On today’s edition of Market Domination Overtime, Jared Blikre and Josh Lipton break down the market close and key stories from the June jobs report to the state of the auto industry.

Friday’s session marked across-the-board gains for all three of the major US indexes (^DJI, ^IXIC, ^GSPC). Meanwhile, the S&P 500 and Nasdaq Composite set new record highs to close out July’s first trading week.

State Street Global Markets macro multi-asset strategist Cayla Seder breaks down the markets’ movement as June’s jobs report marked the latest sign of economic cooling. She explains, “We have this kind of moderation that’s going on… but the actual level is still quite strong. And so I think what that means is as we’re assessing this data, we have to put some of this moderation into context. And so, yes, you have a headline figure in the NFP [nonfarm payroll] print today that was still above pre-COVID norms. But then you do see some signs of weakness underneath.”

Automakers continue to report sales growth, prompting investors to question whether this trend can persist into the second half of 2024. Cox Automotive executive analyst and senior director of economic and industry insights Erin Keatin calls the auto industry’s performance “pretty good” in 2024 despite economic uncertainty that pointed to a potential slowdown. Addressing the electric vehicle (EV) sector, she notes that “a lot of the decline” in the EV market “is coming out of the Tesla (TSLA) share,” noting Tesla’s former position as the sole competitor in the market. Looking ahead, Keating tells Yahoo Finance that ‘the automotive market will have to balance itself out.”

This post was written by Melanie Riehl

Video Transcript

That is the closing bell on Wall Street and now it’s market domination over time.

Let’s get you up to speed on the action from today’s trade Jared.

What are you seeing?

Well, I think what stands out here?

Small caps in the red that is today and also the week.

Let’s just cover that first.

Uh We are seeing small caps down 1% over the week.

Now you contrast that with the NASDAQ composite of 9/10 of a percent over these four days, up 3.5%.

This is gonna be now 10 of the last 11 weeks, the NASDAQ composite has been up.

So that is just a really big amount.

And then you look at the sector action, it’s still about the mega caps.

Look at that communication services.

That is the home of Meta and alphabet.

That’s number one, then number two is staples.

So kind of a defensive play maybe.

But then consumer discretionary third health care.

Anyway, it’s an interesting mix at the top here and I think the NASDAQ 100 tells a big story and video is down.

Story continues

Yes, but Meta is up 6%.

Lots and lots of dark green, especially in the mega caps.

That’s the L performance.

How much of this Jerry is, is sort of, we were talking about this earlier, in your opinion, you got more economic day to day, you got the big Jobs Report and how much of it is kind of just confirming the story we’ve been telling ourselves anyway about an economy.

It’s cooling, it’s monitoring, but it’s not crashing and maybe Jay Powell feels like, oh, you know, I at the cover to make a cut, not July but coming.

Yeah, I think that’s a big part of it.

Nothing today upset the narrative and the prevailing narrative is stocks are going up and this is as we’ve been talking about the 10 most bullish days of the year, at least when you consider beginnings of month and ending of month.

That’s right now.

So this is supposed to be a bullish time of the year, not a lot of traders at that desk, at their desk.

And so we do think see things tend to rise.

If we’re in the bear market, I would expect stocks to maybe go down.

But, you know, the prevailing trend is definitely up.

And didn’t you teach me to Jared a little about seasonality and how right now, at least right now we’re kind of in the sweet spot for as a tail wind for the Bulls.

Yeah, we’re still, we’re coming off of some really good seasonality.

We don’t have any big impediments to it, but we’re not going to get any tail winds from basically.

So the middle of July into the beginning of November, you don’t have those tail winds so anything can happen.

Um, and then when the November election takes place, guess what magically the seasonality kicks back in.

But yeah, there’s a couple of months there, maybe three or four months when things get a little dicey and, you know, we don’t have that map.

All right, let’s get another perspective here because joining us to help us break down this four day trading week, which include a couple of fresh record highs is Kayla Cedar State Street, Global Markets, Macro Multi asset strategist, Kayla, it is good to see you.

It seemed like Kayla, um what you’re suggesting is when you looked at the, the big jobs report today in other, you know, economic data you’ve been reviewing, you seem to be saying, Kayla, you, you’ve seen an economy that OK, it’s cooling, it’s moderating, but it’s still, in your opinion, looking fairly and relatively resilient and strong here.

Yeah, thank you so much for having me.

You know, I think that’s to or that’s definitely right.

We have this kind of moderation that’s going on um this uh direction towards moderation, but the actual level is still quite strong.

