Market Trends - The Dow Jones Industrial Average closed at a record high [1] - The Dow Jones Industrial Average soared more than 800 points [1] Monetary Policy - The Federal Reserve Chair Jerome Powell signaled interest rate cuts are on the way [1]

Interest rate cuts are big for $OPENPowell can unfreeze the housing market. ...

UK consumers are the most optimistic they’ve been about their household budgets in 12 months, according to a closely watched survey, a sign Britons are starting to feel the benefits of the Bank of England’s interest rate cuts https://t.co/rYq5LI1q3W ...

Core Viewpoint - Palantir's stock is experiencing significant sell-offs, raising questions about whether this presents an investment opportunity in a leading AI player [1][2][4]. Group 1: Stock Performance and Market Reaction - Palantir's share price fell by 7% during trading, with a peak decline of 9.8% earlier in the session [1]. - The recent sell-off was influenced by Home Depot's earnings report, which indicated price increases due to higher purchasing costs from tariffs, suggesting potential inflationary pressures on the consumer market [2]. - Target's earnings and comments regarding tariff-related pressures have also contributed to the continued decline in Palantir's stock [2]. Group 2: Economic Context and Valuation Concerns - A report from MIT indicated that many companies investing in AI have seen little to no return on investment, contributing to skepticism about the sector [4]. - Palantir's stock is trading at approximately 221 times this year's expected earnings and 78 times expected sales, making it the most growth-dependent valuation in the S&P 500 [5]. - If inflation rises, the Federal Reserve may struggle to implement interest rate cuts, which could negatively impact growth stocks like Palantir [5]. Group 3: Market Position and Future Outlook - Despite recent challenges, Palantir maintains a leading position in the AI software market and has secured significant contracts with government and corporate clients [6]. - For investors with a high risk tolerance and a long-term perspective, Palantir may still offer potential gains at current price levels, although waiting for a better entry point could be advisable given the current economic uncertainties [6].

Market Trends & Rotation - Big tech names like Palantir, Oracle, and Coinbase are selling off, underperforming on the S&P 500 [1] - The equal weight S&P 500 ETF (RSP) is starting to outperform the MAG7 heavy S&P 500 ETF [1] - Small cap value, midcap value, and large cap value are trading around or below their historic multiples, making them potentially attractive compared to expensive large cap tech [3] - The market is heavily anticipating Fed rate cuts starting next month, but core inflation remains around 3%, a range where the Fed historically holds or increases rates 94% of the time [5][6] Investment Opportunities & Strategies - Value stocks are poised to outperform due to lower entry multiples [4] - Focus on consumer stocks in the high-end (>$100,000 income) and low-end segments, while being cautious on the mid-tier consumer ($50,000-$80,000 income) due to tariff impacts [12][13][14][15] - Home Depot and Costco are favored in the higher-end consumer segment, while Walmart is favored in the lower-end [13][14] - Housing-related names like Residio and Mohawk are attractive due to pent-up demand and low multiples [16][17] Economic Factors & Risks - Short-term bearishness on inflation is expected over the next 6-9 months due to tariffs impacting prices [10] - Longer-term optimism is driven by the potential for AI to increase productivity [10] - Interest rate cuts are important for value names, especially those sensitive to interest rates and housing-related sectors [9]

