What to know today

  • Mr. Powell goes to Washington.
  • Boeing is a felon (again).
  • Small-caps are shaping up well.
markets

This Is No Time for Drama

Slow and steady wins the race.

It was in doubt almost all the way to 4:00 p.m. ET, but the S&P 500 managed to close up 0.10 percent and make a new all-time closing high for the 35th time in 2024.

Progress has been slow this year. Although the S&P reached the halfway mark with a gain of more than 15 percent, we saw just 14 trading days with gains of 1 percent or more.

And there’s been just one trading day with a gain of more than 2 percent this year.

At the same time, we’ve seen only seven trading days where losses were 1 percent or worse.

So progress has been steady this year too.

As Ben Carlson of Ritholtz Wealth Management notes, “Bull markets are typically boring like this. Uptrends tend to be these slow, methodical moves higher.”

And “gradual improvements” don’t make for entertaining headlines. If it’s something other than building wealth you’re after, be careful.

“Bear markets, on the other hand, are where the excitement happens,” Carlson writes. “Downtrends are full of both big down days and big up days.”

June, July, and August are the best three-month period for the S&P 500 during election years since 1950.

Two factors high on investors’, traders’, and speculators’ lists of those that could destabilize the status quo are inflation and politics.

And the twain shall meet today as Federal Reserve Chair Jerome Powell makes his way from 20th Street and Constitution Avenue up to Capitol Hill for testimony before the US Senate Committee on Banking, Housing, and Urban Affairs.

On Wednesday he’ll present his prepared remarks and answer questions from the House Financial Services Committee.

It is an election year in the US, so Senators and Representatives will be that much more eager to score points for their respective parties.

The Fed Chair will take a pounding from partisans, and that’s OK. It’s part of the spectacle, and as a guy who’s been operating in and around DC for decades Powell knows how it works.

It’s going to get noisy over the next couple of days.

Remember, though, that we happen to be right in the middle of the best three-month period during election years for the S&P 500.

And looking beyond these two days we have the onset of an earnings-reporting season that will provide some light and perhaps some more upside momentum too.

deep dive

Boeing Gets Some Lift on a Felony Plea

It’s been a tough year for the aerospace and defense outfit.

The Boeing Company $BA continues to generate terrible headlines.

Early Monday morning, news broke of its settlement with the US Department of Justice over two fatal 737 Max crashes in 2018 and 2019.

Boeing agreed to plead guilty to a single felony count of defrauding the federal government and will pay a penalty of $487.2 million, the maximum allowed by law.

It also agreed to invest at least $455 million in its compliance and safety programs over the next three years. 

A few hours later, the Federal Aviation Administration said it will require inspections of passenger oxygen max systems in 2,600 737 MAX and Next Generation aircraft. 

And then came word that a Boeing 777-200 operated by United Airlines $UAL lost a wheel after takeoff and had to be diverted to Los Angeles International Airport.

The plane, with 249 people on board, landed safely.

BA bounced early and held on for a 0.55 percent gain, clarity on the 2018 and 2019 liabilities and avoidance of an extended criminal trial encouraging investors.

The Boeing Company $BA gained 0.55 percent on Monday, July 8, 2024, but is down 28.70 percent year to date and 30.53 percent from its 52-week high.

The stock is down 28.70 percent in 2024 and 30.53 percent from a 52-week high established on December 21.

Boeing last pleaded guilty to a felony in November 1989. Back then it fessed up to illegally obtaining secret Pentagon documents and agreed to pay more than $5 million in fines. 

Refreshing its “felon” tag will allow the aerospace and defense outfit to get on with what will be a lengthy, costly, and difficult recovery process.

The settlement includes terms to formalize that process, including a three-year probation to be supervised by the Federal District Court for the Northern District of Texas.

The DoJ will also appoint an independent compliance monitor to ensure safety measures are in place. Boeing will face additional penalties should it violate safety terms.

And Boeing’s board of directors must meet with families of victims of the 2018 and 2019 crashes.

Boeing said it probably burned about $8 billion in cash over the first half of the year as it tries to right itself.

Management will report monthly orders and deliveries today. Jefferies analysts expect 42 deliveries in June, including 34 737 MAX jets. Boeing delivered 24 jets in May.

Jefferies expects Boeing to report 90 second-quarter deliveries, down from 136 a year ago.

deep dive |
July 9, 2024

Boeing Gets Some Lift on a Felony Plea

WEEKLY MARKET OUTLOOK

IWM Is Coiling

It looks bullish at these levels.

“Seasonally, we're looking at a very bullish time,” Mish Schneider observes at the top of her Weekly Market Outlook. 

“July tends to be one of the best months of the year, and that's really kind of a statement considering every month has been pretty good so far.”

Indeed, the S&P 500 and the Nasdaq Composite are making new highs seemingly on a daily basis. And the Dow Jones Industrial Average is well within range of the big, round 40,000 level.

But Mish has a specific member of her Economic Modern Family in mind this week: the iShares Russell 2000 ETF $IWM.

Small-caps and IWM have been underperforming for 10 years. “What does it matter? Well, it doesn't matter until it matters,” Mish says.

And the IWM chart is starting to look like it wants to matter. “Coiling” is how technical analysts would describe recent price action.

The iShares Russell 2000 ETF $IWM has been underperforming the S&P 500 for 10 years but is setting up well from a technical perspective.

Mish is wondering whether IWM will be the next exciting opportunity.

The answer depends on continuing economic growth. It also depends on Jerome Powell, the Federal Reserve, and interest-rate policy.

Mish is also keeping her eyes on the SPDR S&P Regional Banking ETF $KRE.

The big banks will begin reporting second-quarter financial and operating results at the end of the week, which should provide some initial indications of broader sector health.

Mish is tuned in to KRE right now due to its underperformance in the aftermath of the Silicon Valley Bank meltdown.

Resilience for regional banks would restore some confidence in the overall economy amid lingering questions about the impact of a shrinking commercial real estate sector.

Check out Mish’s Weekly Market Outlook for key price levels on IWM and KRE.

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