The salient point of today's discourse revolves around the perplexing phenomenon in the stock market, where companies reporting exceptional earnings are witnessing declines in their stock prices. This week has exhibited considerable volatility, with indices nearing record highs yet beginning to show signs of instability. A notable instance involves a company that achieved a remarkable 109% growth in earnings, only to experience a 15% drop in its stock value, indicative of an exhausted trade within the AI sector. As we approach the forthcoming jobs report, the market appears to be in a state of indecision, with participants bracing for the implications of this critical data. I urge our listeners to remain vigilant, as the current fluctuations may necessitate a reevaluation of investment strategies in light of the prevailing economic climate. A comprehensive overview of the current financial landscape is presented, underscoring the complexities and nuances of market behavior as it relates to earnings reports and the anticipated jobs data. The speaker articulates the curious phenomenon of stock price declines following impressive earnings performances, particularly within the AI sector, where a notable disconnect between positive financial results and negative stock reactions has emerged. This trend is indicative of a broader market exhaustion, suggesting that the fervor surrounding certain stocks may be waning, leading to a critical reassessment of their valuations. The dialogue further delves into the implications of this market behavior, highlighting a discernible rotation from high-flying tech stocks into more defensive positions, thereby signifying a cautious approach among investors. The speaker emphasizes the importance of recognizing these shifts, particularly as the market prepares for the forthcoming jobs report, which is anticipated to have significant ramifications for investor sentiment and Federal Reserve policy. The discussion paints a vivid picture of a market at a crossroads, where uncertainty reigns and strategic positioning becomes essential for navigating potential outcomes. In conclusion, the speaker offers insights into the necessity of maintaining a balanced portfolio, advocating for a measured approach that incorporates cash reserves to mitigate risks associated with market volatility. The conversation encapsulates a critical analysis of current market trends, urging listeners to remain proactive and informed as they navigate the intricate landscape of investment opportunities and challenges. The emphasis on preparedness and strategic foresight forms the crux of the discussion, resonating with the overarching theme of prudent investment management amidst unpredictability.

Takeaways:

• The current market conditions indicate a potential shift away from crowded AI stocks, evidenced by their recent disappointing earnings despite substantial growth.
• Investors should remain vigilant as the market appears to be undergoing a subtle rotation towards more stable sectors, such as utilities and healthcare, amidst record highs.
• The upcoming jobs report is anticipated to be pivotal, influencing market sentiment and potentially altering the trajectory of interest rates by the Federal Reserve.
• A critical observation is that when stocks surpass earnings expectations yet decline, it signifies a lack of new buyers, suggesting an exhausted trading environment.
• Maintaining liquidity in one's portfolio is advisable during this volatile period, allowing for strategic responses to unforeseen market movements.
• It is prudent to exercise caution with investments that have experienced significant runs prior to earnings, as the market's confidence remains precarious.

Companies mentioned in this episode:

• Regime Lab
• Western Digital
• Sandisk
• DataDog

Good morning folks.

Welcome to the Daily Read with Jeff Kickle.

It is Thursday, August 6th, and this I cannot tell you how crazy goofy this week has been.

And it is another crazy goofy day and a whole bunch of crazy goofy days this week.

So let's get started and let's talk a little bit about what I'm referring to.

So this week has been just all over the fence.

We are at near records on all the indices but they're getting a little wobbly.

AI chips being sold on beats, defensives have whole or have held.

It's a bit of an exhausted trade and oil is still in the $76 range.

So let's kind of talk about one of the crazy goofy things of this morning.

A company reported earnings this morning that grew 109% beat on every line up the top line, the bottom line and the stock fell 15%.

That's not a typo, it's not a one off.

It happened across the whole AI trade today.

When great news can't lift a stock, that's the market telling you something.

So let's make sure we listen to it.

So quick reminder, Regime Lab, which we call it internally, is our daily sourced read on the market and today it's flashing subtle yellow lights.

We're still near record highs, but underneath the mood shifted from the AI and chip names that have led this rally and they've gotten sold on their earnings.

Beats Western Digital beat big and dropped 15%.

Sandisk beef or beat beat and also fell 11.

A data dog beat and lost 17 while the steady boring names, a soda company, a power utility went up.

That's the market quietly rotating away from the crowded trade one more time and it's all happening while everyone waits for one number tomorrow.

So getting into it, here's what's really going on.

When a market beats expectations and or when a stock beats expectations and falls anyway, it usually means one thing.

Everyone who wanted to own it already does.

There are no buyers left to impress.

So even great news becomes a reason to take profits.

That's the sign of an exhausted trade.

And today it hit the AI names hardest.

But notice what held up the Dow was positive Credit stayed calm and defensive corners in the market, Staples Utilities, Healthcare did just fine.

So this isn't fear.

It's the same rotation we've watched all along.

Out of the crowded names and into everything else playing out even one more time.

So what does this mean for you?

Two things.

First, if your portfolio is heavy in the handful of AI winners, days like today are a reminder that even on perfect earnings can't always hold a crowded stock up.

The price already assumed perfection.

Second and bigger, the market is holding its breath.

Everyone, traders, the Fed, all of it is waiting on tomorrow's jobs report.

Until that number lands, the tape is going to feel indecisive because it's, it genuinely is.

Don't read too much into the waiting room.

And it's an interesting thing when we look at that market during or we look at that number for tomorrow.

A big number, a big surprise on the upside could easily cause the market to go down.

Which you would think okay, more jobs, that would be a good thing.

But the market is betting on what we expect from the Federal Reserve.

And if the Federal Reserve sees jobs coming up significantly they're very likely to go forward with their plans or what people think of possibly even raising interest rates.

I don't really think we're going to see interest rates move at all until later in this year until after the midterm election.

The the Fed typically doesn't like to make moves prior to elections happening but you could see it happen if we see a big pop, everything's pointing to that number actually may be a little lower.

It's probably worth taking the time to plan ahead.

I personally would suggest making sure you keep a pretty good chunk of cash in your portfolio just to cash are really low at risk investments for the time being and let that let us ride through some of this craziness.

And typically August is a very low volume month anyhow.

So it's a time when the market can really have wild gyrations either way.

So what do we have going on for the rest of the week?

The jobs report lands tomorrow morning and it's the number of the month after week.

Private numbers on Wednesday through adp.

The whole market is bracing.

A cool but steady report keeps the easy Fed or the easier Fed rally alive.

A two week one flips the mood from relief to a growth scare in a single session.

Everyone's been or everyone's been a rehearsal or everything's been a rehearsal.

Tomorrow at 8:30 is the actual show.

So quickly let's go over what the the summary is for this.

The beats just aren't enough right now.

And if you have any stocks that have had a big run up going into earnings it's probably, well it might be the time to take a little profit before you go into earnings confidence right now is medium.

We, we're just mixed.

You saw them if you've watched the show for the last couple days.

We've been in the green on our scorecard and it went to yellow today.

As a result of some of this, risk level is still elevated and the market is very volatile either direction.

Friday's jobs report, is it.

Are we cooling?

Are we stalling?

Are we going up?

Who knows?

Tomorrow at 8:30 we're going to know everything.

So that's your daily read.

I'm Jeff Kickle.

Exit rich, retire free.

As always, this is for education and not investment advice, but if you'd like to talk through your own plan, you know where to find me.

So thanks and have a great day and we'll see you in the morning.