On Wednesday, July 30, U.S. equities delivered a rollercoaster session. The S&P 500 plunged mid-day following remarks by Warren Buffett but clawed back half of the losses by the close, ending down 0.12% (-8 points). The Nasdaq posted a mild gain of 0.15% (+31.38 points), forming a doji pattern. While intraday volatility spiked, both indexes held above their 5-day moving averages, suggesting short-term trend resilience.
1. Index Performance: Lower Wicks Confirm Support; 5-Day MA as “Line of Life”
The session’s key feature was the mid-day drop followed by a late rebound. Triggered by Warren Buffett’s comments, the S&P briefly broke below its 5-day MA but reversed to close back above. This lower wick plus close-above-support structure points to contained selling pressure and intact uptrend momentum.
- Nasdaq formed a doji but remained technically sound.
- Key risk: If surprise headlines—such as tariff hikes on August 1—break the 5-day MA, the slow-bull trend could transition into a sideways consolidation. But absent a large bearish candle (e.g., >2% drop), the bullish thesis remains intact.
2. Data Triangle: Employment, GDP & Fed Policy at Crossroads
a. ADP Employment Report: Rebound With Structural Divergence
July’s ADP private payrolls added 104K jobs, beating expectations, led by gains in hospitality and finance. However, job losses in education and healthcare point to uneven momentum.
Combined with Monday’s JOLTS job openings (7.44M) miss, the labor market appears to be cooling, though not collapsing—limiting urgency for immediate Fed rate cuts.
b. Q2 GDP: Strong Headline, Questionable Quality
Q2 GDP rose 3% YoY, beating the 2.3% forecast. However, this growth stemmed from a sharp 30.3% drop in imports (a net positive in GDP math), following front-loaded import activity in Q1 ahead of tariff implementation.
Thus, the beat reflects trade policy distortions, not organic strength.
c. Fed Meeting: Hawkish Messaging Caps Dovish Hopes
As expected, the Fed left rates at 4.25%-4.5%. But two dissents (Bowman, Waller) marked a 30-year record in opposition votes. Powell’s presser was decidedly hawkish:
- Inflation remains above 2% target;
- Labor market remains tight;
- Not ready to cut in September.
Market impact:
- Rate cut bets for September plunged;
- Powell’s defiance triggered political backlash from Trump, raising concerns about Fed independence.
3. Trump & Tariffs: “Independence Day 2.0” Risk on August 1
Trump escalated tensions by threatening a 25% tariff on India, citing its ties to Russia and high U.S. import taxes.
The current tariff increase plan takes effect August 1, with U.S. Trade Rep. Bensent suggesting it could last 3 days to 3 months.
Market read-through:
- If Trump pressures the Fed or escalates trade wars amid frustration, it may cause short-term panic;
- But if markets absorb both shocks, the bull trend may strengthen.
4. Mega-Cap Earnings: Microsoft & Meta Deliver Blowout Results
a. Microsoft: Giant Awakens
Q2 results smashed expectations:
- Revenue: $76.4B (vs. $73.9B est), +18% YoY
- EPS: $3.65 (vs. $3.37 est), +24% YoY
- Intelligent Cloud revenue: $29.9B, +26%
- Productivity (Office 365, etc.): $33.1B, +16%
FY outlook:
- Revenue: $281.7B (+15% YoY)
- EPS: $13.64 (+16% YoY)
Though the PE ratio (~39x) exceeds Peter Lynch’s PEG=1 ideal (current PEG ≈ 2.4), the bullish market favors dominant high-growth names. Shares jumped 7% post-market, nearing $550.
b. Meta: Earnings Crush, New Highs
Meta also beat across the board:
- Revenue: $47.52B (vs. $44.8B est), +6% YoY
- EPS: $7.14, well above estimates
- Q3 Revenue Guide: $47.5–50.5B, above street consensus
- AI Capex: Raised to $66–72B (upper end of analyst range)
Stock surged 8% after hours, breaking above $755 to an all-time high—a clear market verdict that growth justifies valuation.
Conclusion: Trend Intact, but Watch the “Policy Mines” and “Earnings Anchors”
Despite intra-day turmoil, the market held trend support, while earnings outperformance from big tech neutralized policy jitters.
Key variables ahead:
- Tariff hike (Aug 1): If digested smoothly, uptrend likely resumes;
- Fed trajectory: Hawkish Powell could cap upside via valuation pressure;
- Earnings momentum: Microsoft and Meta raise the bar—can Nvidia, Amazon follow?
Strategy: Stay constructive while the trend holds, but brace for “black swans” in policy or macro data.
After all, in U.S. markets, “Earnings are the roots, but policy is the wind.”
