{"id":209546,"date":"2024-07-24T11:30:00","date_gmt":"2024-07-24T15:30:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=209546"},"modified":"2024-07-25T03:57:58","modified_gmt":"2024-07-25T07:57:58","slug":"silicon-valley-sells-off-even-as-harris-odds-jump","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/silicon-valley-sells-off-even-as-harris-odds-jump\/","title":{"rendered":"Silicon Valley Sells Off Even as Harris Odds Jump: July 24, 2024\u00a0"},"content":{"rendered":"\n

The new day has brought fresh probabilities for this year\u2019s presidential election, which are strikingly different from yesterday\u2019s prospects, as several polls reflect near coin-flip odds for the two top candidates. At first glance, many would have expected the Harris trade to gain steam, but as big-tech earnings hit the tape, we\u2019re getting quite the opposite. Risk-off sentiments are indeed dominating Wall Street, with investors dumping high-growth tech stocks and almost everything else in favor of Treasury bills, gold bars and Swiss francs. Rates are certainly plunging with weak new home sales stateside and softer-than-expected flash PMIs on both ends of the Atlantic weighing on the economic outlook.<\/p>\n\n\n\n

New Home Sales Continue to Tank<\/strong><\/h2>\n\n\n\n

This morning\u2019s new home sales data offered the same insight as yesterday\u2019s report on existing housing<\/a>: fresh year-to-date lows in transaction volumes paired with a new high in inventory. Stretched housing affordability led to a decline in the pace of new homes being snatched up by buyers, with last month\u2019s reading slipping 0.6% month over month (m\/m) to 617,000 seasonally adjusted annualized units, beneath projections calling for 640,00 and the previous month\u2019s 621,000. Sharp m\/m declines in the Northeast and Midwest of 7.7% and 6.9% overwhelmed the modest 1.4% and 0.3% increases in the West and South. Inventory, indicated by the amount of supply relative to the rate of current monthly sales, rose to a 20-month peak of 9.3, levels consistent with the great financial crisis of 2008. The ratio hit 12.2, an all-time high, in January 2009.<\/p>\n\n\n\n

\"New<\/figure>\n\n\n\n
\"New<\/figure>\n\n\n\n

US Service Industry Thrives as Manufacturing Contracts<\/strong><\/h2>\n\n\n\n

US economic activity started off strong in the third quarter, according to this morning\u2019s Flash Purchasing Managers\u2019 Indices (PMI) from S&P Global. Services momentum accelerated, with July\u2019s score rising to a 28-month high of 56, above both the anticipated 55 and June\u2019s result of 55.3. Manufacturing dragged down results, however, falling into contraction territory with a score of 49.5, below the median estimate of 51.7 and the prior period\u2019s 51.6. Overall, inflationary pressures slipped during the month, but input costs remained hefty, pointing to firms becoming increasingly unable to pass on loftier costs to consumers. These margin pressures have also become more prevalent on earnings calls, as budget-conscious shoppers trade down amidst erratic purchasing patterns, which are weighing on bottom lines.<\/p>\n\n\n\n

\"Purchasing<\/figure>\n\n\n\n

Olympic Games Boost Eurozone Services<\/strong><\/h2>\n\n\n\n

Conditions were bleak across the Atlantic in the eurozone, with business confidence and a lack of hiring weighing on overall performance. Similarly, though, the services sector expanded while the manufacturing sector contracted. Services and manufacturing PMIs came in at 51.9 and 45.6, missing the estimated 53 and 46.1. In comparison, June\u2019s figures were 52.8 and 45.8. Also weighing on the outlook were rising inflationary pressures, contracting productivity and manufacturing orders. The French Olympics did serve to boost the services sector and offset German sluggishness, however. The combination of rising prices and deteriorating productivity may challenge the European Central Bank\u2019s ability to dish out a rate reduction in September.<\/p>\n\n\n\n

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Magnificent Seven Off to Lackluster Start<\/strong><\/h2>\n\n\n\n

The first two members of the elite Magnificent Seven posted disappointing results, while Visa payment processing volumes grew slower than expected, pointing to weakness in spending by lower-income consumers. Meanwhile, commercial real estate issues weighed on results for Germany\u2019s Deutsche Bank, which tabled a second planned share buyback this morning. Those are a few points from the following earnings highlights:<\/p>\n\n\n\n