Retail Sector Overview - The retail sector has demonstrated significant resilience despite rising prices and inflation, with retail sales increasing by 0.5% in July after a 0.9% rise in June, and a year-over-year increase of 3.9% [1][3] - The growth in July was primarily driven by a 1.6% increase in motor vehicle sales at auto dealerships, following a 1.4% rise in the previous month [3] Online and Specific Retail Sales - Online sales rose by 0.8% in July, building on a 0.9% increase in June, while clothing stores and furniture outlets saw sales increases of 0.7% and 1.4%, respectively [4] - Households are reportedly spending less and saving more due to concerns over a weak labor market and potential inflation from tariffs [4] Impact of Tariffs and Federal Reserve Policy - Tariffs imposed by the Trump administration have contributed to rising prices, which in turn have influenced retail sales positively, potentially leading the Federal Reserve to maintain interest rates at 4.25-4.5% for an extended period [5] - Despite a hawkish stance, some Federal Reserve officials have indicated plans for two 25-basis-point rate cuts before year-end, with markets pricing in an 83.1% chance of a cut in September, which would benefit the retail sector and the economy overall [6] Selected Retail Stocks - Four retail stocks are highlighted for investment: Levi Strauss & Co. (LEVI), Walmart, Inc. (WMT), Dutch Bros Inc. (BROS), and Wayfair Inc. (W), all of which have seen positive earnings estimate revisions in the past 60 days and carry favorable Zacks Ranks [2][10] Levi Strauss & Co. - Levi Strauss & Co. has an expected earnings growth rate of 4% for the current year, with a Zacks Consensus Estimate improvement of 5.7% over the past 60 days, and holds a Zacks Rank 1 [8] Walmart - Walmart's expected earnings growth rate for the current year is also 4%, with a 0.4% improvement in the Zacks Consensus Estimate over the past 60 days, and it holds a Zacks Rank 2 [11] Dutch Bros Inc. - Dutch Bros Inc. is projected to have a 34.7% earnings growth rate next year, with an 8.2% improvement in the current-year earnings estimate over the past 60 days, and carries a Zacks Rank 2 [12] Wayfair Inc. - Wayfair Inc. is expected to see earnings growth of over 100% for the current year, with the Zacks Consensus Estimate improving by more than 100% in the past 60 days, and holds a Zacks Rank 2 [14]

Market Overview - Market participants began the trading week without a clear catalyst, resulting in flat trading with the Dow down 14 points (-0.03%) and the S&P 500 down 1 point (-0.02%) [1] - The Nasdaq saw a slight gain of +0.03%, while the small-cap Russell 2000 outperformed with a +0.35% increase [1] Homebuilders Confidence - Homebuilders Confidence for August decreased to 32, lower than the expected 34 and matching June's level, which is the lowest since December 2021 [2] - Homebuilders are increasing incentives for new home sales to a five-year high due to weak demand and elevated mortgage rates [2] Interest Rate Outlook - No interest rate cuts are expected from the Federal Reserve until at least September 17, with a projected cut of 25 basis points [3] - This potential cut would bring the Fed funds rate below 4% for the first time in 2.5 years [3] Upcoming Housing Data - Upcoming housing data includes Housing Starts and Building Permits for July, expected to be slightly lower at 1.30 million and 1.39 million, respectively [4] - Existing Home Sales are anticipated to improve to 4.0 million from 3.93 million reported last month [4] Earnings Results - Palo Alto Networks reported fiscal Q4 earnings of 95 cents per share, exceeding the consensus of 88 cents, with revenues of $2.54 billion surpassing expectations of $2.50 billion [5] - Following the positive earnings report, Palo Alto Networks shares jumped +7% [5] - Fabrinet also reported Q4 earnings of $2.65, beating consensus by a penny, with revenues of $909.7 million exceeding the expected $883.1 million [6] - Despite positive guidance, Fabrinet shares fell -1.5% after a year-to-date gain of +48% [6]

