Technology took it on the chin Tuesday, with sector bellwether and AI revolutionary Nvidia (NVDA) giving back 3.5% and $154 billion in market capitalization. But it was a broadly "risk off" market again as participants evaluate earnings and incoming data and await more words from the Federal Reserve.
The Roundhill Magnificent Seven ETF (MAGS), which includes NVDA as well as Microsoft (MSFT), Apple (AAPL), Meta Platforms (META), Alphabet (GOOGL), Amazon.com (AMZN), and Tesla (TSLA), was down 1.6%.
All of the Magnificent 7 stocks were lower on the day, and Nvidia was No. 30 among the 30 Dow Jones stocks. But a combination of news from the earnings calendar and the economic calendar made it a Home Depot (HD) kind of day.
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The Census Bureau said before Tuesday's opening bell that housing starts increased 5.2% month over month but building permits declined by 2.8% in July. That's a second consecutive monthly increase for starts.
But permit issuance – historically a stronger indicator of overall housing demand, according to Barclays Chief U.S. Economist Marc Giannoni – shows "a sustained downtrend amid elevated mortgage rates and continued trade policy uncertainty."
A softer-than-expected July jobs report already has investors, traders and speculators pricing in an 84.9% probability of a 25-basis-point trim to the federal funds rate at the next Fed meeting in September, down from 93.9% a week ago.
Indeed, mixed inflation data make the case less clear than price action in the 30-day fed funds futures market. But Neil Dutta of Renaissance Macro Research sees something even ominous in the building permits data.
As Dutta explained to co-hosts Gunjan Banerji and Telis Demos of The Wall Street Journal during his appearance on their August 17 Take On the Week podcast, single-family building permits are down more than 30% from their peak.
And single-family residential real estate is "sort of the backbone of the housing market" and "the fact that that's down implies that we probably won't see much construction activity over the course of the year. You don't really have much growth in the pipeline."
Homebuilders, therefore, will be making fewer homes. "They're going to be focusing on the homes they've already sold, finishing those," Dutta adds, "and they're probably going to rationalize their labor demands."
As Banerji observes, falling employment in the construction sector can be a really bad sign for the economy. "It's growing at a pace now that's typically consistent with very, very weak economic activity," Dutta concludes.
By the closing bell, the blue-chip Dow Jones Industrial Average – which had traded in record-high territory earlier in the day – had inched up 10 points to 44,922. The broad-based S&P 500 was down 0.6% to 6,411, and the tech-heavy Nasdaq Composite had shed 1.5% to 21,315.
Fed chair candidate Bowman speaks (about bitcoin)
Fed Vice Chair for Supervision Michelle Bowman – on the expanded list of potential candidates to replace Jerome Powell as Fed chair – delivered a speech on "Embracing Innovation" at the Wyoming Blockchain Symposium.
Bowman and Fed Governor Christopher Waller – also in the running to be the next Fed chair – dissented from the Federal Open Market Committee's decision to keep interest rates unchanged at the July Fed meeting.
Bowman's presentation shed little light on her position on interest rates. Rather, she discussed how innovation in blockchain could create "profound" opportunities and possibilities down the road. That her appearance comes at a time when cryptocurrency and bitcoin are generally rising once more in profile as well as price is worth noting.
As for interest rates, Bowman told Bloomberg earlier that she hasn't changed her views and still supports a rate cut.
And Wednesday's release of the minutes from the July FOMC meeting will give investors, traders and speculators something more to talk about until Fed Chair Jerome Powell delivers his final Jackson Hole Economic Symposium speech Friday at 10 am ET.
HD tops the Dow despite EPS miss
Home Depot was No. 1 among the 30 Dow Jones stocks Tuesday even though the big-box retailer missed the FactSet-compiled consensus forecast for its fiscal 2025 second-quarter sales and earnings per share.
Home Depot reported EPS of $4.68 (+0.2% year over year) on revenue of $45.3 billion (+4.9% YoY) vs estimates of $4.72 and $45.4 billion, respectively. Management reiterated guidance for total sales growth for the full fiscal year of 2.8% and a "slight decline" of approximately 2% for EPS.
CEO Ted Decker said momentum from late 2024 "continued throughout the first half as customers engaged more broadly in smaller home improvement projects." Decker noted that Home Depot continues "to grow market share."
According to Louis Navellier of Navellier & Associates, "The shares initially dipped on the misses but rose on optimism that if and when mortgage rates fall that the company will benefit from pent-up demand from the housing market."
This is the first time Home Depot has missed on both the top and bottom line since 2014, according to S&P Global Market Intelligence.
Showing why it's one of the best retail stocks to buy and hold, HD stock was up 3.2% Tuesday and is now up 4.7% so far in 2025.
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