CNBC Daily Open: There’s a new narrative in markets

Drilling rigs sit unused on a companies lot located in the Permian Basin area on March 13, 2022 in Odessa, Texas.

Joe Raedle | Getty Images News | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Losing week for stocks
U.S. stocks were mixed Friday, with the Dow Jones Industrial Average the only major index to eke out a gain. Europe’s Stoxx 600 index sank 1.09%, weighed down by a 2.1% drop in technology stocks. Meanwhile, the U.K. surprised with a better-than-expected 0.2% growth in gross domestic product during the second quarter.

Higher producer costs
U.S. wholesale prices rose 0.3% in July. That’s more than economists had expected and the biggest monthly increase since January. On a year-over-year basis, the producer price index was up 0.8%. The PPI tends to reflect price changes before they filter into the consumer price index, so this could dampen the enthusiasm over July’s cooler-than-expected CPI.

Jail for SBF
FTX founder Sam Bankman-Fried headed to jail Friday after a judge revoked his bail over alleged witness tampering. Government prosecutors said Bankman-Fried had sent over 100 emails to the media, including private diary entries of his ex-girlfriend, Coraline Ellison, to the New York Times. Bankman-Fried’s expected to remain in custody until his criminal trial on Oct. 2.

Nvidia’s incredible year
Nvidia’s shares are up 180% this year, beating every other stock in the S&P 500 and making Nvidia the fifth-most valuable U.S. company. But that gives its stock a current price-to-earnings ratio of 220, a multiple more than three times higher than Tesla’s. CNBC’s Kif Leswing explains the trajectory behind Nvidia’s ascent, and where the chipmaker could go from here.

[PRO] Week of the consumer
The U.S. consumer is in focus this week. July’s retail sales data comes out Tuesday. Alongside that will be earnings reports from a range of retailers, ranging from big-box merchandisers like Target, discount shops like TJX Companies and luxury retailers like Tapestry, which owns Coach and Kate Spade. They’ll give a snapshot of whether the consumer can continue propping up the U.S. economy.

The bottom line

There’s a new narrative in markets.

The Nvidia-fueled rally that began in May seems to be petering out. Expectations of bumper earnings are now baked into stock prices — and investors are realizing how expensive artificial intelligence stocks are. The VanEck Semiconductor ETF was down 5.2% for the week, its worst since October 2022.

At the same time, the U.S. economy is growing so much more than anticipated that Wall Street thinks a recession isn’t happening this year. Economists, according to a Philadelphia Federal Reserve poll, are also revising upwards their growth forecasts.

A robust economy means higher demand for goods and services. One barometer of that is oil. Indeed, prices for oil have rallied for seven consecutive weeks, the first time since June 2022. To be sure, that’s largely because of supply constraints for now, but increased demand will surely translate into higher prices soon.

That’s good news for investors in energy stocks, which led the market Friday, last week, this month and this quarter, as CNBC’s Scott Schnipper observed. The VanEck Oil Services ETF rose 2% last week, handily beating the VanEck Semiconductor ETF.

But that’s bad news for investors wary of interest rates. Higher commodity prices and demand might mean the Federal Reserve may not pause — or cut — rates as soon as markets expect. The hotter-than-expected PPI reading adds credence to this new narrative.

Markets were shaken. The S&P 500 lost 0.1% and the Nasdaq Composite slid 0.6%, giving both indexes their second straight losing week. For the Nasdaq, that’s its longest down streak since December. The Dow Jones Industrial Average, however, managed to eke out a 0.3% increase to advance 0.6% for the week.

The week ahead is dominated by consumer spending data, which can be fuzzy because it tends to fluctuate by season and sentiment. Prepare for more volatility.

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Source: CNBC