And so, you know, I think what that means is as we’re assessing this data, we have to put some of this moderation into context.

And so yes, you have um a headline figure in the NFP print today uh that was still above PRE COVID norms, but then you do see some signs of weakness underneath.

However, if we take a step back, wage growth is still quite strong.

Jolt’s data implies that, you know, there are more job available job openings rather than there are folks unemployed.

And so when you bring this back to monetary policy, yes, this means September is live.

But thus far, it looks like the economy is still perhaps too strong to accept or expect the cut in the near term.

Do you think it’s just too strong period?

And we might see a risk of re acceleration up, which would mean maybe the fed is on pause a lot longer than people thought or gasp even has to raise rates.

That seemed to be a possibility a few months ago.

But admittedly it’s been priced down quite a bit from then.

Yeah, you know, I think it has been priced down because the data has started to move in the direction towards easing and moderation.

So that means that the bar for a hike is higher than the bar for a cut.

With that said though, I think you point out a really important uh factor to consider is that the feds are, does not want to cut and then have to hike again.

And so I think that’s why when we look at the underlying data, especially in the CP I prints, we want to start to see services and housing, make progress back towards 2%.

Uh Because otherwise there is that risk of re acceleration.

Kayla, another big economic data point next week.

CPIW, what are you looking for there, Kayla, what’s your, what’s your expectation?

Yeah, you know, one thing that we have uh insight into at State Street is we have price stats, which is a daily measure of goods inflation.

And so when we look at the progress made on goods inflation thus far, that’s really what has led a lot of this disinflationary move lower.

And so I think that means two things, one, we need to start seeing more progress on the services and housing side.

And we also can’t see goods re accelerate.

And so what we’re seeing thus far is that goods inflation is continuing to move lower.

We are seeing this inflation continue.

And so that’s a good sign moving into next week.

But again, we also really need to start seeing those o figures start to come down and we’ll also be looking for uh a continuation lower in uh super core as well.

What are the big macro headlines that you might be a little bit concerned about things?

Uh not necessarily front and center right now.

It could be geopolitics could be election the things uh that might cause some uh uh perturbs in the market uh in the months to come, you know, I think the market does have this habit of getting ahead of itself.

And so that’s what makes this transmission of or um I would say this movement in some of the data hard to grapple with because we do see weakening, but is it weakness?

And so I would caution folks from getting too excited about some signs of moderation and interpreting it as weakness and expecting too many cuts once we’re really going to start pricing in a recession, which thus far looks unlikely.

Um It’s going to be hard for the fed to really deliver this really um this large magnitude of cuts.

And so it’s much more likely.

I think that we’re going to see a shorter and relatively shallow cutting cycle.

So Kayla add it up for us, given your view of the economy and the fed uh for investors listening right now in the stock market, Kayla, what do you prefer?

Yeah, I really prefer still large cap quality growth, which really still means tech as we approach earnings season, which is going to be kicking off next week.

It really does look like tech is where a majority of the earnings growth is going to be as we look forward to the rest of the year expectations are that earnings will continue to accelerate, but revenues will decelerate a little bit.

And so when we think about ok, what does that mean for sector allocation?

That’s really an ok story.

For, for tech because what that means is they can still support profit margins without some of this revenue growth, given their borrowing costs, given their cash flows, things like that.

And so they’re very well uh bolstered to navigate that kind of environment.

All right, got to leave it there, but appreciate your insights here on this Quiet Friday afternoon.

Thank you, Kayla.

Thanks so much for having me and coming up the road ahead for automakers while carmakers reported modest sales growth for the second for three quarters, experts foresee challenging times on the horizon, we’re gonna unpack potential risk driving a slowdown for the industry in the back half of this year.

That is up next.

Automakers reporting modest sales growth.

GM reporting its best quarterly sales in more than three years.

Teslas seeing sales fall less than expected for the second quarter.

However, looking to the second half of the year, the road ahead for automakers may be a rocky one, cox automotive executive analyst and senior director, Economic and industry insights.

Erin Keating joins us now to discuss Erin.

It’s good to see you.

So um maybe Erin it’s our big picture.

You know, we did just hear as we mentioned uh from GM and Ford and Tesla um just a 30,000 ft view.

Erin, when you look at the US auto industry, how healthy, how, how strong does it look to you?

You know, I think we actually have to put it in perspective and, and so far, I think we’re seeing a pretty good year.

We all knew that the uncertainty with the election, the climate, the interest rates keeping at high levels that we were going to be seeing potentially a slow growth this year.

