I. Index Performance: Gap Filled, Primarily a Technical Rebound
On Monday, August 4, U.S. equities rebounded. The S&P 500 rose 91.93 points (+1.47%), forming a solid bullish candle that completely filled last Friday’s downside gap, which was triggered by weak nonfarm payroll data and renewed tariff fears. The swift filling of this gap suggests it was not a “breakaway gap” to the downside. Rather, the market appears to be in a technical correction phase—normal consolidation following prior gains. The broader uptrend remains intact.
By comparison, the Nasdaq also rebounded 403.45 points (+1.95%), but did not fully fill its previous gap. The index showed solid upward momentum with a strong green candle, and as it remains within a medium- to long-term uptrend, this correction seems to be more technical in nature. A steep selloff, like the one seen in early April, appears unlikely.
The current market is stuck in a “no man’s land”—resistance from previous highs above, and buying interest near the perceived “golden dip” zone below. As a result, the short term may see continued sideways movement before attempting another leg higher.
II. Macro Developments: Tariff and Data Risks Being Absorbed
1. Tariff Headlines: Diminishing Impact
- India Tariffs Raised
Trump announced sharply higher tariffs on Indian goods, citing the country’s purchase of discounted Russian oil and “arbitrage behavior.” A second-tier tariff on countries buying Russian oil—targeting China—is also under consideration. However, markets believe that tariffs on China are already near peak levels, limiting further downside impact. The India tariff hike is seen as having more short-term sentiment shock than real economic impact. - EU Auto Tariff Talks Progressing
Talks between the U.S. and EU have made some headway. Trump is expected to announce a cut in tariffs on EU auto imports (currently at 15%). If implemented, the EU would reportedly refrain from retaliatory tariffs for six months. This would further reduce the negative impact of trade tensions on equity markets.
2. Nonfarm Payroll & Fed Policy: Data Absorbed, No Sharp Slowdown
Last Thursday’s selloff was largely driven by downward revisions to May and June nonfarm payroll figures, and the unexpected dismissal of the Labor Secretary. On Monday, those shocks were being digested. Additionally, Q2 GDP showed a strong 3% growth rate, reversing Q1’s contraction and far above trend. This eased investor fears of an imminent recession. While revised jobs data shows labor market cooling, the overall economy hasn’t shown signs of severe slowdown.
3. Fed Personnel Shift: New Nominee Expected
Trump plans to nominate a new Federal Reserve Board governor to fill a vacancy (not for chair). The market expects this nominee to lean dovish, which may influence the future rate cut path. However, Jerome Powell remains in charge of current policy direction.
III. Stock Watch: Diverging Reactions—Sentiment vs. Fundamentals
1. Tech Giants: AI Momentum vs. Earnings Divergence
OpenAI
Though not publicly traded, OpenAI’s user data caught attention—700 million weekly active users, with 5 million paid commercial users (a sharp increase from June). Usage of TryGPT and other tools is up 4x YoY. Generative AI is reshaping search behavior and eating into Google’s core market, though Google is still holding ground through heavy AI investments. It remains the most undervalued of the “Magnificent Seven.”- Google
Currently trading at just 20x PE (lowest among the Big 7). As long as net income doesn’t turn negative—an unlikely scenario—its stock should remain on a steady climb. However, a drop in profits could trigger a “double whammy” valuation compression.
2. Hot IPOs: Figma’s Surge and Drop Reflect Sentiment Over Fundamentals
Figma soared 250% on its IPO debut but dropped sharply on Monday, though turnover remained sky-high at 150%, showing that sentiment remains the dominant force. Its market cap—despite volatility—provides key insight: Adobe’s $20B acquisition attempt fell through due to antitrust concerns. Now, Figma is valued around $40B. Based on a “break-up valuation” logic (enhanced liquidity from being public), a fair valuation range could be $30B–35B, or around $72/share (a potential support level).
3. Tesla: Compensation Plan Clears, But Stock Still Rangebound
Tesla’s board approved a new pay package for Elon Musk—96 million shares (~$30B), contingent on him staying in key executive roles for at least two more years. The news caused a mild rebound in the stock. However, with earnings underwhelming (robotaxi program launching in Chicago but not yet driving revenue), Tesla remains stuck in a sideways range: support at $298, resistance at $350.
4. Berkshire Hathaway: Earnings Miss and Buffett’s Transition
Berkshire Class A/B shares dropped 2.9% on Monday (a technical breakdown), as Q2 net profit fell 41% to just $1.237B, due to:
- Kraft Heinz Impairment
A $3.76B write-down due to the ongoing losses and brand deterioration of its holding in Kraft Heinz. - FX Losses
$877M in foreign exchange losses. - Buyback Halt
Berkshire stopped buybacks as of May 2024. With over $300B in cash sitting idle, the lack of capital deployment weighs on returns.
Buffett is reportedly nearing his formal exit as CEO (expected by year-end), with Greg Abel to take over. As the "Buffett premium" fades, Berkshire stock may shift toward a more defensive positioning.
IV. Market Outlook: Sideways Action Until New Direction Emerges
Much of the recent bad news (nonfarm revisions, tariff shocks) has been partially digested. With no clear signs of economic contraction, a sharp market crash seems unlikely. Still, resistance near recent highs and uncertainties (IPO volatility, Fed appointments) could lead to more sideways consolidation in the near term.
Over the medium-to-long term, if economic resilience persists and the Fed begins cutting rates, the current correction could be a launching pad for renewed gains. Investors should watch:
Turnover trends in IPOs like Figma (high turnover may signal extended volatility);
- Berkshire’s future buyback activity (halted buybacks may weigh on valuation);
- Final resolution of the EU auto tariff negotiations (a potential upside catalyst).
- Markets are always seeking balance through volatility. Short-term pullbacks often present valuable long-term positioning opportunities.