Group 1: Inflation and Economic Indicators - The Producer Price Index (PPI) in the U.S. increased by 0.9% in July from the previous month and 3.3% year-over-year, marking the largest monthly increase in three years [3][5] - Services were the primary driver of the PPI increase, rising by 1.1% in July, indicating that companies may be passing higher import costs to consumers [5][24] - The PPI report has influenced expectations regarding Federal Reserve rate cuts, with traders still anticipating a reduction in September, but the likelihood of a significant half-point cut has decreased [6][24] Group 2: Gold Market Dynamics - Gold prices have remained resilient, trading near historic highs, with spot prices consolidating in the mid-$3,300s after reaching an all-time high of $3,500 per ounce in April [7][8] - Factors contributing to gold's steady performance include inflation concerns, a weaker U.S. dollar, central bank demand, and expectations of lower interest rates [8][27] - Gold-backed exchange-traded funds (ETFs) saw inflows of $3.2 billion in July, bringing total assets under management to $386 billion, indicating strong investor interest [10] Group 3: Royalty and Streaming Companies - Royalty and streaming companies have reported record quarterly results, with Franco-Nevada achieving revenue of $369.4 million, up 42% year-over-year, and Wheaton Precious Metals generating $503 million in revenue [16][17] - These companies provide upfront financing to miners in exchange for a portion of future production, offering lower risk exposure and strong cash flow [13][14] - The model of royalty and streaming companies is seen as a balanced approach between owning bullion and traditional mining equities, capturing upside in rising gold prices while providing downside protection [15][20] Group 4: Traditional Miners and Market Outlook - Traditional gold miners are regaining favor, with UBS analysts upgrading their outlook on the sector due to improved capital management and rebuilding investor trust [21] - If gold prices remain stable, there is potential for increased stock buybacks and merger and acquisition activity among miners [22] - The ongoing inflationary environment and tariff impacts are expected to shift costs to consumers, reinforcing gold's role as a hedge against inflation [24][25]

Geopolitics and Macroeconomics - Investors are focused on President Trump's meeting with Ukraine's president and European allies, seeking clarity on commitments made to Vladimir Putin [1][3][4] - The market anticipates potential interest rate cuts from the Federal Reserve in September, influenced by recent US jobs and inflation data [8] - Economist Mark Summerland suggests a 50 basis points rate cut next month, citing a slowing economy and an inverted yield curve [9][11] Retail Sector - Big box retailers like Walmart, Target, and Home Depot are in focus this week as they report earnings [6] - July retail sales grew 05%, driven by car dealerships, furniture stores, and online spending, but consumer sentiment remains below last year, falling 5% to 586% [6][7] - Target is expected to report potentially lowered guidance, with about 50% of their cost of goods sold tied to imports and tariffs [28] - Home Depot and Lowe's stocks have risen, pricing in a potential rate cut from the Federal Reserve in September, which could improve remodeling trends [30][31] - Walmart is expected to report strong sales and reaffirm guidance, benefiting from lower prices, a larger grocery section, and a better website [34][35][36] Energy Sector - Vestas' shares rose over 16% after the Treasury Department and IRS issued guidance on tax credits for clean energy projects [16][17] - Sunrun's stock jumped almost a third, up over 2%, after the Trump administration released new guidance on tax credits for renewable projects [18][19] - Oil prices are holding steady as traders await clues from the meeting between President Trump and President Zelensky [20] Trending Tickers - Nova Nordisk's stock is getting a boost after receiving FDA approval for Wegovy to treat a serious form of liver disease [43] - Soho House is set to go private in a deal worth $28 billion, with investors paying $9 a share [47] - Palo Alto Networks is set to report fourth-quarter earnings, with analysts expecting adjusted earnings of 89 cents per share on revenue of $25 billion [50]

Market Overview & Strategy - The market breadth is improving overall [1] - Expectations are for interest rate cuts [1] - A trade idea is shared for a global financial services firm [1] - A recent trade for a data storage company is reviewed [1] Risk Disclosure & Compliance - Options trading entails significant risk and is not appropriate for all investors; certain complex options strategies carry additional risk [1] - Supporting documentation for any claims will be furnished upon request [1] - Fidelity Brokerage Services LLC is a Member of NYSE, SIPC [1] Resources & Engagement - Before trading options, please read Characteristics and Risks of Standardized Options [1] - Join weekly sessions for more details on trade ideas [1] - Sign up for more tips and insights from the team [1] - Follow Fidelity on various social media platforms including YouTube, Reddit, Instagram, TikTok, Facebook, LinkedIn, Discord, and X (formerly Twitter) [1]