Um, certainly the CD K outage in June didn’t necessarily help us the fact that the O Ems or the automakers have not come in with really high incentives.

Um, like they were in the pre panem.

I think we’re doing pretty well.

All right.

How, what are margins looking like?

We’re talking about increased incentives here.

We know that the automakers like to uh provide a little juice for the customers from time to time.

How are margins faring?

So, admittedly then Cox Automotive, we don’t get terribly deep into the financials of the automakers.

Um but again, we’re seeing them starting to loosen some of the, the financial space they have on the cars as they try to move more metal off the parking lot.

So we are going to, we are anticipating that we’ll see some more incentives coming forward.

Um There’s a lot of rate of pension that’s having to happen right now because of the high interest rate.

So we’re hoping that they’ll be able to give a little bit more of this back.

It may come a little bit from the dealer’s margin and a little bit of sharing from the automakers uh margin as well.

Erin, let’s talk about a trend.

We talk, we discussed a lot here ev sales growth.

Erin, not what it used to be.

I’m interested, the reasons you see for that.

Erin.

And what do you think it would take to kind of jump start that?

Well, I think, you know what we have to remember is that some of the decline or a lot of the decline is actually coming out of Tesla share.

They were primarily the biggest competitor in the market, the only competitor in the market for a long time outside of Nissan and Chevy.

Um but we see a lot more competitors coming in with some really compelling product as well as good incentives and of course, the tax credit.

So I don’t see that we say ev demand is completely falling off a cliff or you think it’s normalizing.

And so as we see Tesla start to drop share, that’s not alarming around the entire message for evs because the rest of the brands are actually starting to really lift in their E sales.

So while we may not be at 10% this year, we’re going to get hit awfully close to it.

More hybrids are being sold, more P heads are being sold.

This is all good for the transition to fully electrified vehicles in the future.

So I’d say that we’re still on a path to getting to an electrified future.

It’s just going to take us a little bit longer and we’re really excited about the fact that we finally have some additional players in the market providing some really good options for consumers.

Let’s talk about the, the some of those players in the market right now.

Um I was just looking at the Wi Fi Interactive, I know you don’t comment on stock prices, but what I’m gonna show illustrates uh the big versus the small.

This is, this is a year to date um performance for a bunch of EV stocks and Tesla just became positive today actually, but GM is up 30% Toyota is up 12% byd is up 9%.

And then these little, a lot of the smaller players uh nev just are not doing it.

Rivian down 37%.

Lucid Motors down 30%.

Admittedly, China’s its own story.

But what do you think the difference is between some of the, the out performance of these big guys versus the little guys?

I think it’s, I think it’s precisely that a story of the big guys versus the little guys.

I do think that we anticipate Vivian starting to get a little bit more under its feet, um especially with its new tie up with Volkswagen.

Um And I do think that the automotive market will have to balance itself out.

I mean, a lot of people forget that at the beginning of the last century, I think we had over what 1000 automakers, you know, it whittles down.

So I think we may see more consolidation or more collaboration amongst some of the O Ems um and meaning some of the really small players might get swallowed up, perhaps a lot of them over in uh in China.

But even when you saw the Volkswagen Arabian announcement, you see where they’re starting to realize that collaboration in some areas is actually good for, you know, the rising tide helps all all ships.

And of course, we may see a few like we saw with Fisker filing for bankruptcy, some of them will go away from the market and that’s ok. That’s the speed of competition, right?

Aaron.

Uh I’ll get you on this.

You know, we talked about ev si also want to know what’s going on with trucks, Aaron broadly, I mean, what are the, what are the trends and themes you’re seeing there so broadly, I mean, trucks still make up a majority of our sales.

Um But we are seeing that the smaller sub or compact suvs, compact trucks and of course, sedans are starting to have a little bit of a, a renaissance here where there are a couple, you know, their share is going up just a little bit, but I don’t see that we’re going to transition to um going back where sedans are the primary winner in this market.

Um So trucks are doing ok.

Uh they are stabilized.

Um But we are seeing that the lower cost vehicles which tend to be the smaller vehicles are certainly pushing up in sales.

And again, that comes back to the affordability challenge that we’re seeing in the market that if they need a car, they need four wheels, they’ll take what they can get.

And if that happens to be a little bit smaller than they anticipated or wanted, then that’s what they’ll grab for the new or used car and we will leave it there.

Aaron Keating.

Thank you.

Sure, no problem.

And that’s gonna do it today for today’s market domination over time.

Be sure to come back Monday at 3 p.m. Eastern for all your coverage leading up to and after the closing bell.

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