive push into European markets, particularly in France, Germany, and the Netherlands, has driven significant traction, with digital advertising campaigns and partnerships boosting customer acquisition and premium per customer, which rose 4% to $402.
- LMND’s guidance further bolstered investor confidence, with Q3 IFP projected at $1.144–$1.147 bln and FY25 IFP forecasted at $1.213–$1.218 bln, both surpassing analyst expectations. Notably, Europe’s IFP skyrocketed over 200% yr/yr to $43 mln in Q2, accounting for more than 20% of net new customers. This international momentum, combined with LMND’s focus on cross-selling car and pet insurance to existing customers and leveraging telematics for higher conversion rates, underpins the company’s strong outlook for continued premium growth.
- The gross loss ratio, another key metric, improved significantly to 67% in Q2, a 12-percentage-point enhancement from 79% in the year-earlier quarter. This reflects LMND’s refined AI-driven underwriting, which has enhanced risk assessment and pricing precision across its diverse product offerings. The company’s ability to manage catastrophic impacts, such as California wildfires, through a thoughtful reinsurance strategy and product mix diversification further supported this improvement, positioning LMND to better balance growth and risk.
- Strong IFP growth and an improving gross loss ratio are driving LMND toward better profitability metrics. In Q2, adjusted EBITDA loss narrowed to $(41) mln from $(43) mln a year ago, signaling operational efficiencies despite heavy growth investments. The company’s Q3 guidance projects a further improvement, with adjusted EBITDA expected at $(37)–$(34) mln, supported by reduced reinsurance costs and a focus on high-lifetime-value customer acquisition, particularly in the car insurance segment.
LMND’s stronger-than-expected Q2 results, marked by robust IFP growth and a significantly improved gross loss ratio, have ignited a powerful short squeeze, propelling the stock higher. These key metrics highlight a company with strong momentum, leveraging its AI-driven model to capture market share and enhance profitability.
Palantir Technologies continues its remarkable rise following Q2 upside (PLTR)
Palantir Technologies (PLTR +8%) is continuing its remarkable move higher following its strong Q2 report last night. The data analytics software company and government intelligence contractor reported upside EPS and very strong upside revenue, which grew 48% yr/yr to $1.00 bln. This was a notable as its first-ever $1 bln quarter. The guidance was also impressive with upside revs for Q3 and FY25.
- Its US commercial segment led the way with 93% yr/yr revenue growth to $306 mln, outpacing US government revenue growth of 53% yr/yr to $426 mln, but that was quite impressive in its own right. Its overall US business revenue grew 68% yr/yr and 17% sequentially, and now represents 73% of total company revenue. Management cited accelerating demand for its AIP (Artificial Intelligence Platform) offering, which continues to drive the outperformance in its US business overall.
- Palantir is known for its exposure to US government contracts, but it has been doing a good job at building its commercial business. In fact, US commercial comprised 31% of Q2 revs, which is up from 23% a year ago and US Commercial grew faster than US govt. This is being done by Palantir's focus on delivering AI production impact for commercial clients. This was evidenced by strength in new starts and expansions at existing customers. In fact, Palantir says it's seeing new starts with higher ambition and existing customers expand their work at a faster rate.
- Turning to its US government business, Palantir says it's delivering across civil, intel and defense, including greenfield efforts. US Space Force Space Systems Command awarded it a $218 mln delivery order. And last week, Palantir was awarded a 10-year enterprise agreement with the US Army, totaling up to $10 bln, consolidating 75 contracts into a single contract. The Army is one of Palantir's longest-standing customers.
- Another thing that stands out with Palantir is its robust margins. Q2 adjusted operating margin came in at 46%, exceeding the high end of prior guidance by nearly 300 basis points. While Palantir expects adjusted operating margin to continue to expand in 2H25, the company does expect a significant ramp in expenses in Q3 due to the seasonality of new hire starts. PLTR remains committed to investing in the most elite technical talent, but this will impact margins in Q3.
Shares of Palantir have been on a remarkable run since mid-2024. And the stock has made a huge move over the past year, going from around $30 to $174 currently. This computes as a current P/E of 280x, so the valuation has gotten quite stretched, so caution is warranted. However, it seems investors are focusing more on the impressive growth and huge margins. Also, Palantir is being seen as a top tier AI play.
Yum! Brands misses on Q2 EPS and same-store sales lag in fiercely competitive fast food arena (YUM)
Yum! Brands’ (YUM) Q2 earnings report signals caution for investors eyeing upcoming Q2 results from McDonald’s (MCD), Wendy’s (WEN), and Restaurant Brands International (QSR) later this week. The company reported EPS of $1.44, missing analyst expectations, while worldwide same-store sales growth of +2% also fell short of estimates, reflecting a challenging quick service environment where consumers are prioritizing value amid persistent inflation and competitive pressures.
- YUMC's worldwide same-store sales growth was driven primarily by Taco Bell, the company’s largest segment, which posted a 4% increase, though this was down from 5% in the year-earlier quarter. The slowdown reflects intensified competition in the quick service space, where consumers are gravitating toward budget-friendly options. YUM has responded with value-oriented offerings, such as Taco Bell’s $9 five-item value meal, which helped drive a 3.7% increase in U.S. visits despite a broader 1.6% decline in quick-service restaurant traffic.
- Competitors like MCD and WEN are similarly leaning into value promotions, with $5 meal deals and app-based loyalty programs, underscoring the fierce battle for cost-conscious diners in a market squeezed by inflation and selective spending.
- KFC’s division reported same-store sales growth of 2% globally, but its U.S. performance was notably weaker, with a 5% decline in same-store sales. This domestic softness stems from heightened competition from rivals like Chick-fil-A, Popeyes, and Raising Cane’s, which have eroded KFC’s market share. Operating margins at KFC slipped 3.6 percentage points to 43.0%, pressured by increased promotional activity and investments in digital and operational enhancements to counter competitive pricing. However, KFC’s growth strategy remains robust, with 465 gross new units opened (+5%) in Q2, particularly in international markets like India and China, where unit expansion continues to drive system sales.
- Pizza Hut, the weakest performer in YUM’s portfolio, saw same-store sales decline by 1%, with U.S. same-store sales dropping 3%. The division’s operating margin fell sharply to 33.5% from 39.3% a year ago, driven by increased technology spending within franchise advertising, costs related to transitioning three franchise entities to new ownership, and expenses tied to the Global Franchise Convention. These investments, while necessary for long-term digital transformation and brand revitalization, have strained profitability in the near term.
- YUM reaffirmed its long-term guidance, targeting 5% unit growth, 7% system sales growth, and at least 8% core operating profit growth annually. The company expects these goals to be driven by its focus on digital transformation, with over 50% of sales now coming from digital channels, supported by proprietary AI-driven software like Byte, which streamlines ordering and kitchen operations. International unit expansion, particularly for KFC and Taco Bell in markets like China and India, remains a core growth pillar, with approximately 4,560 gross units added in 2024.
YUM's’ Q2 results disappointed due to softer-than-expected same-store sales growth and margin pressures across its divisions, particularly at Pizza Hut and KFC’s U.S. operations. Despite these challenges, the company’s reaffirmed long-term guidance and focus on unit expansion and digital innovation provide a foundation for future growth, though execution in a competitive, value-driven market will be critical.
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